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Shopping Centers Today -> May 2007
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Earth Fare markets fill local organic niche
Whole Foods, Wild Oats and their stripe have company in that organic supermarket niche. A handful of smaller, regional retailers are catering to the growing desire of Americans for more “natural” foods. And Earth Fare, a chain of 11 Southeastern supermarkets, is one of them.
Earth Fare began as a modest natural-foods store called Dinner for Earth, in Asheville, N.C., in 1975. This was hardly the era of consciously healthy eating, but the store developed a dedicated customer base. In 1993 the company changed its name to Earth Fare and then opened a 19,000-square-foot flagship in Asheville’s Westgate Shopping Center the following year.
Today the chain operates 11 stores and remains steadfast in its dedication to fully organic foods. “We are and always have been a natural-foods supermarket,” said Troy Degroff, the chain’s director of sales and marketing. “We know there’s a better way of eating that puts equal emphasis on the healthiness of what you put in your body with the healthiness of the earth.”
To that end, Earth Fare upholds the strictest of standards in its selections. The chain prohibits artificial additives, growth-promoting hormones and pesticides, and even cottonseed and hydrogenated oils.
This separates it from other supposed organic-food stores, Degroff says. “Some of our competitors are more lax than we are when it comes to the content of their products,” he said. “When sucralose, a sugar substitute most notably marketed as Splenda, first [came out], everyone called us crazy for not carrying it. Other places did and made millions. But the lack of long-term tests concerned us, particularly when you consider that there are chlorine components in the makeup. We know our science, and we’re not going to back down.”
Degroff says the chain’s stance against trans fats has been validated; the substance is banned in New York City and other places at the forefront of the healthy foods movement, he says.
But Earth Fare’s focus on healthy living does not end with the products themselves. To avoid using too much fuel, Earth Fare tries to supply foods produced as near to the stores as possible. It also encourages shoppers to bring their own bags or to reuse the store’s bags.
Degroff says Earth Fare’s core customers are vegetarians or those who avoid gluten. Other customers are those “who understand that our food is healthier and tastes better, and have embraced the lifestyle.”
But the company has seen consumers from outside the organic-foods community quickly convert. “Our demographic is growing to include everybody, really,” said Degroff. “If our stores are near a university, we get a lot of students and faculty. We get young shoppers coming in for our microbrews, and senior citizens coming in because their doctor told them to eat healthier. And there are always the ‘foodies’ and moms who just want the best food available.”
The segment is growing. And W. Frank Dell II says he knows why. “Baby boomers, who are the largest consumer group in America, are getting old,” said Dell, president and CEO of Dellmart & Co., a Stamford, Conn.-based consulting firm that focuses on food and consumer products. “They’re realizing that they’re not going to live forever if they keep eating all these chemicals and such. And moms have always tried to stay away from preservatives, so they’re certainly driving this thing, too.”There was a demand, Dell says, and it was not being met. “These all used to be small operations,” he said. “Half the suppliers were packaging goods in their garages. And though they were a niche market, the stores provided customers with the environment and experience they wanted, so they survived.” Now the tide is shifting, he says. “For one thing, Whole Foods continues to buy out lots of the smaller stores,” Dell said. “They’re not purist, though, so there’s still a disconnect from what Earth Fare is doing. The real problem is that regular supermarket chains are realizing that this is not a fad and are adjusting.”
Whole Foods’ $565 million deal to buy rival Wild Oats will make for some tough competition in certain markets, CEO and co-founder John Mackey told investors. The deal, which adds 110 stores and four banners in the U.S. and Canada to Whole Foods’ portfolio, gives the retailer critical mass in Colorado, Florida and the Pacific Northwest, three regions where it is currently underrepresented, he said. Whole Foods will close, rebrand, relocate and remodel some of the Wild Oats stores. Whole Foods, which did $1.2 billion in sales for 2005, reported a seven percent increase in same-store sales for its first quarter ended Jan. 14, a significant slowdown from the 13 percent comp it posted for the period last year.
Safeway, for its part, has rolled out its own organic private label, called “O,” and Wal-mart, too, has been carrying organic products.
As a result, Dell says, the conventional organic-foods companies are going to have to adjust as well. “It used to just be that you’d find organics in areas like California and Colorado,” he said. “But now, as natural foods become more mainstream, places like the mid-Atlantic region are getting into it. Subsequently, two things are going to happen. One, we’re going to run into supply problems. There’s a limited amount of fully organic food available. Additionally, as the segment becomes more competitive, the margins are going to go down.”
But Degroff is confident that even in a market experiencing such dramatic growth, Earth Fare, which posted $100 million in sales last year, will do fine. As Dell says, few other organic-foods stores are quite as organic as Earth Fare, for one thing. For another, Earth Fare works hard to keep the classic organic-foods store feeling alive, says Degroff. “Some of our competition, like Whole Foods, are opening massive, 65,000-to-80,000-square-foot stores, which feels so much less inviting. Our stores are usually between 25,000 and 30,000 square feet, so they retain a natural, intimate, friendly atmosphere. It’s just a nice shop.”
And there will be plenty more of those nice shops, Degroff says. Earth Fare has two stores in the planning for this year, and it aims to open about half a dozen per year going forward. Because the company understands its region, it intends to stay in the Southeast for now. If many there are not yet attuned to the benefits of healthy eating, they soon will be, Degroff says, and Earth Fare will be available to provide it.
“More and more, people are hearing that eating healthy is a trendy thing, and they start doing it,” said Degroff. “It used to be just that we’d have your typical ‘foodie’ customer. Now it’s everybody. And I’ll have to thank Martha Stewart and the Food Network for that.”
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