July 30, 2012
Whole Foods Hits it Off with Millennials
Despite high price concerns often cited in purchasing behavior for the demographic, Whole Foods Market last week said the company is gaining market share against other supermarkets partly because it is reaching Millennials.
"We don’t exactly know why that is," John Mackey, co-founder and co-CEO, admitted in the Q&A session of a Whole Foods conference call last week for its third quarter ended July 1. "We can speculate on it somewhat that … a lot of (Millennials) grew up eating Whole Foods because their parents began it. So they’re already familiar with natural/organic food. So it’s not as big a transition for them."
He added that the Millennials also "line up well with our philosophy and our purpose-driven aspects for our company."
The comments came after Whole Foods delivered another stellar quarter, marking three straight year-over-year comp increases over eight percent. Transaction count climbed seven percent in the period. The performance prompted an analyst to ask which demographic from an age and income perspective was driving the traction.
Besides Millennials, Mr. Mackey said Whole Foods is clearly converting more Boomers into customers because they’re aging and looking to "stay young and healthy and vital and extend their longevity, so that’s a natural push for them."
Relative to Boomers and Millennials, Whole Foods is lagging somewhat with is Gen X. However, Mr. Mackey suspected that as Gen X ages, "they will begin to turn more to Whole Foods as well. So we’re bullish on all three demographic groups."
Walter Robb, co-CEO, also noted being much larger, Millennials will naturally have a bigger impact than Gen X. At the same time, he stated that all age groups are helping to push up the chain’s high transaction rate. "Seventy-five percent of the growth here is transaction count — new customers, new trips. And it’s exciting to see. So you have to believe the X-ers are coming in, too."
Mr. Robb earlier in the presentation said that Whole Foods’ efforts to reduce key prices to improve its "relative value positioning" was helping drive "continued sales momentum" since the early days of the recession. He added that its competitive survey indicates that the chain improved its pricing position versus competitors during the quarter.
He concluded his formal comments, "We will continue to gain market share through further differentiating our shopping experience, improving our relative value proposition and reinforcing our standing as America’s healthiest grocery store."
BrainTrust
Recent Discussions
Discussion Questions
Discussion Questions: What’s driving Whole Foods’ apparent appeal to Millennials? Overall, what factors are supporting Whole Foods’ recent robust performance?
Poll
Whole Foods’ appeal is based on offering healthier food, some of it from local sources, and an array of products that consumers cannot find in their local grocery stores. Their stores also offer a more interactive, friendlier shopping experience than the big grocery chains. WF is not for everyone, but then they don’t try to be. Their customers are willing to pay extra for this quality, uniqueness and in-store experience.
Mr. Robb explained their success well. I personally will benefit from a brand new Whole Foods on East 57th Street in New York City. I look forward to enjoying the shopping experience, some excellent pricing, healthy products and high quality meats and produce.
I may not do all my grocery shopping there. But a substantial share of my dollars will be spent at Whole Foods…and that will show up on their bottom line.
Being constantly surrounded by Millennials in our programs (and teaching about them) it’s no surprise that they are attracted to Whole Foods.
A more connected and aware generation, they relate to the more ‘purposeful’ nature of Whole Foods. Good food, good values and being more than just about the money make Whole Foods a logical stop for Millennials. Yes, it might cost a little more to shop there, but the total value is there for this group.
First, the economy has been exploding for three years. The real unemployment rate for the kind of people who like, or would like to shop at Whole Foods is only about 2%. It’s a fun place to shop and not a bad place to burn some disposable income. Another thing helping Whole Foods is most of the competition is not even remotely trying to compete with them. All those broken down old publicly-held grocers are so beaten and wounded by Walmart they have nothing left to fight with. So they leave Whole Foods alone. Wegmans, HEB Central Market, Mariano’s…those stores come close and seem to be doing quite well too. But for the most part we have a thoroughbred going up against mules.
If my crew of twenty-somethings is any sample — the Millennials are raging foodies and it is the quality at Whole Foods that attracts them as much or more than the natural/organic angle. I’ve actually come to look forward to having meals they and their friends prepare. These kids are good! And they know good food. Other retailers can benefit from this just as much as Whole Foods if they just pay attention to what this generation really values.
