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The Future of Food Retailing Joe’s, and Natural Channel Grocery

Defined by the number who shop there at least once a month, Trader Joe’s draws 10.5% of U.S. adults as customers, compared with 6.3% for Whole Foods. In contrast to a 10-year compound annual growth rate of only 0.2% in the customer base for Kroger, as the conventional supermarket kingpin, and a declining percentage draw since 2007 among most of the leading conventional supermarket banners, Trader Joe’s has posted a 10-year CAGR in customer base of 5.9%, and Whole Foods of 4.9%. But notwithstanding the multi-decade phenomenon of Whole Foods and Trader Joe’s, the natural channel remains a fragment of food retailing overall. The U.S. grocery retailing business has never been more competitive, and this may be especially so for retailers featuring natural and organic foods.

A number of trends are putting pressure on food retailers of all stripes, from upscale natural grocers like Whole Foods to heavily price-focused supercenters like Walmart and discount/limited-assortment grocers like ALDI, to dollar stores such as Dollar General for which food is a smaller but growing part of the mix. Among the trends reshaping the competitive landscape are food deflation driven by heavy discounting, shakeups among major chains, and heightened brick-and-mortar competition spurred by U.S. expansion of Germany-based discount/limited-assortment retailers ALDI and Lidl. At the same time, grocery shoppers’ ever-growing expectation that the natural and organic foods they want will be available where they shop is increasingly positioning natural and organic as an essential competitive chip.

This makes for a whole new ball game for natural channel grocers. Gone are the days when the biggest worry of pure-play natural retailers like Whole Foods and Trader Joe’s were other specialists and local natural grocers: while they still face off against the likes of Sprout’s, Fresh, Thyme, and Natural Grocers, consumer demand has broadened the market to include any grocery retailer worth its salt. In June 2017, moreover, Amazon rocked the grocery and e-commerce worlds with the announcement of its acquisition of Whole Foods. Amazon’s surge into brick-and-mortar grocery has established grocers duly alarmed, since Amazon has a long history of sacrificing short-term profits to win market share and traffic, gaining formidable efficiency along the way.

Scope and Methodology

Whole Foods, Trader Joe’s, and Natural Channel Grocery Shopping analyzes the trends shaping the market, including the snow-balling impact of Millennials as avid shoppers both online andin-store. In addition to a comprehensive assessment of Whole Foods and Trader Joe’s, this report profiles natural and organic foods retailers across the full spectrum, including pure-play retailers like Earth Fare, Fresh Thyme, Lucky’s, Natural Grocers, Sprouts, and The Fresh Market; traditional and non-traditional grocers including Albertsons/Safeway, ALDI, Costco, Kroger, Lidl, Publix, Sam’s Club, Walmart, and Wegmans; and e-tailers including Amazon.com, Door to Door Organics, and Thrive Market. 

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