Healthy Growth For NYC Natural Food Stores

When Whole Foods first came to Manhattan in early 2001, the company wanted to test the waters with first a 30,000 square foot store in Chelsea.

Nearly three year later, that store is doing a million dollars in sales a week, and the world’s largest natural and organic food retailer is in the process of opening up three even bigger locations here, including at the Time Warner Center next month.

With dollars spent in the natural and specialty foods category expected to jump from $35 billion a year today to $52 billion by 2007, it’s not just Austin-based Whole Foods that’s trying to catch in on the trend towards better eating. In Manhattan, fast-food and snack chains that offer healthy alternatives like Jamba Juice are moving in, nutritional health product stores like The Vitamin Shoppe are expanding, and gourmet food stores are increasing their reach.

“People are going an extra step to take care of themselves,” said Robert Kinsey, senior director for restaurant and specialty food at Robert K. Futterman & Associates. “People feel like they can spend another 10 percent.”

This past July, Kinsey represented the owners of the Time Warner Center in completing a 20-year lease with Whole Foods for 57,956 sf in the lower-level first concourse of the building at Columbus Circle. Whole Foods also plans to open a 50,000 sf store at 4 Union Square South, and a 46,000 sf store at 220 3rd Street in Park Slope by spring 2005.

Kinsey said Whole Foods was “very deliberate about coming into New York. They did a lot of homework. And their first store proved that they had done the right thing.” Kinsey said organic retailing is easier these days because there is a more established supply chain and because farmers “are taking hold of it in a major way.”

Whole Foods strategy, Kinsey said, is to look for markets where there is a high level of education, and not necessarily spots where there is the highest income. “They did a huge rollout in Washington D.C.,” said Kinsey, “which is the number one market in college degrees.”

Chase Welles of Northwest Atlantic Partners Inc., which represents Whole Foods in Manhattan and northern N.J., said that the Columbus Circle location and Union Square location were chosen because they are central hub areas, easily accessible to “the shopper who wants that special food and will travel a little further.”

An added bonus for both of the new Manhattan locations is that they seem to fit in well with other “healthy lifestyle” features nearby- in Union Square, the Whole Foods will be right across the street from the Union Square Greenmarket. At the Time Warner Center, the Whole Foods will be in close proximity to an Equinox gym. “I won’t say that made the decision in either case, but it was certainly noticed by all,” said Welles. The typical size of a Whole Foods is 40,000 to 50,000 sf, much bigger than the average supermarket of 8,000 to 10,000 sf, he said.

As to why Whole Foods is expanding in Manhattan now, Welles said it was simply a natural progression, based on the fact that “most of the major players in the country are now Whole Foods stores” and that “there wasn’t anything in New York.”

“Plus,” he added, “there is a tendency for people to buy the best in New York. You can buy fruits and vegetables there you didn’t even know existed.” The company’s promotional material says it strives to offer “the least processed, most flavorful and [most] naturally preserved foods.”

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Whole Foods is likely to face increased competition for upscale foodie dollars from Balducci’s, after a deal that was announced last month. The famed Greenwich Village gourmet store that moved uptown now plans to expand to 12 new locations in the metropolitan area.

Mark Ordan, who spent five years building natural foods retailer Fresh Fields before selling it to Whole Foods, is heading the project. Ordan teamed up with Bear Stearns to make the $50 million acquisition of Balducci’s parent company, Sutton Place Group.

Joe Dobrow, vice president of marketing for Sutton, said the company hasn’t worked out any of the new locations in Manhattan yet. He said Balducci’s would continue to carry high-end gourmet items, but that more “everyday items” would be added to help make it “more a neighborhood shopping destination, and not just for special occasions.”

The healthy eating trend doesn’t stop at supermarkets. Several fast-food and snack chains now moving to or expanding in Manhattan are offering alternatives to the normal fare, including Jamba Juice and Better Burger.

“As people read how important diet is to their lifestyle, there has been a trend towards better eating habits,” said Jason Pruger, a managing director at Newmark New Spectrum. Even at established fast-food chains like McDonald’s and Wendy’s, he said, “salads have become a huge part of business in the last five years.”

Pruger said Jamba Juice, which offers juices and smoothies and already has stores in 24 other states, “will be coming here soon.” Another chain, Better Burger, serves burgers and hot dogs made from beef and poultry that is hormone- and antibiotic-free, and sells sides like baked ‘fries’ made with organic potatoes. The company opened its first location in Murray Hill in 2001 and has since expanded to a second location in Chelsea at Eighth Avenue and 19th Street.

Vitamin stores in Manhattan also have been undergoing expansion or are poised to do so. According to one study, U.S. consumers spent $17 billion on vitamins and nutritional supplements in 2002. That’s more than double the $8 billion spent five years before.

The Vitamin Shoppe, which has 20 stores in Manhattan, recently added two more locations. Pruger of Newmark represented the company in a lease for a 1,230 sf site at 300 West 23rd St. in Chelsea, which he called “an ideal location” for the store. Another recent deal was completed for a 3,700 sf site at 385 Fifth Ave., a larger branch which will include an informational lending library. In December, Vitamin Shoppe Industries was sold to a private equity group at Bear Stearns for about $310 million.

Another large chain, GNC, which has dozens of stores in Manhattan and says it is the largest global retailer of nutritional supplements, was also recently purchased by Apollo Management, LP. Pruger said the acquisition means the store will likely undergo an expansion.