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Whole Foods 365: Gearing Up For A Brand Fight


365 Whole Foods Market Brand Strategy

Unable to shake-off the moniker Whole Pay Check and with lower-priced stores like Trader Joe’s and Sprouts eating into its share, Whole Foods has decided enough is enough and is launching a new chain of stores with lower-priced products.

It’s calling this venture 365 by Whole Foods Market—the 365 name coming from its own-label brand whose products will feature heavily in its product offering. By making this move, Whole Foods is taking a road well traveled by equally frustrated premium brands but one that rarely leads to salvation.

Back in the 00s, for example, many legacy air carriers took this route, hoping that they would win back customers against lower-priced competitors like Frontier, Jet Blue and Southwest. It didn’t work. Typical of the initiatives, United launched Ted in 2003 primarily to compete for vacation passengers headed out of its Denver hub. The launch was supported by marketing that tried to personify Ted and the aircraft were configured with Tedevision screens and TedTune music stations. Ted lasted for five years but was discontinued in 2008, a victim of spiking fuel prices and management preference for focusing on the core business. Even the best of these initiatives, Delta’s Song, didn’t make it. In terms of branded effort, this was more than just a new paint job. The brand had a clear target, (hip, style-conscious professional women), cheerful branding and full marketing support. Yet, despite successfully building up passengers and revenue, Song lasted just three years as Delta management decided to focus on the core business.

And that’s often the problem. Faced with competitors offering lower prices and eating into their sales, companies have to do something. Not wanting to reduce the profitability of their core business, they launch fighter brands to go out there and sock it to these upstarts. But, after an initial wave of enthusiasm and support, these initiatives tend to run out of steam and fail.

As Mark Ritson pointed out here on Branding Strategy Insider: “The history of fighter brands is a discouraging roll call of campaigns that inflicted very little damage on the targeted competitors and resulted instead in significant collateral losses for the companies that initiated them.” He lists five major strategic hazards that companies face, everything from cannibalization of the core business to management distraction.

Motivation is the best predictor of success. Least likely to succeed are fighter brands launched reactively to attack the competition, and to protect and save what the company has. More likely to succeed are brands launched proactively recognizing a market opportunity. Scion’s worked out well for Toyota and the hotel chains like Marriott have been very successful building out property portfolios that cover all different price points. It’s not fighter brands you need, it’s customer-serving brands.

On the reactive/proactive spectrum, Whole Foods motivation is pretty clearly on the reactive end. Co-CEO Walter Robb, when he announced the 365 name, described the move as going on the attack: “For the last couple of years, we’ve been the hunted. This turns us back into the hunter,” and added that Whole Foods does not want to water down its brand by lowering prices because “that’s not a game we want to play or a game we can win.” Yes, there’s some positioning going on—the stores are going to be hip, cool and technology-oriented and targeted at Millennials but will this be enough to succeed against competitors who offer a lot more than just good prices? As I pointed out in an article I wrote about low-priced competitors, companies like Trader Joe’s are not just offering low prices, they offer that plus attitude, design, service, and variety. They have built a loyal fan base that won’t be easy to win over.

This 365 store initiative is not the only program that Whole Foods has launched to turn around its fortunes. It’s also implemented a rebranding program based on the values-matter slogan, lowered prices on some key items and implemented a new home delivery service. These programs have shown some signs of working with sales starting to pick up. The 365 ‘new value-focused’ store program may prove one step too far. What are your thoughts?

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Neil Saunders
Twitter: neilrobert21
on June 16th, 2015 said

This feels like Whole Foods might be unintentionally snubbing their existing customer base.
If the new stores are going “to be hip, cool and technology-oriented and targeted at Millennials”, what does that make the existing stores? Old-fashioned, cluttered and over-priced? For old-farts to pay through the nose for perhaps an inferior experience?

If WF are to stay “on-brand” with the new stores and younger customers, they too should share many of the equity strengths of the parent brand. Not be a cheaper, hipper version of their old stores which insults existing customers prepared to pay the price. It’s flawed strategic thinking.

Martin Bishop on June 16th, 2015 said

Great point, Neil. That’s the implication of what they are proposing and it’s why it’s so difficult to pull off this strategic approach.

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