What's the Matter, Whole Foods?

The upscale grocery store chain is laying off 1,500 employees as competition mounts and consumers demand lower prices.

Mike Blake / Reuters

Earlier this week, Whole Foods announced it would lay off 1,500 employees as the upscale grocery chain aims to save money and lower its prices. On the same day as the announcement, Whole Foods co-CEO Walter Robb told the crowd at a Fortune conference the entire food industry is in the midst of a “tectonic shift” as organic food goes mainstream.

That’s a pretty breezy explanation from the co-head of a company whose shares have fallen about 38 percent this year. It’s true that Whole Foods’s storied growth has been undercut by all the grocers muscling in on the company’s turf. As Helaine Olen noted in Slate:

Once an upstart, Whole Foods is now so successful that it’s spawned its own competitors. A decade ago, organic and other food like gluten-free items were considered specialty products. Whole Foods could charge high prices, because many of their customers were choosing between Whole Foods and … Whole Foods. Now Walmart carries the organic Wild Oats line of food.

But as the market for organic food has grown, there are other reasons why ever-loyal consumers have become less apt to walk down the aisle in search of powdered vinegar. Items like vegan teethers, ornamental kale,  and the short-lived asparagus water—infamously, a $6 bottle of water with three stalks of asparagus inside—have buoyed the troubling “Whole Foods-Whole Paycheck” reputation.

And even if you are among the lucky many who don’t blink at the prices or perhaps buy into some dubious aisle-side huckstering, it certainly doesn’t help that the company has been repeatedly brought to task for overcharging customers.

In 2014, California regulators fined Whole Foods $800,000 following a year-long investigation into its pricing. More recently, the company was accused of “systemic overcharging for pre-packaged foods” with hundreds of violations logged in its New York City stores. Inspectors from the New York City Department of Consumer Affairs called it “the worst case of mislabeling they have seen in their careers.”

For a company whose noble ethics are baked into its marketing materials, this is particularly bad news. But, despite having lost part of its footing in a market that it pioneered, Whole Foods is both still growing and finally taking action that goes beyond laying off 1.6 percent of its workforce.

To combat the “whole paycheck” perception, the company is angling to lower prices as well as launch a chain of ostensibly Millennial-friendly stores with cheaper “curated” selections. It also has invested in technology and apps to streamline the shopping experience.

It’s also trying new ways to market itself. As we noted in June, Whole Foods recently introduced a new food-rating system called “Responsibly Grown” in its stores. The classification system is controversial because it undercuts the organic designation, but it also highlights less pricy, non-organic offerings.

One way it can truly win is by continuing to do what it does especially well: Providing solid-paying work and above-average benefits to its employees. Even if that ultimately means laying some off, presenting relatively generous severance packages is a good thing, too.