February 20, 2006
A part of the whole | A chat with Chandrika Sanyal, owner of Portland's Whole Grocer — now part of the Whole Foods Market chain — on Portland's changing natural food market
By Sean Donahue
Long before organic food became the fastest growing sector of the grocery industry, attracting big food producers and national grocery chains with sales growth of 150% between 2000 and 2005, it was the domain of small producers and independent stores like Portland's Whole Grocer. The natural foods store, founded in 1984, has outlasted many of its small competitors and weathered the arrival of natural food chains like Wild Oats in 2003. But now, it, too, has been absorbed by the industry's larger forces.
Last month, Whole Grocer owner Chandrika Sanyal reached a deal to sell her store to Austin, Texas-based Whole Foods Market, which operates more than 180 organic food stores around the country. The chain is planning in 2007 to open a 45,000-square-foot supermarket on Portland's Marginal Way ˆ just blocks from both The Whole Grocer and Wild Oats (see "Portland's natural food corridor," page 27) ˆ and in the interim will operate out of the former Whole Grocer's 7,500-square-foot store. Sanyal has stayed on to continue running the store.
The Whole Grocer's sale to a national chain is a scenario that's played out in markets across the country, as larger stores have sought out locations with an established natural foods customer base, as well as the potential for growth. But with the end of The Whole Grocer's 22-year independent run, Mainebiz decided to check in with Sanyal to learn how this sale and other national trends in the industry have played out in the Portland market over the years. Sanyal, who joined The Whole Grocer as an employee in 1991 and then purchased the store in 1997, has seen first hand how both the natural foods industry, and her customer base, has changed along with the rapid growth in the national market. An edited transcript of the conversation follows.
Mainebiz: When The Whole Grocer was founded, and even when you joined the company in 1991, the organic food market was a much smaller niche than it is now. But did you see even in the 1990s signs of the changes that make it such a fast-growing industry?
Sanyal: As time progressed [during the 90s] we found people getting away more and more from eating processed foods, and more into wholesome, natural ˆ what we call "real" food. It was pretty clear that was happening. More and more information was put out to the general population through the media and it wasn't any more just the hippie industry, you know? We were finding more people from the general population coming and shopping at the store.
We definitely saw sales increasing steadily, and at the time The Whole Grocer was doing very well and so was Good Day Market ˆ there were two [natural foods] markets here and all of us were doing pretty well.
While that customer base was growing, it seems there also was enormous growth in the number of natural food companies and the varieties of products to sell. Did you notice a spike on the supply side, as well?
Absolutely. Like you said, there are more and more products available and more and more kinds of products available in the same categories. There is so much more choice available to people ˆ it's not just tofu, it's flavored tofu and barbecued tofu. I think a lot of these companies are coming out with great, healthier alternatives that taste like something that people have been used to. So certainly we find [those products] are more appealing to mainstream shoppers.
What do you think drove that market shift? Was it consumers asking for new products ˆ "hey, we want flavored tofu" ˆ or was it vendors getting savvy about developing new products in order to attract different customers and create a new market?
I think it's a bit of both, really. The industry has been growing in leaps and bounds for the last 20 years, and when there is growth people will come up with bigger and better ideas that might have appeal to the mass population. And certainly the mass market has picked up on it. You've seen supermarkets establish their version of little health food stores inside stores, which I think is a great thing. It just opens our industry up to people who generally would not venture that way. It cuts down the fear of, "Is it unaffordable? Does it taste good?"
That certainly seems to be the story in the natural foods industry in the last several years, but when did you first notice this trend accelerating? What did it look like at the store level here in Portland?
It came to a point that the store we were running on top of Munjoy Hill was just way too tiny for the amount of business coming through the door. We were really not able to serve the community the way it should have been served. It was our motivation to look [in 1999] into bigger space ˆ the old store was only 2,400 sq. ft., with less than 1,800 sq. ft. of selling space. There was just no space and customers were coming into crammed aisles. They just needed a better shopping experience than what we could provide.
Tell me a little more about how those customers have changed over the years. Who are they, where are they coming from?
The shopper is the community, really. It's a complete cross-section of people from every part of the community. We have everyone from students to people in their 70s, people who are very well off and people who are struggling artists.
Has the landscape of local suppliers grown in the same way? There seems to be a pretty good niche of natural and organic food producers in Maine, but how well-developed does the local industry seem to you?
