FOOD & DRINK

Taking up Whole Foods' challenge to comparison shop

Survey shows it is competitive on some items with Central Market and Sun Harvest

By Lilly Rockwell
AMERICAN-STATESMAN STAFF
Wednesday, August 20, 2008

In a phone interview two weeks ago, Walter Robb, co-president and chief operating officer of Whole Foods Market Inc., issued a challenge:

"I ask you to look, take a fresh look at who we are and our ability to meet customers' needs," Robb said. "Allow the possibility that Whole Foods is, within the quality standards, competitively priced."

It sounded like a double-dare to me. Whole Foods has recently tried to aggressively promote how competitive it is on price, trying hard to combat its image of being expensive.

So I took Robb up on his offer to find out whether Whole Foods is, indeed, competitively priced. On Friday, Aug. 8, I traveled to the Whole Foods downtown store compiling a list of more than 75 items to compare.

I looked at apples, bananas, peaches, meat, cheese, milk, eggs, bread, frozen dinners, peanut butter, cereals and water. I looked at store-brand labels and name-brand products. I examined conventional products and organic.

Next I went to two Central Markets, a Sun Harvest store and a Randalls, which is owned by Safeway and has its own brand of organic products.

My impression from those comparisons is that Whole Foods, at least in Austin, is more competitive on price than most people realize, with some exceptions. It helps that Whole Foods has more than 1,000 store-brand products, usually offered in both organic and the less-expensive conventional versions.

On some items, such as organic strawberries and its store-brand organic milk, Whole Foods matched competitors' prices.

For a few things, such as its organic green leaf lettuce and store-brand jars of peanut butter, Whole Foods had the lowest price.

Still, there were items where Whole Foods had a higher price than some of its competitors and both were name brands. Its Cascadian Farms Multi-Grain Squares cereal was at least $2 more than two of its competitors. And its frozen Amy's vegetable lasagna was $1 more than Central Market's version. Whole Foods often explains its differences in prices as a matter of quality — but when comparing identical items that's not the case. (To see a spreadsheet of all the items and prices surveyed at Whole Foods, Sun Harvest and Randalls, go to statesman.com/wholescoop.)

Whole Foods Southwest Vice President of Purchasing Rick Findlay said Whole Foods does price comparison shopping every week, but cautioned that comparing Whole Foods to competitors isn't "apples to apples."

"We hold ourselves to a higher quality and a higher standard on our products," Findlay said.

"When we go out and do a comparison, we go look at specific categories," he said. "We might be looking at the meat section or a steak category, or apples in produce."

Whole Foods has been trying for years to shed its reputation of being expensive. The company has blamed the media in part for perpetuating the "Whole Paycheck" stereotype.

So why is it so tough for Whole Foods to be perceived as a place to find value?

Raj Raghunathan, a marketing professor at the University of Texas, said shoppers often make assumptions about how expensive a store might be before shopping there. Then, upon arriving, they look for items that confirm their hypothesis.

For example, if Whole Foods carries eight different kinds of eggs, most of which are competitively priced, but also has a high-quality, expensive version, shoppers will remember the expensive eggs.

"People might infer that something is higher-priced because they think it is better quality," Raghunathan said. But in reality, that item might be the same price as a competitor's version.

"Most people are completely clueless when it comes to prices," he said. And with Whole Foods, it is a difficult balancing act between maintaining its image as a "premium" grocery store and attracting shoppers who value good deals.

Whole Foods isn't planning a national advertising campaign on its prices. Raghunathan said that kind of thing might turn off loyal customers who like shopping there because they believe they pay more for better quality.

"(TV advertising) would only be good if you feel that the customers you get, the main customers, 80 percent, are price sensitive," Raghunathan said.

But what about those shoppers who swear they always spend $30 more at Whole Foods versus H-E-B? Raghunathan said those shoppers might not be buying the exact same things, and aren't paying attention to prices.

"They assume that Whole Foods costs more," Raghunathan said. They buy different items or "assume that the same basket of goods must have been $30 more at H-E-B."

To better promote itself as a place to find low-cost items, Whole Foods has began a "Whole Deal" Web site devoted to helping customers find good deals, even offering coupons. It gives value tours in its stores to shoppers curious about where to find these good deals. (At Whole Foods' downtown Austin store the tour starts at 2 p.m. Tuesday through Sunday.) And it is waging a public relations battle, urging financial analysts and reporters to examine its pricing.

"We want to be competitive throughout the store," Findlay said. "And we feel that we are very, very competitive and we want to offer value to our guests throughout the store."