BRAND WARS
GROCERY SHOWDOWN: TRADER JOE’S VS. WHOLE FOODS
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IT ALL STARTED 99 YEARS AGO... …when the first modern grocery store—Piggly Wiggly—opened in Memphis, TN,1 and revolutionized how we shop for food by allowing customers to pick items off the shelves themselves. And in the century that’s followed, the nature of grocery shopping has expanded even more. In 1967, Trader Joe’s dressed up its valuedriven convenience store chain in Hawaiian shirts and entered the grocery game.2 Then, in 1980, Whole Foods opened in Austin, TX3 and forever changed people’s ideas of what a natural foods store could be. Now, as we approach the 100th anniversary of the grocery store, things are evolving faster than ever, with grocery and meal delivery, specialty stores on every corner, and even big box behemoths like Costco and Walmart peddling organic produce and artisanal cheese.4
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“It’s a tectonic shift that’s going on in the food marketplace right now.” – Whole Foods Co-CEO Walter Robb (Fortune)
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A TALE OF TWO STORES With so much change underway we decided to take a closer look at two grocery stores – Trader Joe’s and Whole Foods – that have differentiated themselves in the grocery category. These two used to be on parallel trajectories, but are now crossing paths more than ever. They’re increasingly pitted against each other in the media – everything from exposés comparing the prices of products at each store,5 what living within close proximity of each does to the value of your home,6 and most recently – whether the new 365 by Whole Foods Market is designed to directly compete with Trader Joe’s.7 We asked consumers their perceptions of and experiences at each grocer, as well as their initial reactions to 365 – read on to hear what they said.
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SOMETHING FOR EVERYONE Trader Joe’s is primarily viewed as a “hip” specialty grocery store that offers a multitude of organic, healthy, and unique products. Consumers love the eclectic items that they can find, noting that these aren’t items you could find on the shelf of a big box store. Although the products are niche, consumers feel that there’s something for everyone: wholesome snacks, international food, gluten-free items, etc. Trader Joe’s delivers a great value, and wins consumer praise for the “family friendly” price point – something that definitely sets it apart from Whole Foods. Only a small portion feels that the grocer is overpriced and caters to particular, expensive tastes.
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Trader Joe’s is more than a grocery store. They sell extraordinary items and things you wouldn’t really find at your local food store. Therefore Trader Joe’s is an awesome place to shop. – Male, 18-34
Fun and different items I wouldn’t find anywhere else. I enjoy the unique atmosphere. Lots of great frozen goods and healthy (or otherwise) unique snack items. Bakery and deli have unique combinations. I say Trader Joe’s corners the market on adventuresome dining. – Female, 55+
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BECAUSE COOKIE BUTTER Or so we thought. While Trader Joe’s absolutely sets itself apart from the competition with unique specialty items that can only be found in Trader Joe’s oasis of ringing bells, Hawaiian shirts, chalkboard signs and, yes, cookie butter, the top unique benefit identified is the healthy, organic food (28%). Consumers speak generally to the “healthier,” “cleaner” options the store provides, but go on to explain how they love the prepackaged goods, frozen food, and wine – not exactly the hallmarks of a nutritious diet. Consumers feel that Trader Joe’s caters to their lifestyles, whether by providing exciting prepackaged options to those too busy to cook, accommodating those with dietary restrictions, or having a constantly-stocked supply of “inexpensive yet drinkable” wines.
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I like that the products Trader Joe’s offers are not in other markets. The frozen and wine selection are my favorite. I feel they are looking out for my health and would not deceive me just to make a dollar. – Female, 55+
A grocery store focused on healthy, usually organic, staples with a fun selection of out of the ordinary options. Stores are smaller in size but carry everything you need for your daily grocery shopping. – Male, 18-34
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WHAT TYPE OF PERSON SHOPS AT [WHOLE FOODS/TRADER JOE’S]? While consumers use similar words to describe the grocers’ customers, the meaning behind them is different – Trader Joe’s seems to have a more authentic customer base whereas Whole Foods’ crew is more about status. HIPSTER Health conscious, upper class hipster nerds
ORGANIC Health nuts that like to eat local, organic, non-GMO foods
HEALTH CONSCIOUS Well educated, health conscious, and eco-friendly
GRANOLA Annoying, tree-hugging, liberal granola-eaters
EDUCATED Wealthy and well educated
CRUNCHY Rich, well-educated, crunchy 10
HIPSTER Wannabe flower child
ORGANIC Prefer to eat organic and are health conscious
HEALTH CONSCIOUS Trendy, health conscious bargain hunters
GRANOLA A little extra money to spend, Californian
EDUCATED Open-minded, educated, white, range from middle to upper class
CRUNCHY Crunchy granola people
Granola eating, earth loving, with extra money to spend. – Female, 35-54
Rich and sometimes a hippie, but still rich. – Female, 18-34
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FOR [GRANOLA] LOVERS The general consensus is that Trader Joe’s aisles are packed with foodies who are savvy shoppers, balancing their preference for healthy, organic food with their budget. While many describe Trader Joe’s shoppers as granola-eating hipsters, they do so in a quirky, positive light. Consumers think that this wool-rocking, kaleloving crew flocks to Trader Joe’s on the hunt for unique items, often due to dietary restrictions such as vegetarianism or veganism. A much smaller group describes Trader Joe’s patrons as rich “yuppies,” but for the most part, the Trader Joe’s customer is a lovingly funky health nut looking for good food on a reasonable budget.
