The Kroger Co. (KR), Whole Foods Market, Inc. (WFM): Has America Reached Peak Obesity?

Yet competing with Whole Foods in the organic market is an entirely different animal. They’ve got more stores (2,435 at last count), but perhaps less brand recognition in this segment of the market. Nobody really thinks of “Kroger” first when thinking of where to buy organic, natural produce. They are sooner to think about the nearest farmers market here in California.

Which brings me to my next point, while Whole Foods not only has organic brand recognition, they also have a broader distribution of stores. The Kroger Co. (NYSE:KR)’s stores basically don’t exist on the West Coast, while Whole Foods Market, Inc. (NASDAQ:WFM) are everywhere to be found on the two coasts and in between . Beating Whole Foods on their own turf, or even slowing them down doesn’t seem likely from The Kroger Co. (NYSE:KR).

Growth through lower prices
There are only so many affluent communities where one can set up shop. You can only mark up your prices so high to make up for lack of total volume. Eventually, you have to expand your sales operation to include more than just the well-to-do and upper-middle class folks.

Recently, Whole Foods has announced that they will be setting up a test store in a most unlikely place: Detroit, Michigan. They are testing a new concept store for more price conscious (lower income bracket) consumers. They are also holding special classes designed to teach consumers how to buy on a budget.

If this new “price conscious” concept can take off for Whole Foods, that opens up a whole new world of expansion. They would be competing with neighborhood corner stores who have cornered the inner-city market with their high prices (due to lack of options), where before they were limited by demographics and price.

Going forward

I don’t think Whole Foods is going anywhere, they’re here to stay. The concept and company has shown to represent a fantastic investment these last few years. If their pilot, low cost stores do well, we can look forward to a roll out in many of the under served communities in the rest of the country and a potential jolt in their stock price.

The article Peak Obesity and the Rise of Whole Foods originally appeared on Fool.com and is written by Marcus Tisdale.

Marcus Tisdale has no position in any stocks mentioned. The Motley Fool recommends Whole Foods Market (NASDAQ:WFM). The Motley Fool owns shares of Whole Foods Market.

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