Why Foodies Flock to Whole Foods
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you aren't aware there's a foodie revolution going on, what shiitake mushroom have you been hiding under? There are two channels devoted to food, food festivals everywhere, reality chef competitions, a Food Blogging for Dummies book and more of those food blogs than you can shake a whisk at. What confirmed it for me that it's gone mainstream is I happened upon The Simpsons episode recently in which Marge, Lisa and Bart start their own food blog. Very funny, you should try to catch it. I, myself, am a foodie and often take a vintage cookbook to bed with me, my food porn if you will, in hopes of finding that long lost recipe that I can whip up into a fortune.
Even if you are aware of this trend you may not know that Whole Foods Market (NASDAQ: WFM) has been attracting foodies for years. It's no longer just the green/crunchygranola/health food destination it once was. Yes, there are still the sleek LululeMoms buying organic baby food but there are also the sophisticated and aspirational cooks wanting to converse with the cheesemonger or fishmonger (such delicious words. So Dickensian). There's plenty of well-marbled meat at Whole Foods Market too, and if you want to kick it Paula Deen style you can buy several different kinds of imported butter as well as the cream of local dairies and many different kinds of sugars. They even carry BACON.
So what does this mean for the stock? Whole Foods Market, founded in 1978, market cap 16.8 billion, has 324 stores in the US, Canada and the United Kingdom. The PE is 41.51 and the share price very recently hit all time highs of $92.00. In fact, you could have grabbed Whole Foods Market for under $9 in January 2009 when people thought no one would pay Whole Foods Market prices ever again. I don't think that trajectory in share price is over as more 'pink slime' type scandals erupt and more people care about the provenance as well as the taste of what goes in their mouth.
Compared with a traditional competitor like Safeway (NYSE: SWY) which has a PE of 10.41 but a yield of 3.90% one would think that's kind of pricey, like Whole Paycheck type pricey. But overlay their charts and you can see Safeway has been on a downward trajectory for some time while Whole Foods Market has been straight up since their 2009 low. Safeway once traded in the 50's in the early part of this century and now trades at $18.00 on a good day.
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Whole Foods is simply a superior shopping experience. It's brighter, cleaner, the sales staff more knowledgable and the variety of foods is amazing. While many traditional chains have tried to compete by simply slapping an Artisan label on their specialties, they don't have the conviction of Whole Foods Markets' relationships with their suppliers, both local and farflung. Foodies can find the esoteric gourmet ingredients they drool for as well as healthier alternatives for the rest of us. Certainly, this healthy food trend has not escaped your notice with the very successful IPO of Annie's and the similar stock price rise of Hain Celestial, both carried by Whole Foods Market for years.
It's also a place for the aspirational to meet and eat or take cooking classes or just meander around on a Saturday afternoon sampling similar to a trip to Costco. Homer Simpson, check it out! And as an earlier Motley Fool post of this week remarked of its esthetics, it is beautiful, the produce as artistically displayed as in Paris, the flower displays right at the front entrance, everything as elegant and simply designed as the Apple products. And the bakery sections are just as delectable as French patisseries. Ooh la la!
Their consumer education and community involvment programs are so well done. Girl Scout troops and elementary school classes are welcomed for tours and tastings. They offer frequent cooking classes for kids, too. Start them out young and they'll be customers forever has certainly worked for the cigarette companies, why not Whole Foods Market?
I enjoy shopping there but I will admit I don't buy a lot there. I always find something, though. I used to take my daughters there as a treat on a scavenger hunt so they could each find one new food they would like to try. Now there are still certain things they won't buy anywhere but at Whole Foods Market. As a foodie there is always something there that I want to try in a dish and I love to read their emails, both informative and enticing.
There are small competitors like Trader Joe's but their square footage just can't compare. Local food coops carry some of the same products as Whole Foods Market but they really aren't serious competition, either.
For the health food or gourmet food manufacturer getting shelf space at Whole Foods carries the same cachet as getting carried by Nordstrom or Saks is for clothiers. It is THE seal of approval. And one day I hope I find that long lost recipe that I can tweak into a Whole Foods Market household name myself.
Note: Since I wrote this last night Whole Foods Market hit another all time high up over 3% today.
leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of Whole Foods Market. Motley Fool newsletter services recommend Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.