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People looking for healthy options for a modest price. I usually see the most unusual people there: healthy, hippie, and hungry. I see people usually 30+ years old. People who like organic or have to avoid certain allergens. Hippie/hipsters. People who like cheap quality wine… – Male, 18-34
Normal weight range for height, exerciser, vegetarian, liberal, health nut, seeks natural health, over 30, more laid back than most, little or no makeup, kind, concerned, likes animals, nature lover, down to earth, hippies, special diets, doctors sent them, wishes to change eating habits, wear flip flops or Birkenstocks, loves salad bars, doesn’t lie too much, outdoorsy, does not hunt, has a bike, enjoys or enjoyed camping, survivalist, seeks peace. – Female, 55+
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COME FOR THE PRODUCE, STAY FOR THE EGOTISTICAL YUPPIES On the flipside, Whole Foods shoppers are painted in a much more negative light, mostly due to their willingness to foot the “whole paycheck.” There’s no doubt that Whole Foods shoppers’ priority is organic, local, Non-GMO foods. Yet their willingness to shell out top dollar, sometimes unnecessarily, is seen as obnoxious and makes shoppers come off as elitist, “egotistical yuppies.” Lastly, the Whole Foods crowd contains a different breed of “granola hipster” than visits Trader Joe’s – the people you bump elbows with at the Whole Foods hot bar are seen as educated, pretentious, entitled “tree-huggers.”
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Someone who cares about where their food comes from, what’s in it, and how it was made. Most likely they prefer organic, healthier options. Maybe even have special diets that don’t have to do with allergies. Cruelty free food would be a main concern as well. – Female, 18-34
Wealthy or upper middle class people who can afford to maintain a healthy diet/lifestyle. They can be snobs and sometimes seem to think they are better than others who don’t shop there. – Female, 25-34
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WHOLE FOODS POCKETBOOK Price plays a large part in the overall brand perception. Although consumers agree that Whole Foods carries premium products, they’re not sold on the value of the food they’re buying. While some are more even-keeled when describing the cost, simply stating that the store is “a bit pricy,” others passionately describe the grocer as “elitist” and “trendy,” some going so far to say that Whole Foods is for “yuppies with their yuppie foods.” This is something that Whole Foods has certainly been under the microscope for in 2015 (could we interest anyone in a $5.99 bottle of asparagus water?).8
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Expensive organic food. Watch what happens at the checkout counter. They’ve been cited in NY and LA for ripping off their customers. – Male, 55+
Whole paycheck. Great selection of organic foods but they tend to be pricey. They also have a great hot plate bar. It’s very nice inside and the prices definitely reflect that. – Male, 18-34
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EVERYTHING FROM A TO Z Price aside, consumers feel that Whole Foods is above par when it comes to freshness and quality. They’re drawn to Whole Foods for much more nuanced health reasons than those who visit Trader Joe’s. Consumers seek ethically-sourced food that is non-GMO and free of pesticides and additives, including “grass-fed meats and poultry,” “fresh organic juices,” products in a “natural state.” Furthermore, Whole Foods provides exclusive products unavailable elsewhere as well as obscure ingredients that expand culinary options for those with allergies or intolerances. This expansive quality and superior selection motivates consumers to visit Whole Foods even when the location isn’t particularly convenient.