There is no surprise here. Millennials are not seduced by the traditional marketing efforts of the CPG companies. In many cases they are not even exposed to them. And, when they are they rightfully question then messages. Their sense of product credibility comes from entirely different sources.
Whole Foods stands for something that is parallel to the values Millennials carry. My international students are big fans. They say they can’t get good food at a regular supermarket.
The Whole Foods shopping environment set a standard “back when” that others have attempted to deconstruct and emulate. It makes sense that Whole Foods’ highly-experiential, funky chic stores combined with its progressive policies and understated marketing resonate with a new generation of shoppers. Dismantle the formula and the millennial magic is compromised.
As stated above, the appeal to Millennials is due to the desire for a healthier and organic food supply, be it from their parents bringing them up on such foods or being better educated about what they consume. Also, the economy has driven more people to eat at home versus dining out, which certainly impacts the bottom line of any food retailer. The reduction of key prices also helps increase the company’s performance.
My two Millennials grocery shop the way they shop for everything — many channels and a variety of price points. They buy the important ‘must be healthy’ items from Whole Foods and rest at the cheapest place they can find.
Whole Foods will do well to maintain quality and keep pressure on prices. I think this strategy will keep the attention of the seemingly flighty Millennial and give them a greater share of their weekly purchases.
Well-off Millennials apparently love the idea of experiential grocery retailing and high-quality merchandise. What’s interesting to me is that they don’t share the save-money-at-every-turn ethic that their parents inherited from their parents, who lived during the Depression.
Since I’m a boomer, I guess that my early-30s kids are Millennials according to the definitions with which I’m familiar. They’re both foodies and cooks (a son and a daughter), and shop at Whole Foods in the San Jose area. As a grocery guy, I’ve visited several Whole Foods stores but have never shopped there. I think they’re pretentious, over-priced, and counting on shoppers not really knowing the meanings of “organic,” “all natural,” and “sustainability.” Lemmings and “kumbaya” come to mind.
In specific response to the question, “What’s driving Whole Foods’ apparent appeal to Millennials,” consider this: Millennials are clueless. For instance, when you buy organic produce at Whole Foods, did you know that they are often imported, carrying with them the additional transportation costs and the stigma of offshoring American labor?
Want more? Whole Foods does not typically support small produce farmers as they claim, especially local ones. Check the stuck-on labels (that you have to peel off later) on their fresh veggies. It’s guaranteed that most come from mega-agribusinesses in Florida or California, or are imported from Mexico or locations in Central or South America.
I think Millennials are being purposely misled, and I fault myself for not teaching my Millennials better discernment.
Whole Foods does a masterful job of attracting and presenting true innovation via its support for startup and local companies and products. Millennials are more attracted by what is “NEW” than any other generation. They have grown up with new in all aspects of their lives, led by video games and social media.
Oh, grown ups can’t understand
And some parents never will,
Why Millennials shun white bread
And seek organic stuff to swill.
They’re on a road to fairyland
Across the cool Whole Foods till.
Whole Foods may have become the “affordable luxury” for Millennials. It’s certainly cheaper than going out to a nice dinner and you can assemble a comparable quality meal by shopping there.
As to what’s driving their overall performance, I think it boils down to great execution. They execute well on so many things: sourcing, merchandising, community engagement, social … In sum, it keeps the customer coming back and attracts new ones.
Millennials, like other age groups before them are not totally homogenous in their behaviors. The sub-segment of Millennials that would be attracted to Whole Foods, Fresh Markets, and other higher priced fresh grocers are likely to be the ones who are urban dwellers, upwardly mobile and most importantly earning a nice paycheck. For other, less affluent Millennials, it’s more about ramen noodles and cheap wine.
But if you are young, health conscious, active, and reasonably affluent, Whole Foods provides the proper “ingredients” for their lifestyle such as prepared meals, time-saving cross merchandising ideas, organics, smaller portion sizes, cooking classes, and above all else, a trending place to shop.
I think many of us may find this group’s attraction with physically shopping any bricks and mortar store, in and of itself a bit astonishing, given their preoccupation with all things digital. But the learning here for all of us is that non-commodity, fresh and prepared food is still very much a visceral business. If you get the preparation, the service, and the smells right, you can capture the business of even the most digitally-minded consumer.
“We don’t exactly know why that is….”
