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Interesting piece in Business Week about Sunflower Farmers Market, which it describes as “the fast-growing chain of grocery stores in five Western and Southwestern states (that) specializes in produce, much of it organic, bought directly from farmers and sold at almost Walmart-like prices.”

The story notes that Sunflower CEO and co-founder Mike Gilliland – who also founded Wild Oats – wants to do more than just provide a lower cost alternative to Whole Foods: “His prices, and the weekly Sunflower sales advertised in the newspaper beside the local supermarket ads, are an attempt to lure consumers at the middle-to-low end of the market. The potential genius of Sunflower is its appeal to consumers at both ends of a market that's increasingly split between low-cost big-box stores and wholesale clubs on one end, and high-end retailers at the other.”

The chain’s tag line: “Serious Food, Silly Prices.”

Business Week writes: “There's a reason Gilliland thinks Sunflower will do well against his longstanding rival. The company's farmers-market format is based on a California chain called Henry's Market, one of the many companies Gilliland had acquired when he was Wild Oats CEO. As his company and Whole Foods expanded, he increasingly found his stores under pressure … But stores based on the Henry's Market format competed well because they were less intimidating to the casual natural-foods shopper and appealed to the demographic that didn't want to pay for the glitz of a natural-foods superstore.”

KC's View:
If, as expected, organic and natural foods continue to make the transition from being a niche segment to being more mainstream, it seems likely that Sunflower will reap the benefits. And while a tightening economy seems likely to help the company maintain a level of price leadership that could be tough for Whole Foods to attain, it seems to me that the company also has to specialize in a kind of thought leadership – finding ways to help new shoppers find and appreciate the organic/natural foods segment.