Sprouts opens in Philly

Sprouts Farmers Market opened its first Pennsylvania store last month at Lincoln Square in Philadelphia. At 32,000 square feet, the store carries about 19,000 products, 90% of which are natural or organic, according to the company. In addition, 6,100 products are non-GMO and 7,100 are gluten free.

Sprouts currently operates 316 stores in 19 states. The company plans to open about 30 new stores per year, according to Chief Financial Officer Brad Lukow.

Aldi planning a major product expansion in 2019

Earlier this month Aldi announced a major product expansion to go along with its ongoing efforts to open new stores and upgrade existing locations. With the product expansion, slated to roll out early next year, Aldi says 20% of items in every store will be new when compared to the product mix during the same time one year prior.

The effort will focus on fresh, organic and easy-to-prepare offerings, and will boost the store's selection of fresh food by 40%. For instance, Aldi says it will have more ready-to-cook and organic fresh meat, a bigger assortment of produce, such as ready-to-eat sliced fruit and organic selections, and new vegan and vegetarian options such as kale and quinoa burgers, and chickenless patties and tenders.

Aldi also plans to offer a broader array of grab-and-go items like single-serve guacamole and organic hummus, fresh fruit and vegetable packs, fresh organic salsa, antipasti salad, as well as more drinks and refrigerated beverages. The retailer also said it will have one of the nation's largest selections of private label milk alternatives.

"We're in the middle of a five-year growth program, where we're opening over 800 stores to get to just under 2,500 stores by the end of 2022," said CEO Jason Hart. "We're spending a lot of money on that: $3.4 billion invested into new unit growth and $1.9 billion into the existing network of stores to remake the shopping experience, to give it a modern market feel and a little more space. We're adding about 20% more square footage to the stores."

Study shows that online grocery shopping and meal kit purchases are increasing

A recent study by Valassis concluded that consumers are embracing new grocery shopping options like online ordering and delivery, and meal kits. Of 1,000 U.S. adults surveyed, 7% said they order groceries online weekly, but that increases to 14% for parents, 12% for millennials, and 15% for millennials with children.

In addition, 5% of all respondents said they order a meal kit online once a week, compared to 10% of parents, 10% of millennials, and 14% of millennials with kids.

Among those ordering groceries online, in-store pickup was a preferred option. Eight percent of all shoppers polled said they order groceries online and pick them up from their local store, compared to 17% of parents, 14% of millennials, and 20% of millennials with children.

"From home delivery services to the growing presence of organic items, emerging channels and trends are changing the way shoppers buy and, in turn, how brands reach and activate their target audiences," said Valassis Chief Marketing Officer Curtis Tingle.

The study also reported the following:

Thirty-three percent of all shoppers reported that they buy only or mostly organic and natural products, compared with 48% of parents, 50% of millennals, and 60% of millennials with kids.

Overall, 69% of the shoppers surveyed save money with print, digital media and/or loyalty cards.

FIfty-six percent of those surveyed said they use grocery, drug, mass and/or supercenter savings apps, up from 51% in 2017 and 38% in 2016.

PA ranks second in organic food sales

According to a report published by the U.S. Department of Agriculture, Pennsylvania trails only California in the sale of organic products. Statewide consumption of organic foods in Pennsylvania has increased by about ten times over the past decade, and has doubled from 2015 and 2016.

Nationwide, organic food sales reached $43 billion last year, an increase of 8.4% over the previous year.

"The demand has increased so much," said Cheryl Cook, deputy secretary for market development at the Pennsylvania Department of Agriculture. "We could quadruple and quintuple the production and still not fill the demand."

Consumer neuroscience firm Nielsen told Progressive Grocer that despite the increase in organic sales in recent years, price perception remains the greatest barrier to organic purchases, even though prices are in general decline.

Mom's Organic Market opens in Center City Philly

Mom's Organic Market opened in Center City Philadelphia last month. The store - at 34 South 11th Street - marks Mom's first Philly store, and their third store in the PA/NJ/DE market (Bryn Mawr, PA and Cherry Hill, NJ).

The new store features all-organic produce, an all-vegetarian in-store cafe, and even a recycling center for glasses, batteries and wine corks. According to reports, Mom's Organic Market doesn't sell anything with artificial colors, preservatives or sweeteners, or hydrogenated oil.

Mom's currently operates 18 stores in MD, VA, PA, NJ and Washington DC.

Sprouts Farmer's Market coming to Philly, South Jersey

Sprouts Farmers Market, an organic and natural foods grocer with 268 stores in 15 states, is reportedly planning on a new store in Philadelphia, PA and Moorestown, NJ. Both stores would represent the first in each state.

The Philadelphia store is planned for Lincoln Square at Broad Street and Washington Avenue in South Philadelphia, a mixed-use development that Kimco is involved in. The Moorestown store would inhabit part of the space in the Moorestown Mall that Macy's recently vacated.