I had expected him to attribute success to being the world’s greatest grocer, and eventually he did — well, sort-of — but what a refreshing burst of candor!
Pretty much shows what happens when a company aligns with their customer’s values while giving them what they want when they want it.
To me its about brand positioning and the effective and consistent execution of this across everything Whole Foods does.
So, I agree with Kevin Graff, and I see parallels with why some Boomers are also being attracted to the brand.
While the truth (around product sourcing) may not always correspond with the brand image (per M. Jericho Banks), the competitive set of retailers would still be considered a worse option to Whole Foods shoppers.
By shopping at Whole Foods, customers are telling retailers what is important to them. This is already influencing what other retailers do and perhaps in the future will drive even greater transparency, better standards and greater choice on “organic,” “natural,” and “sustainable” in future.
The economy is affecting older generations who have their income tied to higher household expenses. Millennials, while also affected, are in a different stage of their life where priorities for their disposable income favor the grocery aisles.
Additionally, Millennials fancy themselves explorers, and Whole Foods lends itself to that mindset. Whether it’s fresh food or deli, Whole Foods has relatively low competition in the products offered.
It’s simple; millennials, and anyone for that matter, love Whole Foods because they stay true to their message. They say what they mean and they mean what they say — AND, their product is always top notch. You trust them, and they deliver, you REALLY trust them. The ‘whole paycheck’ thing is ridiculous because, what’s more important than what you put in your body? Nothing.
To me, they are the ultimate U.S. brand right now.
Radically empowered associates within a highly de-centralized system is basically the antithesis of mainstream (conventional) grocery. Millennials are super-attuned to “spin marketing” messages despite Jericho’s bias and cynicism. Throw into the mix an inspiring shopping environment with a deeply nuanced appreciation of “Act Global/Be Local” and you’ve got a formula that is very attractive to Millennials.
Whole Foods goes out of its way to embrace the long-term health benefits of eating higher quality, less processed foods. But it’s done within the context that screams out TASTE before anything else.
Compared to most of the competition, Whole Foods Market refuses to pander to the lowest common denominator. Millennials crave customization and expect to be treated individually — this retailer hits the spot for many of them.
I’m was a bit surprised to hear Mackey say they “weren’t sure” why his company resonates with Millennials. I took a hop over to Facebook and looked at a few of their individual store’s pages. Not a whole bunch going on there, same thing with twitter.
So, I’m going with those who are saying that M’s are aware of the store due to parents and that Mackey’s right when he says “line up well with our philosophy and our purpose-driven aspects for our company.”
BTW — here is an age break down for the four generations who shop at Whole Foods (and your store).
Veterans: Born before 1945
Boomers: Between 1945 and 1964 and are children of the Veteran generation. Parents to both X’ers and M’s
X’ers: Between 1965 and 1980. Can be parent OR sibling of M’s.
Millennials: Born no earlier than 1981; no “end date” yet.
Great products, great customer service, and good pricing all are the factors in Whole Food’s success. This is nothing new for Whole Foods. It is the reason their model has been successful over the years. This fuels their growth and reinforces their model. The more people that are touched by this, the more successful they become.
A lot is what the competition is not doing and the fact is that WF is meeting the demand to cover a more broad everyday market. Their 365 brand and their consistency with quality and detail has all played into the success mix.
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Whole Foods’ appeal is based on offering healthier food, some of it from local sources, and an array of products that consumers cannot find in their local grocery stores. Their stores also offer a more interactive, friendlier shopping experience than the big grocery chains. WF is not for everyone, but then they don’t try to be. Their customers are willing to pay extra for this quality, uniqueness and in-store experience.
Mr. Robb explained their success well. I personally will benefit from a brand new Whole Foods on East 57th Street in New York City. I look forward to enjoying the shopping experience, some excellent pricing, healthy products and high quality meats and produce.
I may not do all my grocery shopping there. But a substantial share of my dollars will be spent at Whole Foods…and that will show up on their bottom line.
Being constantly surrounded by Millennials in our programs (and teaching about them) it’s no surprise that they are attracted to Whole Foods.
A more connected and aware generation, they relate to the more ‘purposeful’ nature of Whole Foods. Good food, good values and being more than just about the money make Whole Foods a logical stop for Millennials. Yes, it might cost a little more to shop there, but the total value is there for this group.
