Why Whole Foods is Losing the Organic Battle Against Wal-Mart, But Winning the War

It makes sense that food sold at Whole Foods Market (WFM) has historically been more expensive than other supermarkets' offerings. When you sell organic foods, prices are bound to be higher than conventional fare. And that, in a nutshell, is how the company garnered its "Whole Paycheck" moniker.

Are these customers really spending their "Whole Paycheck" for organic foods? Photo: David Shankbone, via Wikimedia Commons. .

Recently, however, Whole Foods' management has made a big deal about investing in price -- which is industry speak for "lowering prices." The company desperately wants to convince consumers that its unofficial nickname is outdated.

At the same time, a number of new entrants have started encroaching on Whole Foods' territory. None of those threats is more interesting than Wal-Mart (WMT 1.02%). The low-cost retailer has found its bread-and-better business -- pun intended -- to include groceries. Given that, it's looking to get in on the organic foods game.

Who offers organic foods for less?
With the battle heating up for domination of the organic foods retail industry, I hopped in my car to see how things played out in my area. The results were surprising.

In the interest of full transparency, here's how the two grocers stacked up on price for a number of organic foods. At times, the size of products were different at the two stores. In those instances, they were normalized to match the lower size. Rarely were the organic packaged goods the same brand.

The low price winner is italicized, and the overall winner is clear.

Source: Author visit of Milwaukee-area locations on Sept. 8, 2014.

Overall, Wal-Mart had the advantage on 15 of the 18 products, and its overall price tag was 8% lower than Whole Foods'.

On the surface, it looks as if Wal-Mart is the clear winner. But dig a little deeper and the picture isn't quite as clear.

Why it doesn't matter ... yet.
Here's the catch with my little experiment: I knew Wal-Mart would have fewer organic goods than Whole Foods. It made more sense to check out the prices at Wal-Mart first, then compare them to what Whole Foods offered.

If you want to find organic goods at my local Wal-Mart, you would be limited to the 18 products listed above. It's possible I missed one or two in there, but I spent well over an hour scouring the shelves, and this was the best I could come up with.

If I had done the reverse -- gone to Whole Foods first, then Wal-Mart -- my list of organic goods would be so long that you could scroll down on this article for ages.

Beyond that obvious numerical difference, there are three glaring categories missing from Wal-Mart's organic offerings: fruits, vegetables, and meats. For most people, the importance of eating food made without chemicals is most crucial when it comes to perishable goods: fruits, vegetables, and meats.

If buying organic goods is important to a shopper, there would be little reason to go to Wal-Mart when Whole Foods is a far more efficient trip. To be fair, Wal-Mart has only started rolling out its line of Wild Oats organics, but it seems unlikely that it would include products in these three key categories.

For the time being, Wal-Mart's price advantage over Whole Foods means nothing. Whole Foods investors should only worry when the retail behemoth starts offering what organic consumers really want at lower prices.