The UK arm of the US health food retailer Whole Foods Market’s has reported that its losses have widened in the UK.
The UK arm of the US health food retailer Whole Foods Market’s has reported that its losses have widened in the UK. Whilst Whole Foods has reiterated its commitment to the UK market, its problems here add further context to the fall into administration of Julian Graves earlier this week.
Julian Graves may not have been the biggest name to collapse into administration this year – and unfortunately it not will be the last – but nonetheless it will be added to the list of retailers lost in action as the cost of this recession is counted.
Owner NBTY Europe said Julian Graves had suffered from a “perfect storm” of reduced consumer spending and “rocketing” commodity prices, a sentiment that colours the retailer as the victim of the downturn.
But the truth is more complicated. This economic storm is in danger of clouding judgement on some of the structural issues that face retailers and Julian Graves is a case in point.
NBTY Europe acquired Julian Graves from defunct Icelandic investment vehicle Baugur in 2008 in a distress purchase. It is understood to have been unproftable since it was acquired, losing around £2m for the last few years.
Its performance is in stark contrast to its sister company Holland & Barrett which, despite operating in similarly tough conditions, still posted a pretax profit surge of 19.4% to £60m this week in its latest accounts.
The more powerful retail sibling has benefitted from investments in stores, product and a considerable marketing push, whilst the Julian Graves brand has, by comparison, been left to tread water. Health food stores need a level of vibrancy and inspiration that was sadly lacking from much of the Julian Graves store portfolio, and the brand has never chimed with consumers the way Holland & Barrett has.
But key to the retailers’ polarised fortunes has been relevancy.
The UK market for health foods has simply not captured consumer interest in the way it has in the US and some other European markets. “There is something about the health food market that doesn’t strike a chord in the UK,” said Neil Saunders of industry analyst Conlumino. Whole Foods and Julian Graves are the evidence of this.
Holland & Barrett has carved out a successful corner as an authority on vitamins, sports and other food supplements. By contrast, Julian Graves is a specialist retailer without a specialist market and the high volumes its low margin business demands seem to be simply out of its reach. Add into the mix the retailer’s need for high footfall, which requires prime retail space and all the costs associated with that model, and it is clearer why NBTY Europe, with all its clout and experience in the broader health market, has been unable to make this work.
The recession, no doubt, has exacerbated these trends, hastening the fruit and nut chain’s downfall, but its demise cannot be laid blamed solely on high street conditions.