Whole Foods Market's 365 grocery chain will convert all of its existing twelve 365 stores into regular Whole Foods stores by the end of 2019, according to reports from Yahoo Finance and other U.S. sources. The announcement follows the decision to stop expanding the smaller format stores, made in an internal announcement in January.
The 365 concept was rolled out nearly four years ago and intended to function as a fewer-frills, value-focused chain that emphasized private label (store brand) products, part of a grocery store trend towards small-scale stores. Whole Foods' flagship store brand is named 365 Everyday Value.
However, reports questioned whether Whole Foods aim is to move away from its 'Whole Paycheck' pricing image across the chain. The 365 stores were targeted at younger age groups such as Millennials with lower prices. Whole Foods CEO John Mackey said the main reason to move away from the smaller, value-based store concept is the price drop at regular Whole Foods stores.
Internal communications reviewed by The Wall Street Journal show the natural grocer raised prices from 10 cents to several dollars as suppliers have boosted their prices in the face of growing costs.
Whole Foods attributed (higher) price moves to increased costs from suppliers due to material, labor, and transportation — all of which are hitting the industry as a whole.
Mr. Mackey noted in an email quoted by Yahoo Finance and Business Insider that as the grocer consistently lowered prices at its core Whole Foods stores after their acquisition by e-commerce giant Amazon, the price distinction between the two formats has "become less relevant," and the company will continue down that path.
"There will be changes in store signages, product assortments, and back-end distributions, according to people familiar with the plan. The transformation will not be too disruptive of current operations. A Whole Foods spokesperson said all 12 Whole Foods Market 365 stores remain open, in an emailed statement to Yahoo Finance," Yahoo said.
The move came as the Amazon-owned Whole Foods opened two of its low-price Whole Foods 365 stores in the Atlanta suburbs of Decatur and Buckhead during December when questions were being asked whether Amazon was slowing rollouts of the larger Whole Foods and the 365 formats. The latest Whole Foods store, expected to open on March 6 in Evergreen Park, Illinois, was supposed to be a 365 store.
At about 25,000 to 30,000 square feet, 365 stores are smaller than conventional Whole Foods supermarkets, which average around 40,000 square feet.
“It’s logical just to convert these few stores into Whole Foods and keep locations that have already got the leases on them,” Phil Lempert, a grocery industry analyst at Supermarket Guru, told Yahoo Finance. “I think that it's smart to just have a singular focus.”
Amazon is focused on making Whole Foods for the general population and not just an upscale, more healthy minded population, Mr. Lempert said. They’re focused on Amazon Go, those stores, and they’re focused on delivery, he added. Lempert attributed the shift to the disappointing performance of the 365 small format stores and Amazon’s overall strategy.
After Amazon bought the grocery chain in August 2017, Whole Foods’ enthusiasm about 365 stores shifted and one month prior to announcing the deal, CEO John Mackey told investors 22 of the 365 stores were under development, while nine were opened.
Whole Foods Market operates more than 470 stores throughout the United States, Canada, and the United Kingdom.