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Organic food: Amazon buy not end of specialty grocers
Iowa Corresponden

LAKEWOOD, Colo. — While Amazon’s August 24 buyout of Whole Foods Market – and the across-the-board price slashing immediately following the $13.7 billion acquisition – may give the Austin, Texas-based organic food chain significant leverage in the “grocery wars,” one well-established and growing organic food chain is celebrating 62 years in the business.

“We do not believe that Whole Foods ever cornered the natural and organic grocery sector of grocery purchases,” said Kemper Isley, co-president of Natural Grocers. “As a matter of fact, they came late to the game; they were started in around 1982.”

Located in Lakewood, Colo., Natural Grocers was established in 1955 by Isley’sparents, Philip and Margaret Isley, with the mission of providing communities with fresh, 100 percent USDA Certified Organic produce, as well as other healthy, affordable, organic and natural products.
Isley said there are many other natural food groceries that came long before Whole Foods. “Whole Foods did a great job buying up regional chains (such as Gooches in California, and Bread and Circus in Boston) after the y went public,” hesaid, “consolidating a fragmented industry, and popularizing natural and organic foods.”

However, Isley said regarding the Amazon buyout and “the tiny bit of price-cutting that has taken place at Whole Foods so far, unless they cut prices more broadly and substantially more than they have, it is going to have little impact because consumers are savvy and they will see this as a ploy.

“If they do more substantial price cutting, it will mean that all grocers that compete in this space will have to become more competitive.” For Natural Grocers in particular, Isley said the company will continue to focus on what makes it different from Whole Foods and their other competitors, which, he added, starts with Natural Grocers’ product standards.

“We sell only organic produce in our produce departments,” he said. “Whole Foods cannot make this claim. As a matter of fact, they mostly sell conventionally-grown produce in their produce departments, and neither do other national competitors.

“We only sell pasture-based dairy products. We sell only eggs from free-range chickens. Again, Whole Foods does not do this and neither do other national competitors.”
Isley said that’s because Natural Grocers’ standards are higher than Whole Foods’ standards “and my guess is 
that the standards at Whole Foods will change under the ownership of Amazon.

“Amazon is in business for one reason, and that is to sell products because they sell,” he said. “We are in business to sell products for a reason, and that is because they are Good4U” – the brand of the company’s national nutritional challenge program.

Regarding the prices, Isley said one of the company’s founding principles is to sell products that are healthy at lower prices “so that everyone can afford to eat healthy.

“We have always been an affordable place to purchase your organic produce organic and natural groceries, pasture-based dairy products, free-range eggs and everything else we sell,” he said. “We will continue to make that point.”

On the other hand, analysts like Jim Hagerty, a principal and investment adviser at Bartlett & Co., in Cincinnati, Ohio, said Amazon’s buyout of Whole Foods will certainly affect stores like Cincinnati-based Kroger, which has already been facing food price deflation and price competition issues that have been hurting its sales and profits over the past year.
“I see Kroger as almost certain to ‘survive’ this competitive onslaught, but I believe the company is unlikely to ‘thrive’ anytime soon,” Hagerty recently told the Cincinnati Business Courier. “It may take a few years for profit margins to bottom out,” he said, adding, “Amazon’s move will only make price deflation worse as another key grocery player cuts prices.

“I see it as another episode in a very challenging deflationary period for the overall grocery industry. I think deflationary pressures will probably intensify during the next few years.”

Taking Natural Grocers’ lead, Amazon’s move will likely spur other natural food chain competitors to step up their game – especially since the independent supermarket sector is accountable for close to 1 percent of the nation’s overall economy and a quarter of retail grocery industry sales, according to the National Grocers Assoc. (NGA), in Arlington, Va.

“Independents are responsible for generating $131 billion in sales, 944,000 jobs, $30 billion in wages and $27 billion in taxes,” Travis Van Horn, NGA communications and media relations coordinator, told Farm World.

So far, Natural Grocers employs more than 3,000 people and operates 123 stores in 19 states. Last November, it opened its new Cedar Rapids, Iowa, store, bringing 18 jobs to the community.

“The crew we’re putting in place in Cedar Rapids will be the experts in their field, and will bring a great deal of knowledge and value to the Natural Grocers family, and the local community,” Isley said two months prior to its grand opening on the city’s northeast side.

“The store will feature a mix of national brands and a selection of locally-produced products in a small, neighborhood market environment.”