Whole Foods Takes Wraps Off Its New Store, and Wal-Mart Should Be Worried

NEW YORK (TheStreet) -- Whole Foods (WFM) is slowly taking the wraps off its new smaller, value-focused store concept that will take aim at Wal-Mart (WMT) and other rivals hawking more affordable organic food.

On Thursday, Whole Foods announced its new store would be called 365 by Whole Foods Market. The name is a reference to 365 Everyday Value, Whole Foods' main exclusive store brand.

Other details such as store design and initial markets for store openings were scant, likely to slowly build buzz leading up to the first round of openings in 2016. Whole Foods says the new stores will "offer convenience and everyday low prices on natural and organic products that meet the company's industry-leading quality standards."

According to a report from the Associated Press, Whole Foods sees potential for the store base of 365 by Whole Foods Market to reach 400.

Exclusive, generally more affordable products like 365 Everyday Value have been a big win recently for Whole Foods.

Exclusive brands generated approximately $1.8 billion in sales for Whole Foods in fiscal year 2014, accounting for approximately 13% of Whole Foods total retail sales and 18% of its non-perishable sales via about 4,400 stock-keeping units (SKUs). The 365 Everyday Value brand accounted for about half of its exclusive brand items, demonstrating the brand's popularity with organic food fans. 365 by Whole Foods is likely to feature several other exclusive brands found in a typical Whole Foods, such as Allegro Coffee, Engine 2 Plant-Strong, and Whole Foods Market.

The arrival of the new stores could prove to be a thorn in the side of Wal-Mart, the world's largest retailer, which has been moving into the business of offering cheaper organics. Similar to Whole Foods' plan, Wal-Mart has been making those organics available in smaller stores called Neighborhood Markets.

Wal-Mart began its rollout of organic food under the Wild Oats brand back in April 2014. These organic products such as canned vegetables and spices were hyped as being 25% cheaper than national brands.

Since then, Wal-Mart has been relatively quiet about its efforts to expand further into health and wellness products. But the aisles of Wal-Mart's stores are certainly being stuffed with healthier fare. According to Irwin Simon, the CEO of Hain Celestial (HAIN), which makes many natural and organic food products, Wal-Mart will be adding over 50,000 new points of distributions for Hain's products in its stores this year. 

The Wild Oats brand is now in all Wal-Mart stores, with an average of 100 SKUs  per store, according to a Wal-Mart spokeswoman.

Wal-Mart will likely have to pick up the pace in organics to thwart Whole Foods, however.

Wal-Mart CFO Charles Holley said at a March 6 investment bank presentation that "90% of our customers would like access to organic sustainable products." Holley added, "The challenge for us [is] making sure that we can source -- and we should be able to do a lot of that with our size -- sustainable organic products to our customers."

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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