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BRAND WARSGROCERY SHOWDOWN: TRADER JOE’S VS. WHOLE FOODS

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IT ALL STARTED 99 YEARS AGO...…when the first modern grocery store—Piggly Wiggly—opened in Memphis, TN,1

and revolutionized how we shop for food by allowing customers to pick items off the

shelves themselves. And in the century that’s followed, the nature of grocery

shopping has expanded even more. In 1967, Trader Joe’s dressed up its value-

driven convenience store chain in Hawaiian shirts and entered the grocery game.2

Then, in 1980, Whole Foods opened in Austin, TX3 and forever changed people’s

ideas of what a natural foods store could be.

Now, as we approach the 100th anniversary of the grocery store, things are evolving

faster than ever, with grocery and meal delivery, specialty stores on every corner,

and even big box behemoths like Costco and Walmart peddling organic produce

and artisanal cheese.4

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“It’s a tectonic shift that’s going on

in the food marketplace right now.” – Whole Foods Co-CEO Walter Robb

(Fortune)

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A TALE OF TWO STORESWith so much change underway we decided to take a closer look at two grocery

stores – Trader Joe’s and Whole Foods – that have differentiated themselves in the

grocery category. These two used to be on parallel trajectories, but are now

crossing paths more than ever. They’re increasingly pitted against each other in the

media – everything from exposés comparing the prices of products at each store,5

what living within close proximity of each does to the value of your home,6 and most

recently – whether the new 365 by Whole Foods Market is designed to directly

compete with Trader Joe’s.7 We asked consumers their perceptions of and

experiences at each grocer, as well as their initial reactions to 365 – read on to hear

what they said.

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SOMETHING FOR EVERYONETrader Joe’s is primarily viewed as a “hip” specialty grocery store that offers a

multitude of organic, healthy, and unique products. Consumers love the eclectic

items that they can find, noting that these aren’t items you could find on the shelf of

a big box store. Although the products are niche, consumers feel that there’s

something for everyone: wholesome snacks, international food, gluten-free items,

etc. Trader Joe’s delivers a great value, and wins consumer praise for the “family

friendly” price point – something that definitely sets it apart from Whole Foods. Only

a small portion feels that the grocer is overpriced and caters to particular, expensive

tastes.

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Trader Joe’s is more than a grocery store.

They sell extraordinary items and things you

wouldn’t really find at your local food store.

Therefore Trader Joe’s is an awesome

place to shop.

– Male, 18-34

Fun and different items I wouldn’t find

anywhere else. I enjoy the unique

atmosphere. Lots of great frozen goods and

healthy (or otherwise) unique snack items.

Bakery and deli have unique combinations.

I say Trader Joe’s corners the market on

adventuresome dining.

– Female, 55+

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BECAUSE COOKIE BUTTEROr so we thought. While Trader Joe’s absolutely sets itself apart from the

competition with unique specialty items that can only be found in Trader Joe’s oasis

of ringing bells, Hawaiian shirts, chalkboard signs and, yes, cookie butter, the top

unique benefit identified is the healthy, organic food (28%). Consumers speak

generally to the “healthier,” “cleaner” options the store provides, but go on to explain

how they love the prepackaged goods, frozen food, and wine – not exactly the

hallmarks of a nutritious diet. Consumers feel that Trader Joe’s caters to their

lifestyles, whether by providing exciting prepackaged options to those too busy to

cook, accommodating those with dietary restrictions, or having a constantly-stocked

supply of “inexpensive yet drinkable” wines.

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I like that the products Trader Joe’s offers

are not in other markets. The frozen and

wine selection are my favorite. I feel they

are looking out for my health and would not

deceive me just to make a dollar.

– Female, 55+

A grocery store focused on healthy, usually

organic, staples with a fun selection of out

of the ordinary options. Stores are smaller

in size but carry everything you need for

your daily grocery shopping.

– Male, 18-34

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HIPSTERHealth conscious, upper class hipster nerds

GRANOLAAnnoying, tree-hugging, liberal granola-eaters

HIPSTERWannabe flower child

GRANOLAA little extra money to spend, Californian

CRUNCHYRich, well-educated, crunchy

CRUNCHYCrunchy granola people

ORGANICHealth nuts that like to eat local,

organic, non-GMO foods

ORGANICPrefer to eat organic and are health conscious

HEALTH CONSCIOUSWell educated, health conscious, and eco-friendly

HEALTH CONSCIOUSTrendy, health conscious bargain hunters

EDUCATEDWealthy and well educated

EDUCATEDOpen-minded, educated, white,

range from middle to upper class

WHAT TYPE OF PERSON SHOPS AT

[WHOLE FOODS/TRADER JOE’S]?

