Apparently, I'm not the only one who worries about what the Whole Foods-Wild Oats merger will mean for organic-foods suppliers.
In a report published by Organic Monitor, a European-based consultancy working on contract for Decision News Media, analyst Amarjit Sahota has sounded an alarm about Whole Foods' growing power. Organic Monitor calls itself a "business research & consulting company that specializes on organic & related industries."
You can read Sahota's full analysis here on the Decision News site, but here is some of what he had to say:
Following the approval of its acquisition of rival Wild Oats, Whole Foods Market has become the single most important natural food retailer in North America. The growing power of this "supernatural" retailer is expected to consolidate supply chains of natural and organic foods, and some suppliers risk being squeezed out of the picture.
The article goes on to detail Whole Foods' plans for Wild Oats, which operated 118 stores. Thirty-five of those were small stores under the the Sun Harvest and Harry's banners, mostly in small markets. Whole Foods will sell those off.
As for the 80 flagship Wild Oats stores, Whole Foods will shutter 10 and transform the remaining 70 into Whole Foods outlets. Before the merger, the natural-foods giant operated 188 stores; now it will have 258.
By 2010, Organic Monitor reports, Whole Foods plans to operate more than 300 stores nationwide -- which would represent a 65 percent expansion in three years. With no comparable rival with a nationwide footprint, Whole Foods would wield tremendous buying leverage.
Here is Sahota:
Whole Foods Market, like all retailers, will seek to rationalize its supplier base. As this happens, the number of its current suppliers will decrease.
Private label producers will be adversely affected as some manufacturers of Wild Oats and related brand products will see their markets disappear. Whole Foods Market will slowly replace these lines with its own 365 brand and private label products. Manufacturers of branded products will also be affected as Whole Foods Market streamlines its product portfolio.
It is likely to use the same suppliers of its Whole Foods Market stores for its newly acquired Wild Oats stores. Loyal and larger suppliers are likely to be favored over small suppliers. [Emphasis added.]
In defending the merger from a challenge by the Federal Trade Commission, Whole Foods claimed it faces plenty of competition from conventional grocers such as Kroger and Safeway, as well as superstores such as Wal-Mart -- all of which are scrambling to grab a piece of the growing organic pie.
Such competition may well benefit consumers. In terms of the outfits that supply Whole Foods, though, the story is different. Here is Sahota again:
Large retailers like Kroger and Safeway have come into the market and introduced organic ranges, many under their private labels. Most, like Wal-Mart, have encouraged their large conventional food suppliers to develop organic lines. Mass market retailers have thus used their existing supply chains for their organic product ranges.
Thus Kroger and Safeway have little use for small or medium-sized companies selling, say, organic juices or ice cream. They're getting their organic goods from their conventional suppliers like Kraft, who are busily rolling out organic lines.
Traditionally, Whole Foods and other dedicated natural-foods retailers have been the avenue through which smaller organic supplier find their market. Those days may be over, Sahota reports.
With few openings in the mass market, most dedicated natural and organic food companies have continued to focus on natural food retailers ... With Whole Foods Market now dominating this sector, many natural and organic food companies could be further marginalized. Whole Foods Market, like all retailers, will seek to rationalize its supplier base. As this happens, the number of its current suppliers will decrease.
In short, Organic Monitor concludes, "Big was always beautiful for the mass market retailers; it appears that large-scale production could also be favored by Whole Foods Market."
And as operations scale up to meet the needs of the megabuyers, we've already seen what happens on the ground. We get mega, monocropped "organic" vegetable farms supplying the processing giants; and abominations like Aurora Dairy, with its 4,000- to 8,000-head "organic" feedlot dairy operations.
"In spite of its large farm sizes [and recent troubles with the USDA], Aurora Dairy remains a dedicated organic company," Organic Monitor notes.
Recently, the Federal Trade Commission made another attempt to block the Wild Oats deal. In their last claim, they focused on the effect the deal might have on consumers. This time, I hope they focus more on suppliers.
