They just built a Sunflower Farmers Market where the old Asian furniture place used to be, off Arapahoe Road and Folsom.
Since you probably have no idea where I’m talking about, let me elaborate. Both these roads are located in Boulder, CO, a small city whose local Whole Foods is the busiest grocery store in town.
Wild Oats used to be the second-busiest, but then Whole Foods acquired them, leaving shoppers with only two natural-foods stores to pick from: Whole Foods and Natural Grocers, an all-organic retailer wedged into a space so small that two full-sized shopping carts cannot pass one another in the typical aisle. Cart rage goes hand-in-hand with your weekly purchase of eggs.
And then, one day, there was Sunflower. It appeared practically overnight. This new natural foods store had ten times the space of prison-like Natural Grocers, and 1/10th the prices of the venerable Boulder Whole Foods. Sunflower was like a beacon in a local industry where cramped/enraged (Natural Grocers) or bedazzled/broke (Whole Foods) were the only other organic shopping options.
The fast-growing chain of grocery stores in five Western and Southwestern states specializes in produce, much of it organic, bought directly from farmers and sold at almost Wal-Mart (WMT) like prices—two pounds of organic broccoli for $3 and 99¢ for a pound of apples, to quote recent specials at Morgan-Draper’s local store.
With its “Serious Food, Silly Prices” tag line, Sunflower targets consumers like Morgan-Draper who want to eat healthy, natural foods, but can’t afford—or don’t want to pay—gourmet prices. As Sunflower CEO and co-founder Mike Gilliland puts it: “We’re a cost-conscious Whole Foods.”
It’s too early to call Sunflower a resounding success, but its strategy seems to be working. Same store year-over-year sales are up by double digits, according to Gilliland. Looking forward, the company will benefit from consumers’ continued focus on fresh produce and on healthy foods. According to Progressive Grocer’s 2008 Annual Report on the industry, retailers expect produce to be the most-shopped food category this year, followed by private-label products—double good news for Sunflower.
“We expect a surge over the next five years as naturals go from niche to mainstream,” says Willard Bishop’s Weitzel. “Sunflower will be well-positioned for that.”
What about rising food costs? Turns out Sunflower is positioned well for those, too. Middle-class shoppers could defect from Whole Foods as they get more price-sensitive. Sunflower may also draw in people who shop at farmers markets, but can’t afford a $5 bag of farm lettuce anymore.
Three trends–increased awareness of health food and organics, Whole Foods customers defecting to Sunflower for lower prices, and farmers market customers going to Sunflower for the same reason–have springboarded Sunflower’s “rapid expansion, growing from its current 14 stores to some 21 locations by the end of 2008. Fifty stores are planned for five years from now.”
Sunflower proves that even an overhead-intense business beholden to rising prices in food and transportation can find a niche effective enough to allow unprecedented growth. They’re in a brilliant market position where rising prices can only help them.
The downside? My friends who’ve shopped at Sunflower (I brave the elbow-scraping aisles of Natural Grocers) say that Sunflower’s produce is subpar, despite being organic. But the price is right, and in this economy, price overrides flavor.
Once crowded, badly-designed Natural Grocers throws me into a final rage, I may find myself walking into the Sunflower, as well, making me yet another customer drawn in by its defector-dependent business model.