During its regular quarterly conference call on May 6 to discuss its financial situation with investors, publicly traded Whole Foods Market announced that it would soon be launching a value-oriented format that could eventually top the 400 stores under its regular banner.

Walter Robb, co-chief executive officer of the retailer, said in a statement, “It will deliver a convenient, transparent and value-oriented experience geared toward millennial shoppers, while appealing to anyone looking for high-quality fresh food at a great price. We believe the growth potential for this new and complementary brand to be as great as it is for our highly successful Whole Foods Market brand.”

Wall Street’s collective reaction (to the news and the financial statement) was negative, as the stock dipped 15 percent prior to the opening bell the next day to below $42 from around $48, and has traded for about $43 ever since. Retail analysts quoted in other publications also were not generally complimentary of the move.

However, several produce industry retail consultants with decades of experiences in various capacities applauded the effort and basically believe it will be successful.

“After the announcement, they got beat up pretty bad by some retail analysts,” said Dick Spezzano of Spezzano Consulting Service in Monrovia, CA. “I’m going the other way. I think they are dead-on.”

The longtime Southern California retailer said the millennials are starting to come of age and how they are going to shop is not completely known, but it is going to be different than their parents and other generations.

Spezzano said it is expected that this group, which at the upper end is approaching their mid- to late 20s, is certainly going to spend more time shopping online. But how are they going to get their groceries?

“Are they going to be delivered?” Spezzano asked. “Are they going to order them online and then pick them up at the supermarket?”

He expects Whole Foods to devote a team to develop this new format, fine-tune it over a period of time and then roll it out when they think they have it right. He said the people at Whole Foods are very good retailers and his bet is that they will do it right.

Ed Odron, another longtime retailer who consults under the banner Ed Odron Produce Marketing Consulting in Stockton, CA, had similar praise for the Whole Foods brain trust.

“This is a smart company,” said Odron. “They will do their homework, put a lot of thinking into picking the right locations, and I think they will be successful. I think it is a wise idea.”

Odron said Whole Foods has a great reputation, with most people thinking its quality of product is top notch. And the perception is that it only sells organic produce that is very good for you. He said that while the perception about being 100 percent organic isn’t accurate, it doesn’t matter. The consumer believes it is a healthy place to shop for their families.

“The only negative you hear is that it is high-priced,” he said.

In fact, the nickname “Whole Paycheck” for the chain is widely circulated.

“If they can open up a format that is a little more price-sensitive, I think it will work,” Odron said.

Still another longtime retailer, Ron Pelger of the RonProCon consulting group, who also writes a column for The Produce News, believes Whole Foods can make it work. He said many retailers over the years have opened a discount format and been successful. He said Whole Foods is “probably the best merchandiser in the business.” If it can keep its quality and the perception of good health, and lower some prices, it will make it, he said.

Spezzano and Odron expect the newer format to consist of smaller stores that will allow for the cutting of some costs. Pelger said Whole Foods utilizes more staff than most conventional supermarkets, and he expects it would cut down a bit on its labor in these more value-oriented stores.

Pelger said that it is difficult to make a discounted format successful. “It’s a tough nut to crack. You have to make it on high volume” and low margins, and that has not been Whole Foods’ method of operation.

Odron expects the format to still feature lots of organic produce and fresh items but at a more palatable price for the average shopper.

“The scallops at Whole Foods look great and are beautiful, but how many people are going to pay $23 to $24 per pound for scallops?” Odron asked.

He said many of the produce offerings might feature a different size product where a better price point can be offered. But he reiterated that the company’s reputation, which is very well known across the country, would offer a great boost to the new format if it can maintain the quality and provide lower prices.

Odron sees some of the stores being located in inner cities with a diverse demographic of people still concerned about healthy eating, but on a budget.

“Where they put these stores is going to be very important,” he reiterated.

Whole Foods, which has enjoyed double-digit growth in year-over-year per-store sales for many years, has seen an erosion of that growth pattern in recent years.

In fact, the latest quarter only registered an increase of about 3.6 percent. That was well below Wall Street expectations of 5.3 percent, which also had a lot to do with the falling stock price the next day. While 3.6 percent is still better than most conventional supermarkets, it is not the standard that Whole Foods has led Wall Street to expect.

Spezzano said the new format will enable the company to experiment on a smaller scale and then adopt some of the best practices for both the new format and Whole Foods stores.  

During its conference call, the executives at Whole Foods indicated that more information about the new format will be revealed by September with the first stores unveiled sometime next year.