First, the economy has been exploding for three years. The real unemployment rate for the kind of people who like, or would like to shop at Whole Foods is only about 2%. It’s a fun place to shop and not a bad place to burn some disposable income. Another thing helping Whole Foods is most of the competition is not even remotely trying to compete with them. All those broken down old publicly-held grocers are so beaten and wounded by Walmart they have nothing left to fight with. So they leave Whole Foods alone. Wegmans, HEB Central Market, Mariano’s…those stores come close and seem to be doing quite well too. But for the most part we have a thoroughbred going up against mules.
If my crew of twenty-somethings is any sample — the Millennials are raging foodies and it is the quality at Whole Foods that attracts them as much or more than the natural/organic angle. I’ve actually come to look forward to having meals they and their friends prepare. These kids are good! And they know good food. Other retailers can benefit from this just as much as Whole Foods if they just pay attention to what this generation really values.
There is no surprise here. Millennials are not seduced by the traditional marketing efforts of the CPG companies. In many cases they are not even exposed to them. And, when they are they rightfully question then messages. Their sense of product credibility comes from entirely different sources.
Whole Foods stands for something that is parallel to the values Millennials carry. My international students are big fans. They say they can’t get good food at a regular supermarket.
The Whole Foods shopping environment set a standard “back when” that others have attempted to deconstruct and emulate. It makes sense that Whole Foods’ highly-experiential, funky chic stores combined with its progressive policies and understated marketing resonate with a new generation of shoppers. Dismantle the formula and the millennial magic is compromised.
As stated above, the appeal to Millennials is due to the desire for a healthier and organic food supply, be it from their parents bringing them up on such foods or being better educated about what they consume. Also, the economy has driven more people to eat at home versus dining out, which certainly impacts the bottom line of any food retailer. The reduction of key prices also helps increase the company’s performance.
My two Millennials grocery shop the way they shop for everything — many channels and a variety of price points. They buy the important ‘must be healthy’ items from Whole Foods and rest at the cheapest place they can find.
Whole Foods will do well to maintain quality and keep pressure on prices. I think this strategy will keep the attention of the seemingly flighty Millennial and give them a greater share of their weekly purchases.
Well-off Millennials apparently love the idea of experiential grocery retailing and high-quality merchandise. What’s interesting to me is that they don’t share the save-money-at-every-turn ethic that their parents inherited from their parents, who lived during the Depression.
Since I’m a boomer, I guess that my early-30s kids are Millennials according to the definitions with which I’m familiar. They’re both foodies and cooks (a son and a daughter), and shop at Whole Foods in the San Jose area. As a grocery guy, I’ve visited several Whole Foods stores but have never shopped there. I think they’re pretentious, over-priced, and counting on shoppers not really knowing the meanings of “organic,” “all natural,” and “sustainability.” Lemmings and “kumbaya” come to mind.
In specific response to the question, “What’s driving Whole Foods’ apparent appeal to Millennials,” consider this: Millennials are clueless. For instance, when you buy organic produce at Whole Foods, did you know that they are often imported, carrying with them the additional transportation costs and the stigma of offshoring American labor?
Want more? Whole Foods does not typically support small produce farmers as they claim, especially local ones. Check the stuck-on labels (that you have to peel off later) on their fresh veggies. It’s guaranteed that most come from mega-agribusinesses in Florida or California, or are imported from Mexico or locations in Central or South America.
I think Millennials are being purposely misled, and I fault myself for not teaching my Millennials better discernment.
Whole Foods does a masterful job of attracting and presenting true innovation via its support for startup and local companies and products. Millennials are more attracted by what is “NEW” than any other generation. They have grown up with new in all aspects of their lives, led by video games and social media.
Oh, grown ups can’t understand
And some parents never will,
Why Millennials shun white bread
And seek organic stuff to swill.
They’re on a road to fairyland
Across the cool Whole Foods till.
Whole Foods may have become the “affordable luxury” for Millennials. It’s certainly cheaper than going out to a nice dinner and you can assemble a comparable quality meal by shopping there.
As to what’s driving their overall performance, I think it boils down to great execution. They execute well on so many things: sourcing, merchandising, community engagement, social … In sum, it keeps the customer coming back and attracts new ones.
