The Whole Foods supermarket chain is known for its organic product lines, which have historically attracted consumers willing to pay premium prices for such inventory. But after it was acquired by Amazon.com Inc. (AMZN​) in June 2017, for a whopping $13.7 billion, Whole Foods was finally in a financial position to dramatically lower costs and make its pricing more competitive with major chains such as Target (TGT) and Kroger (KR).

Key Takeaways

  • The Whole Foods supermarket chain has attracted market share by offering organic products.
  • The company initially charged premium pricing on its goods, but after it was acquired by Amazon in 2017, it began dramatically lowering its prices.
  • Whole Foods expanded its footprint by launching its own additional stores and by acquiring other purveyors of organic food products.
  • Whole Foods' chief competitors include Trader Joe's and Sprouts Farmers Market.

The History of Whole Foods

Whole Food founders John Mackey, Renee Lawson Hardy, Craig Weller, and Mark Skiles opened their maiden store in Austin, Texas, in 1980, during a time when only a handful of natural foods stores existed in the United States. That store's success prompted the opening of several new stores, as well as the acquisition of pre-existing natural foods retailers, throughout the 1990s. And in 2002, the company expanded into Canada, then soon established a footprint in the United Kingdom when it acquired seven Fresh & Wild stores.

Whole Foods was early to capitalize on the organic food trend, which is still very much in mid-swing. In fact, it has been predicted that the demand for organic foods will experience double-digit growth over the next several years, stimulating even behemoth supermarket chains to jump on the bandwagon. Many such retailers stock Simple Truth Organic products, which contain no artificial preservatives, no artificial sweeteners, and are presented in no-frills packaging featuring easy-to-read ingredient lists. Notably, all stores under the Kroger family umbrella shelve these items beside their highly-processed alternatives, in an effort to cater to the widest spectrum of shoppers possible.

Competitive Companies

Whole Foods' biggest rival is Sprouts Farmers Market, which likewise specializes in organic, natural products, but sells them at lower price points. Founded by members of the Boney family, who opened their first location in 2002, Sprouts went through a rapid growth period spurred by a combination of acquisitions and new store launches. It currently boasts more than 165 stores across eight states.

Whole Foods' second-biggest rival is Trader Joe's, a California-based privately held business that began as a chain of convenience stores in 1958 when the business was then known as Pronto Markets. Nine years later, the chain's founder changed the name to Trader Joe’s and began packaging inexpensive natural and organic products under that label.

(For related reading, see: Evaluating Grocery Store Stocks.)

On the day Amazon acquired Whole Foods, the supermarket chain's stock price spiked a whopping 29%, which was remarkable given that grocery stocks broadly tumbled during that period. Case in point: Sprouts closed down 6%, and Kroger ended the day down 9%.