The New Face of Natural Foods

The newest branch of Whole Foods Market is in Porter Ranch, a development cutting into the windy horse country of the Santa Susana Mountains. Set in one of the last semi-wild corners of the San Fernando Valley, it’s a neighborhood where everything seems new. The mall is new, the homes nearby are new and, inside, on aisle after aisle stocked with delicacies, the face of the American health-food movement is brand-spanking new.

Gone are the stripped pine shelves, the greasy brown rice stir-fries, the leaden baked goods, the anemic staff and the conviction that meat is murder. Here clerks are not ornery ideologues but bright-eyed, smartly turned-out food handlers looking for careers in the grocery business.

As customers leave the floral section and enter the produce area, misters spray butter lettuces and bouquets of fresh herbs. There are organic fruits, fruits from farms “in conversion” to organic and just plain fruit. The fish counter stocks thick swordfish steaks, Atlantic salmon, prawns, live mussels and tilapia so fresh the eyes still stand proud. Workers behind the fish counter offer samples of bouillabaisse and lobster bisque.

Nearby, another is taking a feather duster to the selection of balsamic vinegars. Next to it is a display of easily 50 kinds of extra-virgin olive oils, including the delicious (and organic) Spanish L’Estornell.

Moving on, there is a meat counter. Not just any meat counter, but one displaying well-marbled New York strip, New Zealand lamb and prime rib eye; next to it is a dry-aging room for sides of beef. Over at the deli, 16 types of olives are displayed in sumptuous platters, including Nicoise, black sun-dried, Alfonso, Cerignola, Calamata and Lucques. This is not a discount store. The olives are $7.99 a pound, the rib eye $14.59 a pound.

Elsewhere there is a cheese aging room and a wood-fired pizza oven. There is an in-store bakery. There is a catering operation making everything from salads to pizzas to stews. Over there, fresh coffee is roasting. Back that way is a large wine section.

If this is a health food store, it begs the question: What is Dean & DeLuca?

The change from lentil loaves to gourmet food can be explained in two ways: one, that the American health-food movement has come of age; or, two, that it has sold out. Either way, a market sector that made its name being anti-establishment is now the darling of the grocery industry, with growth rates that analysts say are four times that of mainstream supermarkets.

Whole Foods, followed by Wild Oats, both public companies listed on NASDAQ, have not just led the make-over of the health food industry; for all intents and purposes, they are the industry. Whole Foods Market has 125 stores in 23 states, and Wild Oats has 107 stores in 22 states.

Under Whole Foods, old stores have been refurbished and new stores are being conceived as latter-day pleasure palaces. Gone is the notion of food solely as cure for body and social ills in one mouthful. Those partial to Oreos do not have to skulk off to the competition to feed their vice. Rather, they are offered supposedly cleaned-up versions without hydrogenated fat.

While they are now big businesses, both chains began not so long ago as humble health-food stores--John Mackey, Craig Weller and Mark Skiles opened Whole Foods in Austin, Texas, in 1980, and Mike Gilliland and Elizabeth Cook opened the vegetarian shop Wild Oats in Boulder, Colo., in 1987.

But it did not take long for them to display distinctly carnivorous business instincts. Both groups rapidly expanded their chains by taking over smaller businesses around the country. In Southern California, Whole Foods took over Mrs Gooch’s in Los Angeles in 1993; Wild Oats took over Henry’s Markets in San Diego in 1999.

Whole Foods first set the tone for the romping new sybaritism, and by doing so gained the business edge. According to Investors Business Daily, Whole Foods had the vision to spot that the market for pills and potions was limited but that the quality grocery business was wide open. Wild Oats was slower backing away from its emphasis on homeopathic antidepressants and aromatherapies.

The numbers tell the story: Whole Foods’ annual sales in 2000 were $1.8 billion, more than twice those of Wild Oats. Whole Foods’ 2001 figures, which were just released, show a rise to more than $2.2 billion. Wild Oats’ 2001 figures won’t be released until next week.

Meanwhile, Wild Oats is in a state of market correction. Last March, founder Gilliland resigned and the chain appointed Perry Odak from Ben & Jerry’s as its leader. Odak, in turn, brought in a slew of new vice presidents who have come from companies like Coca-Cola and the Gap.

Change is now proceeding apace. Funky and poorly performing stores are being closed--six have been shut down in recent months--and four new openings are scheduled for this year, including one in Long Beach.

As the chain updates and upgrades, there have been some awkward transitions. For example, the Hollywood Wild Oats was sold last year but remained open through January, trading under the company’s name. The result was a mixture that might not have fit the new Wild Oats image: A masseuse offered head massages near the meat counter, and a poster inquiring “Do you experience two to three bowel movements per day?” was propped up near the deli section.

While some stores bearing the name are not Wild Oats, some stores actually owned by the chain go by other names. The company has allowed some chains it has taken over to retain their formats and much of their independence.

One example is the Henry’s Marketplace stores in San Diego. These are low-key suburban stores with produce displayed on tables. For every conventional Fuji apple, there will be an organic one. A meat counter displays pre-speared kebabs and carne asada; there is some wine and your choice of real or soy ice cream. The resident dietitian chatters avidly about the benefits of eating like a caveman.

To reconcile the new, reformed Wild Oats with the slightly shaggy but familiar Henry’s, Henry’s has become the chain’s “farmers market division.”

