In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche
Low margins and intense competition make both Whole Foods and Sprouts bad investments. Both of these chains will struggle to survive in a market filled with larger and far better capitalized rivals in the near future. My prediction is that either Whole Foods or Sprouts will enter the death spiral at some point before the year 2020.
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The nature of today’s grocery market gives Kroger a lot of room for low-cost growth. Deep discounting and intense competition are making it very hard for regional grocers to survive. News reports indicate that Kroger picked up Roundy’s and its $4.03 billion in revenue for just $800 million, because of losses the smaller chain faced.
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Kroger is a threat to Sprouts because it too is a deep discounter. News reports indicate that Kroger can sell most groceries at prices 3% to 5% lower than the industry norm. It is also making an aggressive push into the organic and natural foods segment with Simple Truth, a private label brand that reached $1 billion in sales in 2014. Simple Truth sales have been growing at a rate of around 10% a quarter.
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