Natural Products  October 3, 2018

It’s business as usual for niche grocers

When Amazon.com Inc. (Nasdaq: AMZN) purchased Whole Foods Market Inc. in June 2017 for $13.7 billion, pundits and analysts alike wondered what would become of specialty retailers such as Sprouts, Lucky’s and Natural Foods by Vitamin Cottage, all of which have a presence in Northern Colorado and the Boulder Valley.

Denny McCorkle, chair of the marketing department at the University of Northern Colorado Monfort College of Business in Greeley, said he sees two outcomes resulting from Amazon’s purchase of Whole Foods.

The first outcome is the discounts enjoyed by Amazon Prime members who shop at the high-end grocery store, which some — especially non-Prime members — still refer to as “Whole Paycheck.”

“People who want the convenience, and are already loyal to Amazon, will get additional benefits from shopping at Whole Foods,” McCorkle said. Not a Prime member? Significant benefits aren’t coming your way. At least for now.

The second effect is essentially no effect at all in that consumers will continue to shop at stores that offer lower prices for healthier foods, he said.

In fact, retailers specializing in natural and organic food and products continue to  grow and open new stores.

Sprouts Farmers Market (NYSE: SFM), headquartered in Phoenix and with stores in several regional Colorado cities, is one of the larger retailers that offers natural foods and products throughout the U.S. It has 315 stores in 15 states and will add 30 new stores this year alone.

In an August third-quarter earnings call, company CEO and director Amin N. Maridia said store traffic and overall store performance has remained consistent.

“I think there’s probably a lot of concern around what can one or other competitor do to Sprouts. And I think we are laser focused on our business. And to date, we feel pretty good about what we are seeing or not seeing.”

James L. Nielsen, president and COO of Sprouts, added during the call that focusing on the health-conscious customer requires “a higher touch.”

“… the team here has done a fantastic job of just really enhancing the products we carry, making sure we are trend leading, we are not trend following.”

Diego Romero, a spokesman for Sprouts, told BizWest that Sprouts has begun offering additional savings to guests through mobile coupons, checkout challenges and promo codes on the Sprouts app.

Like others in the industry, Sprouts continually looks at guest shopping trends to help reach customers wherever they are in their healthy living journey.

“Close to half of our stores now feature expanded Market Corner Deli amenities to appeal to grab-and-go shoppers,” Romero added. This includes salad bars, freshly squeezed juices, olive bars, fresh sushi and soup bars along with ready-to-eat and ready-to-heat meals, salads, entrees and sides for convenience-seeking shoppers.

Natural Grocers by Vitamin Cottage Inc. (NYSE: NGVC), headquartered in Lakewood and with several stores in Northern Colorado and the Boulder Valley, will open eight or nine new stores, including locations in Colorado, Iowa, Oregon and Texas, according to a company press release. It currently has 147 stores in 19 states.

In the company’s Aug. 2 sales earning call, co-president Kemper Isley said that Natural Grocers targets its marketing and promotional initiatives toward driving traffic into its stores.

“We believe, we are more effectively communicating our differentiations in leadership and product quality, while also enhancing our everyday affordable pricing principles,” he said.

In September, however, the company announced it will close one of two stores in Tulsa, Okla., the first store-closing in the company’s 63-year history.

Isley declined to comment for this article due to being in the “quiet period” before the fourth-quarter earnings call.

Also in expansion mode is Lucky’s, which was started in Boulder by chefs Bo and Trish Sharon. The company plans 20 new stores over the next 18 to 24 months, with locations ito include Fort Collins and Wheat Ridge along with Florida, Montana and Ohio, according to Supermarket News. Lucky’s currently operates 28 stores in 11 states. Requests for comment from Lucky’s management were not returned.

The second generation of Alfalfa’s — the store was originally founded in Boulder in 1979, then gobbled up by Wild Oats, which was later purchased by Whole Foods — acquired new Denver-based owners in November 2017. Calls for comment were not returned, but newspaper reports at the time of the sale said the new owners plan an undisclosed number of smaller stores in dense neighborhoods.

When Amazon.com Inc. (Nasdaq: AMZN) purchased Whole Foods Market Inc. in June 2017 for $13.7 billion, pundits and analysts alike wondered what would become of specialty retailers such as Sprouts, Lucky’s and Natural Foods by Vitamin Cottage, all of which have a presence in Northern Colorado and the Boulder Valley.

Denny McCorkle, chair of the marketing department at the University of Northern Colorado Monfort College of Business in Greeley, said he sees two outcomes resulting from Amazon’s purchase of Whole Foods.

The first outcome is the discounts enjoyed by Amazon Prime members…

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