With GoodGuide scanner, PC food shopping goes point and click
Pollan shoots down organic myths at Grist event
Ask Umbra’s video advice on making lunch matter
Comments
View as Threaded
bigfaceworm Posted 3:58 pm
30 Oct 2007
First, the grist article correctly points out that other, large, supermarkets are opening up their own lines of organic produce/food, and Whole Foods now competes against that. (this is the building the business issue)
Second, the article suggests that Whole Foods will likely turn away from small suppliers and try to "rationalize its supplier base." (this is the supporting local (small) suppliers)
Second point first. While "rationalization" of supplier base has traditionally happened, Whole Foods does seem dedicated to keeping local suppliers involved. See the open letters between Whole Foods and Michael Pollan: one, two, three. Sure, there's no guarantee, but it appears Whole Foods has made an honest effort to bring local suppliers into their stores.
Back to the first point: The argument made here is essentially: "well, Whole Foods used to be good, now they're going to become corporate, and that's bad." grist lets the other super markets (Kroger, Safeway, Wal-Mart) pass on involving local suppliers, but wants to tie the hands of Whole Foods. Sounds like it would just give the other super markets a (potential) edge over Whole Foods which, in the long run, could hurt the chain.
I'm all in favor of supporting local suppliers, in fact, my family buys over 95% of our produce from the local food co-op (http://www.firstalt.coop) or directly from the farmers (through the market or CSA).
Tilting the playing field to burden a single chain seems unfair, and in the long run doesn't directly address the issues raised.
Permalink
MCollins Posted 1:29 am
31 Oct 2007
The point, I think, is that the conventional supermarkets have plenty of competition whereas Whole Foods, if the acquisition survives this next FTC appeal, will not. Meaning that adding to the existing problems of monopsony, which the merger would aggravate, we're looking at a pretty traditional monopoly. Trader Joe's really can't compete on the perishable side--and one thing none of these linked articles is discussing is the size of the stores themselves. Trader Joe's stores simply do not have the square footage of Whole Foods stores in any market I know of. If Trader Joe's were to step up the competition by focusing on perishables, it would require a serious re-haul of existing stores; and with the chain being a largely urban concern, that's a huge hurdle.
In the interests of full disclosure, I have a private grudge in the matter: a Wild Oats store was literally the only grocery store within walking distance of my home. When it reopens in April as a Whole Foods market, my choices will be to shop there--and despite Wild Oats position as a "premium" retailer, they were nowhere near Whole Foods prices--or drive to a conventional market or to Trader Joe's. I'll have to choose between spending my dollars where I would prefer not to, and adding a new carbon price tag to my grocery expenses. I'm not thrilled I have to make that choice. I'll certainly be keeping tabs on the second appeal.
Editor, http://www.getsolar.com
Permalink
mat Posted 1:17 am
01 Nov 2007
i love the Wild Oats chain. they are different from Whole Foods, and it is going to be a real shame when they all turn into Whole Foods stores. the prices, in general, are lower in Wild Oats and their bakery departments are better than Whole Foods, so maybe that's why the takeover is happening.
the Whole Foods chain is greedy and price gouging.
i just don't understand corporate takeovers enough to understand what Wild Oats rights are in this matter. can't they stop the takeover? or maybe they don't want to? i don't understand it. consumers have no say i guess, but i have to admit that the Whole Food stores are always packed with shoppers.....
don't most grocery shoppers compare prices?
what a country this is.......
i guess i'll have to go back to my good old standard grocery stores for almost everything from now on - i refuse to give in to a Whole Foods monopoly.
sigh.....
Permalink
thematterwithKansas Posted 2:24 am
01 Nov 2007
....using the sociological imagination like a lariat.
Permalink
ennasnosrap Posted 7:43 am
01 Nov 2007
Permalink
nedruod Posted 4:53 pm
08 Nov 2007
It would seem logical to me that online groceries could be much more environmentally friendly. Of course I've never seen anyone who could or even tried to show one way or the other.
Still, if you don't walk to your grocery store, the Peapod trucks are like carpooling for your groceries. I notice a pretty good selection of local goods from Chicago when I order too. Probably most useful is the better supply chain management (since they have an average 24 hour look ahead plan for deliveries) which means less spoilage and thus a greater ability to source locally.
Like I said, I've yet to see any hard facts, but if Peapod doesn't fare well, I'd think someone else could.
Permalink