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It is a godsend for those of us who have to cook for someone with food allergies or certain food ingredient intolerance. Not only do they have hard to find things like glutenfree items, but they have a wide variety that offers customers a choice. I love that! – Female, 55+
A store filled with local, organic, and fair trade goods. Fresh produce, deli, health and beauty. Eateries and bakeries. Beer and wine. A natural and wholesome variety of products. – Male, 18-34
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LET’S TALK ABOUT HEALTH, BABY Consumers appreciate both Whole Foods and Trader Joe’s because of their healthy offerings. This makes perfect sense for Whole Foods, which lists selling “the highest quality natural and organic products available”9 at the top of their list of core values. But Trader Joe’s brand promise is much more about value, “We just focus on what matters – great food + great prices = Value.”10 There’s no talk about organics or even health. Still, of the consumers that we asked, Trader Joe’s top benefit (28%) is its “healthy,” “organic” offerings, even when mentioned in tandem with frozen and prepackaged goods. Health is defined much differently – “healthier alternatives” at Trader Joe’s versus food in its purest form at Whole Foods, but Trader Joe’s seems to have enjoyed the benefits of the organics wave without actively pushing their efforts.
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They have a wider selection of organic foods than my local grocery store, not to mention that the quality of their produce is far better. Fresh veggies and fruits are a main staple in my family’s diet, I wish to give them the best choices possible without the questions of preservative and additives. – Female, 18-34
Healthy, responsible, convenient food options at affordable prices…The food is slightly healthier than typical grocery stores but not is not overpriced or “too granola” like Whole Foods. – Female, 18-34
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THE NEW STORE ON THE BLOCK Despite issues with perceptions, Whole Foods has a good thing going on: many consumers are willing to pay top dollar for what they think are outstanding, fresh, and healthy goods, and will drive out of their way to do so. At the end of July, the grocer announced that they’re opening a new chain of stores targeted at millennials11 – 365 by Whole Foods Market, which is “Designed to complement the Whole Foods Market brand by bringing fresh, healthy food to a broader audience with a streamlined, quality-meets-value shopping experience, 365 by Whole Foods Market stores will feature a curated mix of products that adhere to the company’s industry-leading quality standards in an environment that’s fun and convenient for shoppers.”12 So Whole Foods but cheaper, smaller, with some sort of whiz-bang gadgetry to optimize the shopping experience.
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SPREAD THE HEALTH We asked consumers what they thought of the 365 by Whole Foods Market concept. And no surprise… they’re really excited as long as they get Whole Foods quality at traditional grocery store prices. Consumers envision adding 365 into their current grocery store rotation, visiting to pick up specialty items or particularly healthy choices. Many agree that lower costs would allow more consumers to take advantage of healthy foods, and spreading the health (especially to their own dinner tables!) is something that they’re wildly enthusiastic about. A smaller group is excited by the store’s smaller footprint and therefore reduced environmental impact.
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I would definitely shop there. I have recently retired and am now on a fixed income. I like having a choice of natural foods to choose from. I try to eat healthy, but I want good foods to choose from. Anyone would want lower prices. – Female, 55+
I will definitely shop at a place like this. This addresses the exact concerns I have with Whole Foods. I love the products Whole Foods offers but the price can be high at times. This will definitely draw me to shop there. – Female, 18-34
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AN IMPOSSIBLE FEAT? Whole Foods has its work cut out for it in pulling this off. If 365 can deliver cheaper, best-in-class organics, what does that mean for their original stores, already under great scrutiny this year after a shareholder sued the company for overcharging customers in New York City13? If the prices remain high, the brand will struggle to engage the “broader audience” they’ve hoped for. And if the quality drops, their reputation is at risk. To top it all off, Whole Foods announced at the end of September that 1,500 jobs are being cut in order to “free up some more money to invest in lower prices, marketing communications, and technology upgrades.”14 The jury is out on whether this will affect consumer perceptions and behavior.
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Whole Foods is just too expensive for my middle-class family. Even if Whole Foods 365 offers lower prices, it seems unlikely that it will fit within my current budget at this stage of my life. – Female, 35-54
I would expect the food to be too expensive to change my habits. – Male, 18-34
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THE MAGIC FORMULA In the battle for market share, there are two key factors at play – accessibility and health. More specifically, consumer perceptions of both. While Trader Joe’s is viewed as more accessible than Whole Foods, especially in terms of price and value, the latter has a slight advantage when it comes to health, in particular with the segment of the population that is highly educated in the organic food arena. That said, it’s not enough to tip the scales in Whole Foods’ favor. Whole Foods will always be seen as the go-to for fresh foods and, in particular, produce, but Trader Joe’s is seen as the friendly neighborhood market where you can eat healthy and find unique items, all on a reasonable budget. Throw Whole Foods’ recent litigations on overcharging and employee layoffs into the mix, and Trader Joe’s comes out looking even better.