While consumers use similar words to describe the grocers’ customers, the

meaning behind them is different – Trader Joe’s seems to have a more

authentic customer base whereas Whole Foods’ crew is more about status.

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Granola eating, earth loving, with extra

money to spend.

– Female, 35-54

Rich and sometimes a hippie, but still rich.

– Female, 18-34

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FOR [GRANOLA] LOVERSThe general consensus is that Trader Joe’s aisles are packed with foodies who are

savvy shoppers, balancing their preference for healthy, organic food with their

budget. While many describe Trader Joe’s shoppers as granola-eating hipsters,

they do so in a quirky, positive light. Consumers think that this wool-rocking, kale-

loving crew flocks to Trader Joe’s on the hunt for unique items, often due to dietary

restrictions such as vegetarianism or veganism. A much smaller group describes

Trader Joe’s patrons as rich “yuppies,” but for the most part, the Trader Joe’s

customer is a lovingly funky health nut looking for good food on a reasonable

budget.

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People looking for healthy options for a

modest price. I usually see the most

unusual people there: healthy, hippie, and

hungry. I see people usually 30+ years old.

People who like organic or have to avoid

certain allergens. Hippie/hipsters. People

who like cheap quality wine…

– Male, 18-34

Normal weight range for height, exerciser,

vegetarian, liberal, health nut, seeks natural

health, over 30, more laid back than most,

little or no makeup, kind, concerned, likes

animals, nature lover, down to earth,

hippies, special diets, doctors sent them,

wishes to change eating habits, wear flip

flops or Birkenstocks, loves salad bars,

doesn’t lie too much, outdoorsy, does not

hunt, has a bike, enjoys or enjoyed

camping, survivalist, seeks peace.

– Female, 55+

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COME FOR THE PRODUCE, STAY FOR

THE EGOTISTICAL YUPPIESOn the flipside, Whole Foods shoppers are painted in a much more negative light,

mostly due to their willingness to foot the “whole paycheck.” There’s no doubt that

Whole Foods shoppers’ priority is organic, local, Non-GMO foods. Yet their

willingness to shell out top dollar, sometimes unnecessarily, is seen as obnoxious

and makes shoppers come off as elitist, “egotistical yuppies.” Lastly, the Whole

Foods crowd contains a different breed of “granola hipster” than visits Trader Joe’s

– the people you bump elbows with at the Whole Foods hot bar are seen as

educated, pretentious, entitled “tree-huggers.”

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Someone who cares about where their food

comes from, what’s in it, and how it was

made. Most likely they prefer organic,

healthier options. Maybe even have special

diets that don’t have to do with allergies.

Cruelty free food would be a main concern

as well.

– Female, 18-34

Wealthy or upper middle class people who

can afford to maintain a healthy

diet/lifestyle. They can be snobs and

sometimes seem to think they are better

than others who don’t shop there.

– Female, 25-34

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WHOLE FOODS POCKETBOOKPrice plays a large part in the overall brand perception. Although consumers agree

that Whole Foods carries premium products, they’re not sold on the value of the

food they’re buying. While some are more even-keeled when describing the cost,

simply stating that the store is “a bit pricy,” others passionately describe the grocer

as “elitist” and “trendy,” some going so far to say that Whole Foods is for “yuppies

with their yuppie foods.” This is something that Whole Foods has certainly been

under the microscope for in 2015 (could we interest anyone in a $5.99 bottle of

asparagus water?).8

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Expensive organic food. Watch what

happens at the checkout counter. They’ve

been cited in NY and LA for ripping off their

customers.

– Male, 55+

Whole paycheck. Great selection of organic

foods but they tend to be pricey. They also

have a great hot plate bar. It’s very nice

inside and the prices definitely reflect that.

– Male, 18-34

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EVERYTHING FROM A TO ZPrice aside, consumers feel that Whole Foods is above par when it comes to

freshness and quality. They’re drawn to Whole Foods for much more nuanced

health reasons than those who visit Trader Joe’s. Consumers seek ethically-sourced

food that is non-GMO and free of pesticides and additives, including “grass-fed

meats and poultry,” “fresh organic juices,” products in a “natural state.” Furthermore,

Whole Foods provides exclusive products unavailable elsewhere as well as obscure

ingredients that expand culinary options for those with allergies or intolerances. This

expansive quality and superior selection motivates consumers to visit Whole Foods

even when the location isn’t particularly convenient.

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It is a godsend for those of us who have to

cook for someone with food allergies or

certain food ingredient intolerance. Not only

do they have hard to find things like gluten-

free items, but they have a wide variety that

offers customers a choice. I love that!

– Female, 55+

A store filled with local, organic, and fair

trade goods. Fresh produce, deli, health

and beauty. Eateries and bakeries. Beer

and wine. A natural and wholesome variety

of products.

