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[whitespace] Local grocery biz buzz: Whole Foods is coming to Santa Cruz

By John Yewell

AUSTIN-BASED WHOLE FOODS has been planning its entry into the Santa Cruz market for some time. If it does come, it will present a serious challenge to local, homegrown natural foods stores, such as New Leaf and Aptos Natural Foods. By sheer dint of size and marketing budgets, Whole Foods often leaves few competitors in its wake. At the same time, as the accompanying article points out, the company has drawn fire from environmental organizations and labor unions--two politically progressive movements whose constituencies overlap with Whole Foods' customers.

A few years ago, the company was on the verge of moving into the 17th Avenue site currently occupied by Staples, but backed out at the last minute. Two months ago, the chain store opened an outlet in Monterey that is reportedly doing well. Some observers, like New Leaf co-owner Scott Roseman, believe that Whole Foods' success in Monterey hastens the day when the company opens a store in Santa Cruz. "I think their success in Monterey has made them even more excited about being here," Roseman says. The local grocery industry rumor mill has been hotter than usual lately with Whole Foods gossip, Roseman says--the consensus being that an announcement may be imminent. "They're determined to be here," Roseman says. "It's only a matter of time."

After the 17th Avenue retreat, Whole Foods never gave up looking. Tim Gates, a Scotts Valley resident and former manager of the Los Gatos Whole Foods store, now manages the new store in Monterey. Gates would not confirm a pending deal but offered that Whole Foods' entry into the Santa Cruz market is inevitable. "Santa Cruz is definitely a market we're interested in," Gates says. "Sooner or later, we're coming to Santa Cruz."

Gates says that finding a suitable site in Santa Cruz has proved difficult. For one thing, says Gates, they would like to find at least 25,000 to 30,000 square feet. That would make it about a medium-sized market, much smaller than the 40,000 to 55,000-square-foot mega-Safeways but larger that the 15,000-square-foot outlet that New Leaf has proposed for Aptos (New Leaf now has five stores, three of which are company owned, and two of which are licensing agreements). Once space is found, it could be a year or more before the store opens. Still, Gates says, "I'm excited about Whole Foods coming here. It's a good fit." Not everyone thinks so, including Roseman, who is admittedly a Whole Foods competitor. "The public is already well served here," Roseman says.

Bryan Smith, co-owner of Aptos Natural Foods, shares Roseman's view of Whole Foods. "Whole Foods is a scary outfit," Smith says. "They put people out of business wherever they go. When there's more of a monopoly there's less choice, less information."

ONE OF ROSEMAN'S New Leaf co-owners, Chris Quinn, also anticipates the imminent arrival of Whole Foods. "I think they want to be here but can't find a location," Quinn says. Referring to a proposal for a new New Leaf store in Aptos, Quinn calls it "part of our prevention plan to keep them out." Both Quinn and Roseman also denied a related rumor: that they are planning to sell New Leaf to Whole Foods. Both said there had been no contact with Whole Foods on such a deal, although neither would rule out the suggestion that they might consider an offer.

"I won't say we're not going to sell, only that no one has yet met our price," Quinn says with a laugh. Both she and Roseman say they want to hang onto New Leaf but fear being put in the position of having to do battle with a chain that's listed on the New York Stock Exchange. Roseman tries to put New Leaf's position in perspective. "If I'm ever faced with the choice of taking a bunch of money and getting out, or staying in and fighting the behemoth, I know which way I'm going to go," he says, indicating that he feels he would have no choice but to sell. Building the Aptos store will better position them to compete, says Roseman, "but I don't think we're going to discourage them at this point."

Walter Robb, president of Whole Foods' Northern California division, cited Securities and Exchange Commission regulations in not divulging company plans for Santa Cruz. But he confirmed that Whole Foods is in the hunt. "We've long had an interest in the Santa Cruz area," Robb says, "but we're going to wait for the right location."

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From the September 3-9, 1998 issue of Metro Santa Cruz.

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