Monday, August 20, 2007

Whole Foods and Wild Oats

It has been a very interesting story to follow. Both sides have good arguments. The FTC is pretty adamant that Whole Foods' purchase would create a monopoly on the natural foods movement. #1 buying #2 with #3 far, far behind is pretty big. But it's all about how you define the market. If you think natural foods stores primarily compete against each other than the FTC's argument is very valid. And, in fact, when you hear people in Austin talk about grocery shopping they either talk about HEB/Randalls/Albertsons OR they talk about Whole Foods/Central Market/Sun Harvest. Not many people consider them to be very comparable to the mainstream grocery stores.

But if you dig down further and look at what they're selling....I think it tips the other way in favor of Mackey's argument. Did you know that only 45% of organic foods last year were bought in natural food stores (Sundale Research, 2007)? Did you also know that this # is expected to decline steadily as organic foods become more available? From this perspective, Whole Foods AND Wild Oats should be much more worried about competition from mainstream markets than from each other. A merger would help them stay competitive and WF would gain presence in many markets it doesn't currently serve, making it a real, nationally recognized brand that hopefully people would trust their organic and natural shopping with.

It currently looks like the merger will go through.

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