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In Lean Times, Whole Foods Tries for a Fresh Image

PHILADELPHIA - Shawn Hebb may have one of America's toughest jobs: convincing people that Whole Foods Market can be an economical place to shop.

This week, leading five customers through a store here, he breezed past the triple cream goat cheese, $39.99 a pound, and the fresh tuna, $19.99 a pound, to focus on the merits of beans, chicken thighs and frozen fish.

Then he held up a $1.50 package of tofu. "It looks gross but it's delicious," he said.

Whole Foods Market is on a mission to revise its gold-plated image as consumers pull back on discretionary spending in a troubled economy. The company was once a Wall Street darling, but its sales growth was cooling even before the economy turned. Since peaking at the beginning of 2006, its stock has dropped more than 70 percent.

Now, in a sign of the times, the company is offering deeper discounts, adding lower-priced store brands and emphasizing value in its advertising. It is even inviting customers to show up for budget-focused store tours like those led by Mr. Hebb, a Whole Foods employee.

But the budget claims are no easy sell at a store that long ago earned the nickname Whole Paycheck. Told of the company's budget pitch by a reporter, some Whole Foods customers said they had not noticed cheaper prices; a few laughed.

Walter Robb, the company's co-president, acknowledged that Whole Foods was fighting strong consumer perceptions about the chain's prices, and he added that some of that was deserved. But he said the company had made a strong effort to challenge its competitors on price.

"I'm getting a little tired of that tag around our neck," he said, referring to the nickname. "We are a lot more competitive than people give us credit for. We challenge anyone on like items."

Whole Foods' makeover comes amid a tumultuous time in the grocery industry, as customers struggling to pay for higher-priced fuel and food are trading down to lesser products and discount-oriented stores. A July survey by TNS Retail Forward, of Columbus, Ohio, found that 20 percent of shoppers have changed where they buy groceries and household essentials because of the economy. The biggest beneficiaries have been dollar stores and discount grocers like Aldi and Save-a-Lot, which offer a limited selection at extreme discounts.

The losers have been convenience stores, drug stores, health and natural food stores, and conventional supermarkets.

Full Story: http://www.nytimes.com/2008/08/02/business/02food.html?_r=1&ref=business&oref=slogin