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Organic grocery wars get heated: will Whole Foods fix a broken Wild Oats?

I've been in love with natural foods grocers since I was a little girl, when Fred Meyer opened a little mini-store dedicated to raw peanut butter, tofu, wheat germ and a dozen different kinds of bulk grains. The store had candy bars made out of honey and I loved it. Since then, my understanding for and appreciation of the natural grocer has grown up with the industry; from the cute little small-town co-op where I shopped in college, to the Fresh Fields (acquired, and already assimilated by, Whole Foods Market, Inc. (NASDAQ:WFMI)) I fell in love with in Philadelphia during business school, to the discovery of the Portland, Oregon New Seasons chain when I moved "back home" in 2001. I noshed at every quick-service franchise that jumped on the healthy foods wagon, from spirulina-spiked smoothies to bagels loaded with sprouts and hummus.

Natural and organic grocers always seemed like the nice (if a bit militant) guys, interested in supporting the local farmer, providing non-toxic food and diapers for our babies, striving to make sure our bodies were healthy and our baths were perfumed with chamomile and lavendar. And then 2005 happened.

Suddenly Wal-Mart Stores, Inc (NYSE:WMT) was in the organic grocery game. Safeway Inc. (NYSE:SWY) started its own line of "O" organic foods. Johnson & Johnson (NYSE:JNJ) created a line of herbal-infused babycare products and Kellogg Company (NYSE:K) launched organic Rice Krispies and Corn Flakes. Big business had figured it out and suddenly it wasn't smelling much like chamomile and patchouli. No. It smelled more like war.

With the news yesterday that Whole Foods was set to acquire Wild Oats Markets (NYSE:OATS), the war seems ever more bitter.It's not that Whole Foods is a vicious street fighter in the grocery industry (in fact, quite the contrary). But it's quite clear that Whole Foods isn't going to sit back and let the Wal-Marts and Safeways of the world do business on its corner without a considerable and formidable fight.


Wild Oats is, in my opinion, an interesting front in the battle. Here in Portland I recently watched closely as Wild Oats bought a chain called "Nature's Northwest" and, in one market that had thrived in the crunchy Hosford-Abernethy neighborhood for decades, quickly became a has-been when a New Seasons opened about a mile away. The store often seemed empty and depressing even before the competition opened, with badly-organized shelves and confusing pricing that was sometimes far more expensive than other nearby markets.

So tonight I went on an investigative shopping trip through my nearest Wild Oats, on 28th and East Burnside in a hot, food-focused Portland neighborhood. It was about 6:30 p.m., a time when I know from experience the Trader Joe's stores are busy with shoppers hurrying to get last-minute dinner staples. The store was dark and mostly quiet; the several customers (definitely not the dozens, even hundreds that fill Trader Joe's on a typical early evening) had only a few items in their baskets. A perusal of the shelves and it was quickly obvious that this transition will be a huge one.


Firstly, the Wild Oats stores are much smaller than a typical Whole Foods, about half the size by some reports. Translating the Whole Foods concept into a smaller space will be challenging, and likely, expensive -- Whole Foods representatives say they'll remodel each of the 110 Wild Oats stores, eventually. Secondly, the question of what to do with the prodigious amount of Wild Oats-branded grocery items (which are, in my estimation, much higher-priced than nearly identical items at Trader Joe's -- a store-brand bottle of organic ketchup, for instance, was a dollar more at Wild Oats). Most of the items are slightly different than the 365 brand Whole Foods stores carries -- will customers complain at the loss of their favorite cheddar cheese potato chips, or chocolate sandwich cookies?


Finally, I see an obvious attitude difference between Wild Oats employees and those at Whole Foods. In one famous exchange between a Wild Oats employee and a friend of mine looking for an expensive fudge sauce, she was told the product she was looking for had partially hydrogenated vegetable oil, so of course the store didn't carry it! When she finally found it at New Seasons, I checked the label myself -- all natural ingredients, not a trans fat in the mix. Last night, I wasn't asked once if I could be helped, though the employees were clearly not busy (I saw two gossiping in the produce section) and could have weighed in on my blue cheese quandary.

In a trip to Whole Foods just a few miles away, on the same street, a few days later, I was met with amazingly solicitous service, smiles everywhere, stickers for my children, aisles so packed -- and with full carts -- that we had trouble moving around. People were just hanging out, and no one minded a bit. If Whole Foods management can pull it off, and gain the doubling of per-square-foot-sales they've promised, the acquisition will be good indeed. And not just for shareholders, but for the millions of affected customers, too. Especially me. That Whole Foods on the other side of the river is just too far... I can't wait for the makeover.

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Last updated: July 03, 2008: 06:59 PM

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