Wild Oats Still Well Behind Whole Foods

Implications: 1.  Wild Oats has lacked the forward thinking of its main competitor Whole Foods in developing its retail business focused on offering natural and organic foods.

2.  While it is encouraging that Mr. Odak has been let go there are a number of key strategic issues that must be addressed for them to achieve the kind of success that Whole Foods continues to demonstrate.

3.  The organic industry is booming, representing $20 billion of retail sales in the U.S. The category is driven by produce at 42% of the market, growing at a rate of 20-25% per year.

Analysis: Wild Oats made several strategic mistakes as they have developed their retail model for marketing natural and organic foods.  Unlike Whole Foods, they failed to leverage both the trend toward natural and organic foods, as well as the growing consumer demand for prepared meals and upscale high end grocery products.

Whole Foods recently announced same store sales growth of 9% for the 3rd quarter of 2006.  They continue to be lauded for their overall approach in the market both as a repeat member of the Fortune 100 Best Companies to its financial performance and new store growth.

It is certainly a positive step to see the current CEO step down.  However, it will take a significant adjustment in strategy and execution to topple Whole foods both from a customer and investor point of view.

The organic market is growing at a remarkable pace, yet Wild Oats same store sales growth is in the 3-5% range, which is significantly lower than the industry average.  Their locations are smaller and less upscale and as a result fail to drive the traffic from mainstream shoppers in addition to the organic enthusiasts that frequent their stores.

Whole Foods, on the other hand has embraced the trend toward super stores which is a key to attracting new shoppers today.  Also their commitment to offering a wide array of prepared meals has been a key to driving sales in today's retail environment. 

Wild Oats also faces stiff competition from other, more conventional retailers like Safeway and Publix.  Both leading retailers are stepping up efforts to launch organic concepts within their stores and as stand alone new concepts.

Again, the changes at Wild Oats are a positive sign, however any thoughts of surpassing Whole Foods are unfounded, or in the least well ahead of its time.