It’s Time to Revisit A Whole Foods Publix Grocery Merger

Food Lion repositioned itself back to its roots as a chain grocer offering “low prices and convenient locations” soon after the completed merger between Dutch company Royal Ahold NV, and Belgian firm Delhaize Group, the two companies form the fifth-biggest U.S. supermarket retailer sending a notice to the industry they are not planning to get stuck in the middle or capitulate market share.

Jeff Stier and Henry Miller reported in Forbes that “Holier-than-thou Whole Foods has admitted cheating its customers by systematically overcharging in stores in California and New York. Equally dishonest are its false claims about the superiority of organic foods.”

The moniker of ‘Whole Paycheck’ which Whole Foods worked so hard to dispel is not going to go away anytime soon now. What’s even worse for Whole Foods the The Seattle Times reported that Costco sold more than $4 billion in organic products this year, compared with Whole Foods' estimated $3.6 billion annually all with fewer locations.

So What’s a Company to do?

That is the easy part. While Food Lion and parent Ahold Delhaize appear to steaking out the Middle to Low end of the market place, they will be battling with Aldi, WinCo, and Lidl for that space. Whole Foods has but one choice, stay with what works grocerant niche Ready-2-Eat and Heat-N-Eat fresh food. Whole Food does a great job creating local menu options, merchandising, pricing, packaging fresh prepared food for Take-Out.
Publix, Safeway and Kroger are positioned squarely in the middle of the grocery / supermarket sector in the United States. That is one place no company can thrive in todays bifurcated marketplace. That middle position is simply yesterday’s strategy.

Don’t Get Stuck in the Middle.

Simply put there is no lasting opportunity being stuck in the middle. Publix wants to sell more and more quality fresh prepared Ready-2-Eat and Heat-N-Eat food. However, our continue review and monitoring only provide evidence that they have a very long way to go. Publix has been continually plagued with system wide inconsistent food quality, service, and merchandising. At best we think of Publix fresh prepared food as mediocre.

Both Publix and Whole Foods want/need to grow. Whole Foods suffers from ‘Whole Paycheck’ fatigue Publix has to be tired of stumbling with Ready-2-Eat and Heat-N-Eat fresh food. More important both face increased competition from well-funded European grocery retailers the ilk of Aldi, Lidl, and Ahold Delhaize.

The View From Afar.

We don’t need to look far away for examples of what may be on the horizon for these legacy companies that are in quagmire of their own making. This year middle of the road grocery retailers in Great Britain are experiencing a uniquely challenging environment complicated with unwanted declining sales.

Both Tesco and Morrisons are capitulating market share due to management strategies that put them in the middle of the grocery sector in Great Britain. Here is what’s bad, they are capitulating share to Lidl and Aldi each known as ‘discounters”. That’s a view / fight neither Whole Foods or Publix wants.

Look at some facts from the US

These facts from a recent study by Willard Bishop Consulting provide insights into why we think that Whole Food and Publix might just be a perfect match for a merger:

1. WB found, the traditional grocery channel's dollar share has decreased by about half since 1988, while non-traditional grocery and convenience stores competed for the food dollar.
2. Specifically, the non-traditional channel's dollar share jumped from 2 percent in 1988 to 39 percent in 2014,
3. The convenience channel's dollar share almost doubled from 8 percent to 15 percent over those 25-plus years.
4. By 2019, Willard Bishop predicts traditional supermarkets will continue to lose dollar share to other segments of the traditional grocery channel, like fresh format and limited assortment.

The competition no one wants to talk about.

In the United States Aldi is no stranger today Aldi has 1,275+ outlets. They are the fastest growing grocer in the United States. Like the U.K. mid-market retailers Publix has discounted companies the ilk of WinCo and Aldi that continue to garner market share everywhere they open. WinCo had increased the size, quality, and positioning of its Ready-2-Eat and Heat-N-Eat offering providing additional points of consumer differentiation. Don’t forget that Lidl is on its way with a new US headquarters on the east coast the I-90 corridor.

Ok, Whole Foods is stuck with ‘Whole Paycheck’ what else can we say. They tried and failed to dispel the notion that they are too expensive. Whole Foods does have the national footprint, ability to consistently offer grocerant niche Ready-2-Eat and Heat-N-Eat food, merchandise it well , and Publix well they need everything that Whole Foods does right.

It may be others that want to migrate into the Grocerant Niche as they search for tactics to elevate brand relevance but Whole Food and Publix today are best positioned to win at it together.

Steven Johnson is Grocerant Guru? at Tacoma, WA based www.FoodserviceSolutions.us with extensive experience as a multi-unit operator, consultant and brand/product positioning expert. Since 1991 Foodservice Solutions? of Tacoma, WA has been the global leader in the Grocerant niche