It's really pleasantly well stocked, in a way. It used to be we could buy free-range, antibiotic- and hormone-free chicken from one vendor. Now we can choose between three or four farmers in Maine. Plus, there are farmers doing organic poultry and organic meat, and in terms of vegetables there are so many choices. Every year we get new farmers coming in saying, "We are certified organic."
There are so many choices available now for a retailer that it's fantastic. Practically in every aisle in our store and in almost every category of products we carry there is some vendor from Maine.
Do you know what percentage of the products you sell is from local producers?
I'm not sure, but I know we've got over a 100 different local vendors in the store.
Is buying local something that customers are particularly interested in?
Very much so ˆ they're asking for it. One of the reasons we have been successful in this market is because of our commitment to continually carrying Maine products. It's very important to our customer base.
Obviously, though, the Portland market is no longer the domain of local stores and local suppliers. What do you think the national chains see that have made them want to establish stores here?
I think Portland has always had a kind of ˆ for lack of a better word ˆ a cool, alternative community base. The community is very aware of what is going on with food and the environment and all of that. When companies are coming from out of state, they do research and see that it's absolutely a perfect market for companies like Wild Oats and Whole Foods. They're not coming into a market where they have to create a customer base ˆ the customers are here waiting.
But it seems like the chains could also look at local stores like The Whole Grocer and see proof in the model.
I think we have done a remarkable job of educating customers about how to eat healthy and to get away from processed foods and to provide them with the products to do that. It's true, there are stores already providing people with the alternatives ˆ besides us, there is Lois' [in Scarborough] and Royal River [in Freeport] and Morning Glory in Brunswick.
So in deciding to sell to Whole Foods, was it just a matter of the challenge of another competitor coming in, or were there other issues that made you decide not to continue operating The Whole Grocer as a standalone store?
As a standalone store we've done what we could with all the resources we had. We have been very successful. But with Whole Foods approaching us, it became clear that we have become part of a big, huge family where the resources have doubled and tripled for us. I think it should be very exciting for the community, because what we could not provide as a standalone small store we absolutely will be able to as part of Whole Foods Market because they have some tremendous resources.
I think people will see the affordability of products increase, because with the buying power of Whole Foods we will be able to offer certain things at certain prices that as an independent, one-store operation was just not possible. The other change is in the products that are available to us: There are products that are available to the Whole Foods stores in our region that don't make it up here because of lack of transportation. Some companies just don't want to send trucks up here. Now, we have the resources to get those products up here.
We've had shoppers who've been traveling somewhere and bought a product that they've come back with and asked us to carry. And sometimes we've had to say, "Well, it's not really available to us." Now, we're finding we can do more with our distribution while staying committed to the same kind of standard we've always had.
Last month, Whole Grocer owner Chandrika Sanyal reached a deal to sell her store to Austin, Texas-based Whole Foods Market, which operates more than 180 organic food stores around the country. The chain is planning in 2007 to open a 45,000-square-foot supermarket on Portland's Marginal Way ˆ just blocks from both The Whole Grocer and Wild Oats (see "Portland's natural food corridor," page 27) ˆ and in the interim will operate out of the former Whole Grocer's 7,500-square-foot store. Sanyal has stayed on to continue running the store.
The Whole Grocer's sale to a national chain is a scenario that's played out in markets across the country, as larger stores have sought out locations with an established natural foods customer base, as well as the potential for growth. But with the end of The Whole Grocer's 22-year independent run, Mainebiz decided to check in with Sanyal to learn how this sale and other national trends in the industry have played out in the Portland market over the years. Sanyal, who joined The Whole Grocer as an employee in 1991 and then purchased the store in 1997, has seen first hand how both the natural foods industry, and her customer base, has changed along with the rapid growth in the national market. An edited transcript of the conversation follows.
Mainebiz: When The Whole Grocer was founded, and even when you joined the company in 1991, the organic food market was a much smaller niche than it is now. But did you see even in the 1990s signs of the changes that make it such a fast-growing industry?
Sanyal: As time progressed [during the 90s] we found people getting away more and more from eating processed foods, and more into wholesome, natural ˆ what we call "real" food. It was pretty clear that was happening. More and more information was put out to the general population through the media and it wasn't any more just the hippie industry, you know? We were finding more people from the general population coming and shopping at the store.
We definitely saw sales increasing steadily, and at the time The Whole Grocer was doing very well and so was Good Day Market ˆ there were two [natural foods] markets here and all of us were doing pretty well.
While that customer base was growing, it seems there also was enormous growth in the number of natural food companies and the varieties of products to sell. Did you notice a spike on the supply side, as well?