Millennials, like other age groups before them are not totally homogenous in their behaviors. The sub-segment of Millennials that would be attracted to Whole Foods, Fresh Markets, and other higher priced fresh grocers are likely to be the ones who are urban dwellers, upwardly mobile and most importantly earning a nice paycheck. For other, less affluent Millennials, it’s more about ramen noodles and cheap wine.
But if you are young, health conscious, active, and reasonably affluent, Whole Foods provides the proper “ingredients” for their lifestyle such as prepared meals, time-saving cross merchandising ideas, organics, smaller portion sizes, cooking classes, and above all else, a trending place to shop.
I think many of us may find this group’s attraction with physically shopping any bricks and mortar store, in and of itself a bit astonishing, given their preoccupation with all things digital. But the learning here for all of us is that non-commodity, fresh and prepared food is still very much a visceral business. If you get the preparation, the service, and the smells right, you can capture the business of even the most digitally-minded consumer.
“We don’t exactly know why that is….”
I had expected him to attribute success to being the world’s greatest grocer, and eventually he did — well, sort-of — but what a refreshing burst of candor!
Pretty much shows what happens when a company aligns with their customer’s values while giving them what they want when they want it.
To me its about brand positioning and the effective and consistent execution of this across everything Whole Foods does.
So, I agree with Kevin Graff, and I see parallels with why some Boomers are also being attracted to the brand.
While the truth (around product sourcing) may not always correspond with the brand image (per M. Jericho Banks), the competitive set of retailers would still be considered a worse option to Whole Foods shoppers.
By shopping at Whole Foods, customers are telling retailers what is important to them. This is already influencing what other retailers do and perhaps in the future will drive even greater transparency, better standards and greater choice on “organic,” “natural,” and “sustainable” in future.
The economy is affecting older generations who have their income tied to higher household expenses. Millennials, while also affected, are in a different stage of their life where priorities for their disposable income favor the grocery aisles.
Additionally, Millennials fancy themselves explorers, and Whole Foods lends itself to that mindset. Whether it’s fresh food or deli, Whole Foods has relatively low competition in the products offered.
It’s simple; millennials, and anyone for that matter, love Whole Foods because they stay true to their message. They say what they mean and they mean what they say — AND, their product is always top notch. You trust them, and they deliver, you REALLY trust them. The ‘whole paycheck’ thing is ridiculous because, what’s more important than what you put in your body? Nothing.
To me, they are the ultimate U.S. brand right now.
Radically empowered associates within a highly de-centralized system is basically the antithesis of mainstream (conventional) grocery. Millennials are super-attuned to “spin marketing” messages despite Jericho’s bias and cynicism. Throw into the mix an inspiring shopping environment with a deeply nuanced appreciation of “Act Global/Be Local” and you’ve got a formula that is very attractive to Millennials.
Whole Foods goes out of its way to embrace the long-term health benefits of eating higher quality, less processed foods. But it’s done within the context that screams out TASTE before anything else.
Compared to most of the competition, Whole Foods Market refuses to pander to the lowest common denominator. Millennials crave customization and expect to be treated individually — this retailer hits the spot for many of them.
I’m was a bit surprised to hear Mackey say they “weren’t sure” why his company resonates with Millennials. I took a hop over to Facebook and looked at a few of their individual store’s pages. Not a whole bunch going on there, same thing with twitter.
So, I’m going with those who are saying that M’s are aware of the store due to parents and that Mackey’s right when he says “line up well with our philosophy and our purpose-driven aspects for our company.”
BTW — here is an age break down for the four generations who shop at Whole Foods (and your store).
Veterans: Born before 1945
Boomers: Between 1945 and 1964 and are children of the Veteran generation. Parents to both X’ers and M’s
X’ers: Between 1965 and 1980. Can be parent OR sibling of M’s.
Millennials: Born no earlier than 1981; no “end date” yet.
Great products, great customer service, and good pricing all are the factors in Whole Food’s success. This is nothing new for Whole Foods. It is the reason their model has been successful over the years. This fuels their growth and reinforces their model. The more people that are touched by this, the more successful they become.
A lot is what the competition is not doing and the fact is that WF is meeting the demand to cover a more broad everyday market. Their 365 brand and their consistency with quality and detail has all played into the success mix.