Whole Foods Market (NASDAQ:WFM) hasn't been able to move very far past its "Whole Paycheck" epithet despite very real and determined efforts to hold the line on prices and provide consumers with lower cost options.
Its private label 365 Everyday Value brand not only gives its organic shoppers a price break compared to brand names on its shelves, it also competes with traditional supermarkets, even Wal-Mart (NYSE: WMT), on price. But still the moniker persists.
The high cost of going natural
It's probably not fair to Whole Foods to be saddled with that baggage because according to a recent Consumer Reports survey, consumers paid on average 47% more for organic food regardless of where they shopped than they would have spent on similar conventionally grown food.
For example, organic zucchini was quadruple the cost of conventionally grown zucchini at online-only grocer FreshDirect while it was just 24% higher at Whole Foods.
But in some cases the organic version was actually cheaper. Consumer Reports points to honey as one instance where the organic product is cheaper than the nonorganic one. Amazon Fresh, the online grocery store from Amazon.com (NASDAQ:AMZN), priced organic honey 13% lower than regular honey, while organic maple syrup could be had at Whole Foods for 2% cheaper. That's even cheaper than Wal-Mart's organic syrup, though it remained more expensive than the discount retailer's regular brand.
As the consumer products testing organization notes, people buy organic foods to avoid the pesticides that are used to grow traditional crops, pointing out that even rinsing conventional produce doesn't remove all pesticide residue. So to sidestep it altogether, more consumers are going organic, with the Organic Trade Association saying 78% of U.S. families are buying organic produce.
But even more could be sold if it wasn't so expensive, and Whole Foods isn't doing much to help the situation with its new produce rating program. Yet the overall high cost of going organic is what led Consumer Reports to survey its nearly 63,000 subscribers to find out where they were getting the best prices.
Making the cut
As suggested at the outset, despite its best efforts, consumers don't realize they're getting lower prices than before at Whole Foods so it's not surprising it didn't make the cut as an affordable option. And though supermarket chains like Wal-Mart and Kroger (NYSE:KR) have made a concerted effort themselves to introduce more organic produce to their aisles -- Kroger says sales of its Simple Truth Organic brand enjoyed double-digit growth last quarter and hit $1 billion in sales for the first time last year -- they didn't make the list either.
Grocery stores like Sprouts Farmers Market (NASDAQ: SFM) and Wegman's did make the list. Perhaps this isn't surprising as the latter places in most consumer satisfaction surveys. Just this year Wegmans topped Amazon as the most reputable company in the 2015 Harris Poll annual survey of the most visible companies.
And Sprouts has been giving Whole Foods a run for its money as being more affordable. My Foolish colleague Bradley Seth McNew said a 2014 Bloomberg study found Whole Foods prices were 13% higher on average at than at Sprouts, and were 22% higher for similar natural produce.
With Wegmans coming in at No. 2 in the Consumer Reports survey and Sprouts, No. 4, who filled the third place spot? None other than Costco (NASDAQ: COST). Though it may be best known for being the leader in pricing on 100-roll bales of toilet paper, the company also had some $3 billion in organic food sales in its fiscal 2014 year, and accounts for an estimated 9.3% of the total organic food market.
Costco has actually surpassed Whole Foods as the biggest organic retailer in the U.S., as it's on track to reap $4 billion in sales this year.
Trading up to growth
So, who's the leading low-priced organic grocery store? Trader Joe's.
The supermarket that tied Wegman's in customer satisfaction has also made a name for itself in giving shoppers low-cost access to organic food.
Although it operates just over 400 stores nationally, almost exactly the same size as Whole Foods, and despite the latter's better known brand, Business Insider says Trader Joe's records sales per square foot of $1,723 annually, almost double Whole Foods' $937 per s.f. and three times more than Sprout's $490 per s.f.
Part of its secret is that 80% products are private label goods, which allows it to more broadly offer lower prices. In comparison, just half of Whole Foods products are exclusive to its stores, and only a third of them are organic. In fact, Trader Joe's was tops in a separate Consumer Reports survey on the best private label brands.
Supermarkets are investing billions in organic goods realizing there is burgeoning demand for more wholesome foods free from pesticides, herbicides, and genetic modification. Those like Trader Joe's that can do it for less will be the ones that gain the lion's share of consumer dollars.