Absolutely. Like you said, there are more and more products available and more and more kinds of products available in the same categories. There is so much more choice available to people ˆ it's not just tofu, it's flavored tofu and barbecued tofu. I think a lot of these companies are coming out with great, healthier alternatives that taste like something that people have been used to. So certainly we find [those products] are more appealing to mainstream shoppers.
What do you think drove that market shift? Was it consumers asking for new products ˆ "hey, we want flavored tofu" ˆ or was it vendors getting savvy about developing new products in order to attract different customers and create a new market?
I think it's a bit of both, really. The industry has been growing in leaps and bounds for the last 20 years, and when there is growth people will come up with bigger and better ideas that might have appeal to the mass population. And certainly the mass market has picked up on it. You've seen supermarkets establish their version of little health food stores inside stores, which I think is a great thing. It just opens our industry up to people who generally would not venture that way. It cuts down the fear of, "Is it unaffordable? Does it taste good?"
That certainly seems to be the story in the natural foods industry in the last several years, but when did you first notice this trend accelerating? What did it look like at the store level here in Portland?
It came to a point that the store we were running on top of Munjoy Hill was just way too tiny for the amount of business coming through the door. We were really not able to serve the community the way it should have been served. It was our motivation to look [in 1999] into bigger space ˆ the old store was only 2,400 sq. ft., with less than 1,800 sq. ft. of selling space. There was just no space and customers were coming into crammed aisles. They just needed a better shopping experience than what we could provide.
Tell me a little more about how those customers have changed over the years. Who are they, where are they coming from?
The shopper is the community, really. It's a complete cross-section of people from every part of the community. We have everyone from students to people in their 70s, people who are very well off and people who are struggling artists.
Has the landscape of local suppliers grown in the same way? There seems to be a pretty good niche of natural and organic food producers in Maine, but how well-developed does the local industry seem to you?
It's really pleasantly well stocked, in a way. It used to be we could buy free-range, antibiotic- and hormone-free chicken from one vendor. Now we can choose between three or four farmers in Maine. Plus, there are farmers doing organic poultry and organic meat, and in terms of vegetables there are so many choices. Every year we get new farmers coming in saying, "We are certified organic."
There are so many choices available now for a retailer that it's fantastic. Practically in every aisle in our store and in almost every category of products we carry there is some vendor from Maine.
Do you know what percentage of the products you sell is from local producers?
I'm not sure, but I know we've got over a 100 different local vendors in the store.
Is buying local something that customers are particularly interested in?
Very much so ˆ they're asking for it. One of the reasons we have been successful in this market is because of our commitment to continually carrying Maine products. It's very important to our customer base.
Obviously, though, the Portland market is no longer the domain of local stores and local suppliers. What do you think the national chains see that have made them want to establish stores here?
I think Portland has always had a kind of ˆ for lack of a better word ˆ a cool, alternative community base. The community is very aware of what is going on with food and the environment and all of that. When companies are coming from out of state, they do research and see that it's absolutely a perfect market for companies like Wild Oats and Whole Foods. They're not coming into a market where they have to create a customer base ˆ the customers are here waiting.
But it seems like the chains could also look at local stores like The Whole Grocer and see proof in the model.
I think we have done a remarkable job of educating customers about how to eat healthy and to get away from processed foods and to provide them with the products to do that. It's true, there are stores already providing people with the alternatives ˆ besides us, there is Lois' [in Scarborough] and Royal River [in Freeport] and Morning Glory in Brunswick.
So in deciding to sell to Whole Foods, was it just a matter of the challenge of another competitor coming in, or were there other issues that made you decide not to continue operating The Whole Grocer as a standalone store?
As a standalone store we've done what we could with all the resources we had. We have been very successful. But with Whole Foods approaching us, it became clear that we have become part of a big, huge family where the resources have doubled and tripled for us. I think it should be very exciting for the community, because what we could not provide as a standalone small store we absolutely will be able to as part of Whole Foods Market because they have some tremendous resources.
I think people will see the affordability of products increase, because with the buying power of Whole Foods we will be able to offer certain things at certain prices that as an independent, one-store operation was just not possible. The other change is in the products that are available to us: There are products that are available to the Whole Foods stores in our region that don't make it up here because of lack of transportation. Some companies just don't want to send trucks up here. Now, we have the resources to get those products up here.
We've had shoppers who've been traveling somewhere and bought a product that they've come back with and asked us to carry. And sometimes we've had to say, "Well, it's not really available to us." Now, we're finding we can do more with our distribution while staying committed to the same kind of standard we've always had.
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