Sprouts expansion to the northeast comes at a time when sales of organic food has been soaring in the U.S. Until recently, Whole Foods has owned most of the organic market in Greater Philadelphia. However, Mom's Organic Market and bFresh have recently entered the market, and several traditional and discount grocery stores - like Aldi and ShopRite - have been increasing their organic and natural foods offerings. Newcomer Lidl is expected to offer a significant variety of organics, as well.

What this all leads to is "a price war of unprecedented proportions," according to Burt Flickinger III, managing director at Strategic Resource Group.

Nationally, Sprouts had reported that they have 63 sites approved for new stores and 43 signed leases "for the coming years."

As reported previously, Albertsons (Acme) is exploring an acquisition of the Sprouts chain.

Target adding grocery employees, pushing to boost food sales

The Wall Street Journal reported last week that Target stores across the U.S. will soon have teams of employees working exclusively in their grocery sections. The change is part of a plan to improve the company's grocery revenue, which currently accounts for about 20% of the retailer's business.

Last March Target announced it would cut back on its dry packaged goods and add more fresh produce, as well as more organic and gluten-free products. However, Target is not alone in these efforts, as similar investments in the product mix and in customer service have been made by Walmart, Kroger, Aldi and Trader Joe's.

Despite Target's recent changes, their most recent quarterly results showed a 1.1% decrease in comparable store sales.

Whole Foods hoping to boost sales with coupons and loyalty program

With traffic and sales falling at Whole Foods due to competition from food retailers selling natural and organic products at lower prices, the company has started to offer discounts and began rolling out a customer loyalty program.

The discounts come in the form of digital coupons available on the Whole Foods mobile app, and company officials says the adoption rate so far has been very high. The loyalty program, launched initially in Dallas and here in Philadelphia, provide member-only deals like 10% off purchases and rewards points that lead to free products.  The program is set to roll out nationwide in 2017.

Whole Foods is hoping to achieve results similar to what Starbucks experienced when they introduced a loyalty program in 2009. Starbucks now has more than 12 million users and more than $1 billion in prepaid value. The program is cited as a major reason that Starbucks has been able to grow same-store sales year after year.

Mom's Organic Market opens in Cherry Hill

Mom's Organic Market opened a new store last weekend on Kings Highway in Cherry Hill, NJ. The company now operates 16 stores, including one in Bryn Mawr, PA, and has plans for a third area store in Center City Philadelphia.

According to Store Manager Jen Weigel, the Cherry Hill location is the chain's largest at 22,000 square feet.

CEO Scott Nash thinks of Mom's as "a third leg on a stool... Whole Foods sells about 25,000 products and Trader Joe's, about 3,000 to 4,000. We sell 14,000 to 15,000, so we're somewhere in between the two."

According to the company, all produce is certified organic, bottled water and plastic bags are not allowed, and they boast a 93 percent companywide recycling rate.

Mom's minimum wage is $12 an hour, and Cherry Hill store perks for employees include a free meal daily at Naked Lunch, the in-store restaurant, paid maternity leave, subsidies towards the purchase of a hybrid or electric car, and a 30 percent discount on all products.

Aldi's fastest growing line: organic

A recent article on Bloomberg.com said that Aldi is now trying to make itself more attractive to the type of customer that shops at Trader Joe's.

According to the report, Aldi U.S. CEO Jason Hart believes that American shoppers are increasingly concerned with the content and quality of the food they eat, so the company, which has about $8 billion in sales in the U.S. and is growing at a steady rate, has added items like organic quinoa and coconut oil, chia seeds and grass-fed beef. In fact, Aldi's Simply Nature all-natural and organic line has become its fastest-growing brand.

"This isn't your grandmother's Aldi," Hart said. (That's for sure, considering that Aldi opened its first U.S. store in 1976 when my grandmother was 63, and that store was in Iowa. The chain didn't get to the east coast until many years later.)

According to the Nutrition Business Journal, Americans spent about $33 billion on organic items last year, and these days they expect to find organic selections at both traditional supermarkets and discounters. Aldi's plan is to not only offer such items, but offer them at extreme discounts.

Regarding the company's pricing, a July survey by Bloomberg Intelligence found Aldi to be cheaper than other discounters, including Walmart and Save-A-Lot.

Target delaying food overhaul until 2017

The Minneapolis Star Tribune reported earlier this month that Target has pushed back the rollout of its food overhaul from 2016 to 2017, saying they need more time to hash out and test ideas. The company's goal is to make its grocery department more of a destination, rather than an afterthought.

The process has already begun, with small tests taking place in several stores around the country. In these select stores, shoppers see a new kiosk on wheels that displays food items and accessories. A store in Minneapolis is one of 450 Target stores with a bigger assortment of gluten-free, organic and healthier items.

