People in general like to feel good about themselves. This relationship has aided in generating business opportunities the world over; such as fancy gym memberships, protein shakes that sound like they came out of a sci-fi movie, and yes, even those yoga classes everyone can’t stop talking about.
What stands out above all the rest however; with regards to being the most profit generating and the most popular, is none other than the health food industry.
From smoothies and juices to raw food diets, there is undoubtedly a huge market for healthy food. With an industry that is estimated to hit $1 trillion by 2017, one can easily understand why so many f&b companies are taking the healthy route. One such company to do so is Kroger.
Kroger is an American retailer founded by Bernard Kroger in 1883 in Cincinnati, Ohio. It is the country's largest supermarket, the country’s second largest general retailer, and the twenty third largest company in the world.
Kroger has recently entered the health food market, and now seems to be doing what Lidl has done to brand name supermarkets in Europe. Kroger has been driving prices for organic products down to the point that there's little or no mark-up over their non-organic counterparts, it has turned things around by creating its “simple truth” line of health foods that not only simplify the packaging, ingredients and process of purchasing, but offer a low price for a quality product; which is something very few do in this specific industry.
Having launched its “Simple truth” line in 2012, Kroger hit $1.2 billion in 2014, and stands at a current stock price of $ 37.16 on September 16; whilst its main competitor, Wholefoods has plunged more than 35 per cent in 2015. It’s nothing revolutionary; offer a decent price for a decent product and people will start flocking.
With the above having been stated, one may ask, “so what’s next?” Given the tremendous success of Kroger’s cheaper option it is clear that unless competitors adapt, Kroger would most likely continue to take over the market; the question is: “are huge brands such as Wholefoods, willing to drop prices in order to compete?”
Wholefoods is not exactly in the best light, with its recent asparagus water stunt, and needs to do something in order to gain back market power, however lowering its prices might cause it to change its public image, and perhaps the company should focus instead on improving in more qualitative standards.
It is uncertain what Wholefoods will do next, what we do know is that Kroger seems to have the right idea, yet is still seen to be the bad news for Whole Foods is that there isn't much it can do to neutralize this challenge.
Its supermarkets have a high cost profile, thanks to being stuffed with luxuries including sit-down eateries, wood-burning pizza ovens, and wine bars. Essentially Kroger is just giving the customers exactly what they want, and with such action, might have just set off a new trend that might change how health food organisations function.
This article was issued by Steve Diacono, Intern at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.