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365: MAKE IT MORE THAN A “ME TOO” So where does 365 fit in? Based on what we know about consumer perceptions of Trader Joe’s and Whole Foods, in order to succeed, 365 by Whole Foods Market needs to be: •
INCLUSIVE: The 365 concept appeals to a wider audience than millennials, and the traditional perception of the Whole Foods “egotistical yuppie” must go.
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UNIQUE: Uniqueness drives visits – this can be a vital ingredient to accommodate a food intolerance or a hard-to-find treasure that they’ve come to covet. 365 should carve out a bevy of products unique to their aisles.
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HELPFUL: Consumers are thrilled to spread the health to a broader population. Become a trusted partner for those just starting out with fresh foods– provide recipes, teach cooking techniques, and share general health (related to exercise, sleep, etc.) as well.
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VALUABLE: Consumers who have never shopped for organics will likely find the prices to be high, even if significantly lower than traditional Whole Foods stores. Explain how products can be bundled to get the most bang for their buck – how many meals can consumers get out of $20? If they splurge on a higher priced ingredient, how many ways can they use it?
If 365 by Whole Foods Market is able to deliver Whole Foods quality goods without the “yuppie” factor and at a Trader Joe’s price point, they will carve out a niche for themselves. The challenge for Whole Foods is to retain Whole Foods’ customers at the traditional stores while driving traffic to 365. This isn’t necessarily mutually exclusive, as we know consumers are visiting a variety of stores in order to fulfill their grocery needs,15 but hinges on 365 looking and feeling different than the parent brand. Trader Joe’s, in the meantime, will continue on its merry way. 30
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METHODOLOGY We recruited thousands of consumers ages 18-65 through various online channels (Google Consumer Surveys, Survata, online panel) and asked each person one open-ended question. Questions were formulated using ThoughtPath, our proprietary framework that is rooted in elements of cognitive psychology. Our analysts trimmed any irrelevant answers (jibberish) prior to loading the feedback into Luminoso, our text analytics tool. Luminoso forms broad themes based on connections within the data set, which our analysts use as a basis to build more nuanced themes after diving into the data set and looking closely at factors such as clarity and intensity of language. Percentages reported are based off of the share that each theme represents within the data set for each question, and are calculated after the irrelevant data has been cut.
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THE QUESTIONS: PERCEPTION THEORY How would you describe [Trader Joe’s / Whole Foods] to somebody who is unfamiliar with the store? Please use as much detail as possible. N=1,500 As you may or may not know, Whole Foods recently announced that it will be launching a new store concept called Whole Foods 365. The stores will utilize innovative technologies and offer quality products in a smaller footprint and at a lower cost than current Whole Foods stores. In as much detail as possible, please describe how you think the opening of one of these stores in your neighborhood would affect your shopping habits. N=1,000
IDENTITY THEORY Using as much detail as possible, please describe the type of person that shops at [Trader Joe’s / Whole Foods]. N=1,500
EXPERIENCE THEORY Using as much detail as possible, please explain what makes shopping at [Whole Foods / Trader Joe’s] “worth it”. What are the specific benefits [Whole Foods / Trader Joe’s] provides that other grocery stores do not? N=1,500
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INGREDIENTS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 34
http://www.groceteria.com/about/a-quick-history-of-the-supermarket/ http://www.traderjoes.com/our-story http://www.wholefoodsmarket.com/company-info http://www.bloomberg.com/news/articles/2015-05-14/whole-foods-walmart-costco-stealgrowth-in-organic-groceries http://www.sfgate.com/food/article/Trader-Joe-s-vs-Whole-Foods-A-price-comparison6462560.php#item-44548 http://fortune.com/2015/08/13/trader-joes-whole-foods-home-value/ http://www.forbes.com/sites/retailwire/2015/06/22/whole-foods-365-takes-on-trader-joes/ http://time.com/3985325/whole-foods-asparagus-water/ http://www.wholefoodsmarket.com/mission-values/core-values http://www.traderjoes.com/our-story http://www.bloomberg.com/news/articles/2015-06-11/whole-foods-new-millennial-focusedchain-will-be-called-365?cmpid=twtr1 http://media.wholefoodsmarket.com/news/whole-foods-market-announces-first-365-bywhole-foods-market-store-leases http://www.reuters.com/article/2015/08/07/wholefoods-lawsuit-overchargingidUSL1N10I1BG20150807 http://fortune.com/2015/09/28/whole-foods-tectonic-shift/ http://www.us.jll.com/united-states/en-us/Research/JLL-ShopTopic-Groceryshare.pdf?715e0e88-2c50-49df-8839-d50262c6066a
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