– Male, 18-34

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LET’S TALK ABOUT HEALTH, BABYConsumers appreciate both Whole Foods and Trader Joe’s because of their healthy

offerings. This makes perfect sense for Whole Foods, which lists selling “the highest

quality natural and organic products available”9 at the top of their list of core values.

But Trader Joe’s brand promise is much more about value, “We just focus on what

matters – great food + great prices = Value.”10 There’s no talk about organics or

even health.

Still, of the consumers that we asked, Trader Joe’s top benefit (28%) is its “healthy,”

“organic” offerings, even when mentioned in tandem with frozen and prepackaged

goods. Health is defined much differently – “healthier alternatives” at Trader Joe’s

versus food in its purest form at Whole Foods, but Trader Joe’s seems to have

enjoyed the benefits of the organics wave without actively pushing their efforts.

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They have a wider selection of organic

foods than my local grocery store, not to

mention that the quality of their produce is

far better. Fresh veggies and fruits are a

main staple in my family’s diet, I wish to

give them the best choices possible without

the questions of preservative and additives.

– Female, 18-34

Healthy, responsible, convenient food

options at affordable prices…The food is

slightly healthier than typical grocery stores

but not is not overpriced or “too granola” like

Whole Foods.

– Female, 18-34

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THE NEW STORE ON THE BLOCKDespite issues with perceptions, Whole Foods has a good thing going on: many

consumers are willing to pay top dollar for what they think are outstanding, fresh,

and healthy goods, and will drive out of their way to do so. At the end of July, the

grocer announced that they’re opening a new chain of stores targeted at

millennials11 – 365 by Whole Foods Market, which is “Designed to complement the

Whole Foods Market brand by bringing fresh, healthy food to a broader audience

with a streamlined, quality-meets-value shopping experience, 365 by Whole Foods

Market stores will feature a curated mix of products that adhere to the company’s

industry-leading quality standards in an environment that’s fun and convenient for

shoppers.”12 So Whole Foods but cheaper, smaller, with some sort of whiz-bang

gadgetry to optimize the shopping experience.

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SPREAD THE HEALTHWe asked consumers what they thought of the 365 by Whole Foods Market

concept. And no surprise… they’re really excited as long as they get Whole Foods

quality at traditional grocery store prices. Consumers envision adding 365 into their

current grocery store rotation, visiting to pick up specialty items or particularly

healthy choices. Many agree that lower costs would allow more consumers to take

advantage of healthy foods, and spreading the health (especially to their own dinner

tables!) is something that they’re wildly enthusiastic about. A smaller group is

excited by the store’s smaller footprint and therefore reduced environmental impact.

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I would definitely shop there. I have recently

retired and am now on a fixed income. I like

having a choice of natural foods to choose

from. I try to eat healthy, but I want good

foods to choose from. Anyone would want

lower prices.

– Female, 55+

I will definitely shop at a place like this. This

addresses the exact concerns I have with

Whole Foods. I love the products Whole

Foods offers but the price can be high at

times. This will definitely draw me to shop

there.

– Female, 18-34

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AN IMPOSSIBLE FEAT?Whole Foods has its work cut out for it in pulling this off. If 365 can deliver cheaper,

best-in-class organics, what does that mean for their original stores, already under

great scrutiny this year after a shareholder sued the company for overcharging

customers in New York City13? If the prices remain high, the brand will struggle to

engage the “broader audience” they’ve hoped for. And if the quality drops, their

reputation is at risk. To top it all off, Whole Foods announced at the end of

September that 1,500 jobs are being cut in order to “free up some more money to

invest in lower prices, marketing communications, and technology upgrades.”14 The

jury is out on whether this will affect consumer perceptions and behavior.

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Whole Foods is just too expensive for my

middle-class family. Even if Whole Foods

365 offers lower prices, it seems unlikely

that it will fit within my current budget at this

stage of my life.

– Female, 35-54

I would expect the food to be too expensive

to change my habits.

– Male, 18-34

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THE MAGIC FORMULAIn the battle for market share, there are two key factors at play – accessibility and

health. More specifically, consumer perceptions of both. While Trader Joe’s is

viewed as more accessible than Whole Foods, especially in terms of price and

value, the latter has a slight advantage when it comes to health, in particular with

the segment of the population that is highly educated in the organic food arena.

That said, it’s not enough to tip the scales in Whole Foods’ favor. Whole Foods will

always be seen as the go-to for fresh foods and, in particular, produce, but Trader

Joe’s is seen as the friendly neighborhood market where you can eat healthy and

find unique items, all on a reasonable budget. Throw Whole Foods’ recent litigations

on overcharging and employee layoffs into the mix, and Trader Joe’s comes out

looking even better.