The mix can be confusing. Asked which is the real Wild Oats, company spokeswoman Sonja Tuitele points to the new 26,000-square-foot branch in Irvine, or the smart Santa Monica branch, where customers are as likely to be buying fresh arugula, Tuscan olive oil and English tea as echinacea and Tofurky. The new Wild Oats, says Tuitele, marries the “gourmet” and the “natural.”

But it has a way to go to catch up with Whole Foods, which picked up the theme of eco-gourmandism and ran with it, consistently, nationally and on a supermarket scale. Key to the Whole Foods formula are huge stores in what it calls the “big box” format--35,000 square feet, on average 10,000 square feet larger than Wild Oats’ new sites in California.

Equally important is location. Whole Foods plans to position “big boxes” in areas where the average household income is $50,000 or more. This leads the shops to chase new suburban developments such as Porter Ranch. Michael Besancon, president of the southern Pacific region of Whole Foods, defends the strategy, although in an ideal world, he says, the sprawl would stop, we would preserve the countryside, and visionary retailers would lead the redevelopment of neglected inner cities.

Besancon, who describes himself as a card-carrying environmentalist who marched in the first Earth Day parade, got into the health-food business in 1970, founding Follow Your Heart Natural Foods in Canoga Park. He is a vegetarian of 32 years, but one of the best New York strip steaks for sale anywhere in Los Angeles is at a meat counter just behind him. “I keep my personal bias to myself,” he says. His corporate barometer for a product, he says, is excellence. “If we’re going to carry a product, it’s going to be the best.”

The emphasis on quality is not accidental. The Hartman group, a market research company in Bellevue, Wash., that studies the “wellness” industries, recently surveyed Whole Foods customers. Among “lifestyle segments,” they found that foodies outnumbered vegetarians by more than three to one, and the fitness-minded by two to one.

The old customers are still catered to. It’s just that the meat counter is better positioned than the one with soy products, and the “nutraceuticals” are sequestered off in an unobtrusive aisle, in much the same way a conventional supermarket might stock personal hygiene products.

The new star, quite simply, is the food. Besancon says one of the major thrusts in the new orientation is on “artisan product.” This is Whole Food-ese for foods made on smaller farms, with a degree of Old World craft involved.

Vivien Straus’ family runs Straus Family Creamery in Marin County, an organic dairy that makes nonhomogenized milk, whole-milk yogurt and smoothies. She says Besancon’s claim is not just bluster--Whole Foods is good to the small guys. “Without them we wouldn’t exist,” she says. Whole Foods not only stocks their products, but in Northern California it helped devise a returnable bottle program.

The staff seems enthusiastic about what it sells. At the deli counter someone offers spiced olives. Nearby a woman is handing out tastes of brie with fig paste. Convenience is a constant theme, but with a quality that brings to mind French traiteurs rather than American-style takeout joints. For roughly the same price it costs to order from Domino’s, you can walk away from Whole Foods with a freshly baked goat cheese and olive pizza. Or you can buy an unbaked, pre-assembled one to cook at home. And instead of a liter of Coke, you can buy a bottle of wine.

But for all the service, for all the cheery bustle, to catch and keep foodies, Whole Foods is finding it has to do more than buy food from small producers. It’s going to have to train its own class of artisans. Butchers, says Besancon, are almost impossible to find, and the chain is now training its own staff in a bid to save a dying craft.

Cheese fares worse than meat. Whole Foods stocks the full gamut of cheeses from Neal’s Yard in London, including one of only two authentic Cheddars left in production in all of England. It charges Neal’s Yard prices, too (as high as $17 per pound). But while Neal’s Yard picks up the cheeses at the farms, ages them, then cuts them to order at a well-displayed cheese counter, Whole Foods sells the cheese the same way it might treat processed “Cheddar” from Kraft--in pre-cut, misshapen, plastic-wrapped clumps, which it displays piled up in a refrigerated case.

Besancon defends the pre-cut cheese by saying customers wouldn’t have the patience to wait for it to be cut to order and wrapped properly. “Nobody would buy it,” he says.

But the new stores come in for their harshest criticism not from foodies but from the old guard of the health-food movement. Peter Lassen of the Lassen chain of health food stores in Ventura County says these new models have lost their way by pandering to the crossover set with doppelgangers of junk food. “We draw a line in the sand to keep with the cleaner products,” he says. “We’re not interested in carrying Cheerios or Coke or the crossover things that the mainstream does.”

Whole Foods has not only crossed that line, it is doing a victory dance in the end zone. It is now celebrating National Snack Foods Month by pushing its organic pretzels, imitation Oreos and air-popped popcorn. To promote these as somehow wholesome, it offers advice from its “snack coach,” Alana Sugar: “Frequent, balanced snacking is one of the best things you can do to promote well-being,” says Sugar.

A health-food chain peddling Oreo-type cookies and observing National Snack Month in a country where the federal government is simultaneously declaring obesity an epidemic has a mad kind of daring about it. Read the fine print of Whole Foods promotional material, and behind all the salsa and corn chip serving tips, the chain insists that what it is doing is promoting “responsible snacking.”

But the more obvious reason for the lusty new abandon is a paradigm shift in the health-food movement. A generation that set out to reform its customers now seems intent on pleasing them, and profiting while it’s at it. Whole Foods and Wild Oats are now adjusting their values to fit the marketplace.

“We’re creatures of the demands of our customers,” says Besancon. “Our customers expect us to have strawberries year-round. If our competitors do, we have to.”