Company News

‘365’ Will Bring Competition, Not Cannibalization

Whole Foods execs tease first “value” stores, which will capture different trip choices

AUSTIN, Texas -- Whole Foods Market has announced the first five leases for its streamlined, value-oriented 365 by Whole Foods Market concept.

Whole Foods 365

The company disclosed leases for 365 by Whole Foods Market locations in Bellevue, Wash.; Houston; Portland, Ore.; and Santa Monica, Calif., and also announced that the first 365 store will be located in the Silver Lake neighborhood of Los Angeles.

Designed to complement the Whole Foods Market brand by bringing fresh, healthy foods to a broader audience with a streamlined, quality-meets-value shopping experience, 365 by Whole Foods Market stores will feature a curated mix of products that adhere to the company’s quality standards in an environment that’s “fun and convenient” for shoppers.

Suggesting the chain’s competitive strategy in ration to other channels such as convenience stores, co-CEO Walter Robb addressed during the company’s third-quarter earnings call the possibility of 365 cannibalizing sales from Whole Foods.

“We feel like it's very complementary to being in the area of a Whole Foods that [a] customer has choices between going into a 365 or a Whole Foods depending upon the time and what they want to accomplish with the shop. And so we're hoping that it captures both of their choices when they decide to go out and shop. So if we look at the cannibalization, we think it's going to be lower, but we also are really encouraged by the chance that we have to capture more trips that the customer would have shopping,” he said.

“We see the 365 stores as being a smaller and able to slide in, in lots of markets where we can't find a big format store,” said co-CEO John Mackey. “We never feel like we can ‘capture’ any customers. At best, we can ‘rent’ them for a little while if we continue to create value and service to them. But we do think the 365 is going to have some appeal to our existing Whole Foods customer base, and maybe have a … greater appeal to [the] more value-oriented customer that we already have. But I think it's going to open up a whole new set of customers who, so far, have for various reasons, have not liked Whole Foods Market. … They think our prices are too high. There's no question 365 is going to have very, very competitive prices.”

Jeff Turnas, president of 365 by Whole Foods Market, said, “We are really excited about the progress we have made with securing real estate in markets where there is high demand for both quality food and value in a convenient format.”

He continued, “We think the Silver Lake area of Los Angeles is an ideal community to plant our first 365 store flag and bring a modern shopping experience that draws from the best innovations of Whole Foods Market stores and gives them a new expression. With a fresh format and unique product assortment, we think 365 will offer convenience and value while providing the quality standards and transparency that consumers love and expect.”

The first store locations are slated to open in the second half of 2016. The company plans to double the number of 365 by Whole Foods Market store openings in 2017.

Austin, Texas-based Whole Foods Market, with sales of approximately $14 billion, has 424 stores in the United States, Canada, and the United Kingdom.

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