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365: MAKE IT MORE THAN A “ME TOO”So where does 365 fit in? Based on what we know about consumer perceptions of Trader

Joe’s and Whole Foods, in order to succeed, 365 by Whole Foods Market needs to be:

• INCLUSIVE: The 365 concept appeals to a wider audience than millennials, and the traditional perception of

the Whole Foods “egotistical yuppie” must go.

• UNIQUE: Uniqueness drives visits – this can be a vital ingredient to accommodate a food intolerance or a

hard-to-find treasure that they’ve come to covet. 365 should carve out a bevy of products unique to their aisles.

• HELPFUL: Consumers are thrilled to spread the health to a broader population. Become a trusted partner for

those just starting out with fresh foods– provide recipes, teach cooking techniques, and share general health

(related to exercise, sleep, etc.) as well.

• VALUABLE: Consumers who have never shopped for organics will likely find the prices to be high, even if

significantly lower than traditional Whole Foods stores. Explain how products can be bundled to get the most

bang for their buck – how many meals can consumers get out of $20? If they splurge on a higher priced

ingredient, how many ways can they use it?

If 365 by Whole Foods Market is able to deliver Whole Foods quality goods without the

“yuppie” factor and at a Trader Joe’s price point, they will carve out a niche for themselves.

The challenge for Whole Foods is to retain Whole Foods’ customers at the traditional

stores while driving traffic to 365. This isn’t necessarily mutually exclusive, as we know

consumers are visiting a variety of stores in order to fulfill their grocery needs,15 but hinges

on 365 looking and feeling different than the parent brand. Trader Joe’s, in the meantime,

will continue on its merry way.

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METHODOLOGYWe recruited thousands of consumers ages 18-65 through various online channels

(Google Consumer Surveys, Survata, online panel) and asked each person one

open-ended question. Questions were formulated using ThoughtPath, our

proprietary framework that is rooted in elements of cognitive psychology. Our

analysts trimmed any irrelevant answers (jibberish) prior to loading the feedback

into Luminoso, our text analytics tool. Luminoso forms broad themes based on

connections within the data set, which our analysts use as a basis to build more

nuanced themes after diving into the data set and looking closely at factors such as

clarity and intensity of language. Percentages reported are based off of the share

that each theme represents within the data set for each question, and are calculated

after the irrelevant data has been cut.

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PERCEPTION THEORY

How would you describe [Trader Joe’s / Whole Foods] to somebody who is unfamiliar with the store? Please use as much detail as possible.

N=1,500

As you may or may not know, Whole Foods recently announced that it will be launching a new store concept called Whole Foods 365. The stores will utilize innovative technologies and offer quality products in a smaller footprint and at a lower cost than current Whole Foods stores. In as much detail as possible, please describe how you think the opening of one of these stores in your neighborhood would affect your shopping habits.

N=1,000

IDENTITY THEORY

Using as much detail as possible, please describe the type of person that shops at [Trader Joe’s / Whole Foods].

N=1,500

EXPERIENCE THEORY

Using as much detail as possible, please explain what makes shopping at [Whole Foods / Trader Joe’s] “worth it”. What are the specific benefits [Whole Foods / Trader Joe’s] provides that other grocery stores do not?

N=1,500

THE QUESTIONS:

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INGREDIENTS1. http://www.groceteria.com/about/a-quick-history-of-the-supermarket/

2. http://www.traderjoes.com/our-story

3. http://www.wholefoodsmarket.com/company-info

4. http://www.bloomberg.com/news/articles/2015-05-14/whole-foods-walmart-costco-steal-

growth-in-organic-groceries

5. http://www.sfgate.com/food/article/Trader-Joe-s-vs-Whole-Foods-A-price-comparison-

6462560.php#item-44548

6. http://fortune.com/2015/08/13/trader-joes-whole-foods-home-value/

7. http://www.forbes.com/sites/retailwire/2015/06/22/whole-foods-365-takes-on-trader-joes/

8. http://time.com/3985325/whole-foods-asparagus-water/

9. http://www.wholefoodsmarket.com/mission-values/core-values

10. http://www.traderjoes.com/our-story

11. http://www.bloomberg.com/news/articles/2015-06-11/whole-foods-new-millennial-focused-

chain-will-be-called-365?cmpid=twtr1

12. http://media.wholefoodsmarket.com/news/whole-foods-market-announces-first-365-by-

whole-foods-market-store-leases

13. http://www.reuters.com/article/2015/08/07/wholefoods-lawsuit-overcharging-

idUSL1N10I1BG20150807

14. http://fortune.com/2015/09/28/whole-foods-tectonic-shift/

15. http://www.us.jll.com/united-states/en-us/Research/JLL-ShopTopic-Grocery-

share.pdf?715e0e88-2c50-49df-8839-d50262c6066a

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