The same Minneapolis store is also testing a larger selection of bulk nuts, trail mixes and grains in self-service bins, with produce laid out in wood-paneled receptacles and wicker barrels promoting a fresh-from-the-farm look.

According to the Star Tribune story, analysts have tracked a 49 percent increase in organic items offered at Target in the last year, including private label and brand-name items. Sean Naughton, a retail analyst for Piper Jaffray & Co. noted that Target's brand-name organic items are often sold for less than at Whole Foods. He explained that Target can afford to sell the items for less since the margins it gets on its home goods and apparel "allows them to be competitive on traffic-driving categories like food."

"It's a nice advantage they have compared to others," said Naughton.

Whole Foods launches first-ever national ad campaign

Reacting to competitors who are increasingly selling natural and organic foods, Whole Foods launched its first-ever national ad campaign to remind consumers of the company's buying standards, the origins of its products and the Whole Foods' pioneering role in the industry.

In a campaign that kicked off in October, Whole Foods is calling itself "America's Healthiest Grocery Store." Documentary-style television spots talk about the company's sustainable seafood standards, animal welfare ratings, and its "Responsibly Grown" produce ratings. Farmers, ranchers and fisherman who supply Whole Foods are also featured.

The ads can be seen during prime time on shows such as Modern Family, Scandal and The Voice, and on late night shows like The Tonight Show Starring Jimmy Fallon and Saturday Night Live. Ads also appear in business, food, health and lifestyle outlets.

Competition gaining on Whole Foods as organic and natural markets grow

Whole Foods officials told analysts last month during the company's earnings conference call to expect profits to be under pressure for the next couple years. The company cited growing competition for sales of natural and organic products, and what could be a prolonged period of price investments and internal cost reductions.

"I think it's important to understand that competition has accelerated, there's no question about it," said Co-CEO John Mackey. "We've seen the conventional supermarket companies like Kroger and Wegmans and H-E-B, they certainly have upped their game in natural and organic foods. We've seen new entrants get public money such as Sprouts, Fresh Market, Natural Grocers, and they're expanding more rapidly. Trader Joe's continues to expand."

"We still remain the market leader in this category, I think by a significant margin," he added. "And the market continues to expand, which is why all these guys are jumping into it... I think for a long time Whole Foods had the field to ourselves pretty much. That was nice. But we don't any longer."

It should be noted that Whole Foods is still gaining market share and same-store sales continue to climb. However, their market share gains are at half the rate they used to be, and same-store sales have gone from high single digits to mid-single digits. Wall Street doesn't like that, nor do Whole Foods executives.

Perhaps most disturbing to Whole Foods, although they won't admit it, is Walmart's entrance into the organic food arena. Walmart's buying power and value-pricing may bring lower prices to natural and organic foods overall, and could lead to price competition typically reserved for the conventional supermarkets.

As Analyst Neil Stern of McMillan Doolittle pointed out, "even Aldi has a private label for natural and organic."

Despite these challenges, Mackey pointed out that Whole Foods has a record 114 new stores in its development pipeline and was poised to approach 500 stores by 2017.

Analyst Chuck Grom of Sterne Agee believes a more tepid store development approach is required, and expressed concern over Whole Foods' ability to communicate a lower price image, stating that the company "will need to get very loud with its price message, which would almost certainly lead to lower operating margins."

S&P raises Whole Foods rating to investment grade

Last week S&P raised their corporate credit rating on Whole Foods to "BBB-," or investment grade. Based on S&P's expectation that strong sales and profit growth will continue at Whole Foods, they issued a "stable" outlook.

According to S&P, "Whole Foods has enhanced credit protection measures with considerable profit growth reflecting higher comparable-store sales and new smaller and more productive stores, trends we expect to continue."

S&P also stated that "the rating on Whole Foods reflects our assessment of its business risk as 'satisfactory,' which incorporates the company's strong position as the leader in the organic and natural food retailing sector, and our expectation that it will continue to outperform traditional grocery stores in the near and intermediate term. We also revised our assessment of Whole Foods' financial risk to 'intermediate' from 'significant.' This is based on the company's strong cash flow generation and forecasted credit ratios."

Whole Foods reports "best results in history"

Last week Whole Foods Market reported another outstanding quarter, "producing the best results in our company's 32-year history," according to Co-CEO John Mackey.

For the quarter ended April 8, 2012, Whole Foods reported a profit of $117.7 million, a 31% increase over the same quarter last year. They also reported the following:

• Sales up 14% to $2.67 billion
• Gross margin widened to 36.3% from 35.6%
• Same store sales up 9.5%

Although the natural and organic foods sold by Whole Foods tend to be more expensive than the groceries at traditional supermarkets, its sales have continued to grow, which has helped shield the company from higher food costs. At the same time, Whole Foods has been trying to come across as more value-oriented in order to attract more price-conscious shoppers.

The company's continued success has resulted in a "positive" outlook from Standard & Poor's.