Dive Brief:

• Whole Foods Market announced Thursday that it’s reorganizing three of its key operating divisions as it looks to overcome lackluster physical store sales and position itself for further growth.
• In a memo sent to company employees, the grocer said it will merge its global and regional merchandising teams to centralize purchasing, and create new leadership roles for local products and supplier relationships. It’s also realigning its team member services division to “provide more consistent, strategic support across all regions” and shifting its technology team to “focus more on skills required for software engineering and technical product and program manager roles.”
• In the announcement, Whole Foods promoted its online sales, store openings and staff growth during the pandemic. But recent reports paint a picture of a struggling company.

Dive Insight:

In its announcement Thursday, Whole Foods rattled off a laundry list of milestones it has achieved over the past year. With new store openings, the grocer was able to reach 1.4 million additional customers within a 10-mile radius of its locations. It added 10,000 jobs and the same number of local products to its stores. Between March and December, online sales tripled.

The company, which now numbers more than 105,000 employees, also said it has 40 new stores in the pipeline, signaling confidence in the format as parent company Amazon builds out its grocery ecosystem.

Whole Foods said its organizational changes, which do not impact any store or distribution-center based roles, are meant to continue its strong momentum to date and enhance its growth prospects. “These changes are designed to improve support for our stores and distribution centers as we remain committed to delivering an exceptional customer experience in stores and online,” the company stated in its memo to team members. 

But recent sales and foot traffic reports suggest Whole Foods is also trying to patch a leaky ship. Customer visits fell precipitously last year, as they did at many other chains, but data from last fall showed Whole Foods wasn't recouping those visits in the same way competitors have. Last week, Amazon reported sales at physical stores, the vast majority of which are Whole Foods locations, declined 16% during its recently reported first quarter compared with the same period in 2020, indicating the sluggish in-store sales have continued.

During the pandemic, many shoppers consolidated their trips and turned to conventional supermarkets for their weekly shopping. Specialty operators like Whole Foods are also under significant pressure to distinguish their assortments from supermarkets, which now offer a wide array of natural and organic goods.

An Amazon spokesperson recently told The New York Times that Whole Foods sales are increasing when factoring in e-commerce, which Amazon reports separately, as part of its overall online retail sales. Even so, the company, which has become notorious for having aisles filled with Amazon Prime shoppers, no doubt wants to make its stores more enticing for shoppers to visit.

It’s unclear whether or not the latest organizational changes include staff reductions. The announcement also notes forthcoming changes to the company’s Allegro organization, which produces coffee and tea, without specifying what these might be. Asked to clarify these matters and comment on recent sales, a Whole Foods spokesperson said Thursday the company had no further comment beyond its announcement.

What is clear is that Whole Foods is trying to become a more efficient and effective operator. In addition to merging its global and regional merchandising teams to centralize purchasing, the company will run regional operations teams focused on merchandising execution and in-store operations, including e-commerce. This will allow regional divisions to focus on running stores and provide workers with clearer roles and routes for advancement within the company, Whole Foods said. The leadership roles in supplier relations and local products, meanwhile, will elevate the company’s assortment of local and emerging brands.

The company said it’s realigning its team member services to provide better support across recruiting, training, compensation and benefits, and career development. It will also use platforms like Workday to streamline human resources management. Meanwhile, adjustments across its technology division roles will allow the company to build new internal capabilities and further distinguish its products and services, the announcement said. 

In closing its employee memo, Whole Foods struck an upbeat tone about the future of the company, indicating the easing pandemic will help reinvigorate sales.

“We have many reasons to be optimistic about what’s ahead as we emerge from the pandemic,” the memo stated. “We look forward to welcoming our customers back to our stores, reinvigorating our Prepared Foods operations, having more face-to-face interactions among Team Members, and delivering that exceptional experience that can only be found at Whole Foods Market.”