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May 11, 2008 (The Arizona Daily Star - McClatchy-Tribune Information Services via COMTEX) -- Consumers are keeping a tighter grip on their wallets these days. But some are also growing more interested in sometimes pricier natural food products.

At the intersection of those two trends, two retailers are finding a sweet spot.

Colorado-based Sunflower Farmers Market and Phoenix-based Sprouts Farmers Market, which aim to please customers who are conscious about both their health and their spending, are feeling little impact from the economic slowdown, company executives said.

"Our business has been on fire lately probably because of our price-orientated approach," said Mike Gilliland, CEO of Sunflower Farmers Markets and former CEO of Wild Oats Markets, now owned by Whole Foods Market.

Both small-scale retailers are growing rapidly. Sunflower, which is armed with $30 million recently provided by a private equity fund, is planning to open two new stores in Tucson by the middle of 2009, doubling its presence here. Sprouts is also on the hunt for more Tucson-area locations, said its chief operations officer Doug Sanders.

"We just haven't yet found the site that fits us yet," Sanders said.

Sunflower Farmers Market currently has 14 locations in Arizona, New Mexico, Nevada and Colorado and has plans to open seven more this year, Gilliland said. Sprouts has 25 stores in California, Arizona and Texas, and is adding six more this year, Sanders said.

Retailers in general have felt some pain from lower consumer confidence and cutbacks in spending. March retail sales were up by only 2 percent from the same month last year, the U.S. Department of Commerce reported. Grocery stores were in slightly better shape, with sales up 4.6 percent compared with March 2007, according to the Commerce Department.

But natural-foods leader Whole Foods showed more strength, with sales at stores open at least a year up by 9.3 percent in the first three months of this year compared with the same period in 2007, according to the company.

However, success in natural and organic foods isn't a given, said William McDonald, of Fort Mitchell, Ky.-based Service Industry Research Systems, who has studied the United Kingdom-based Tesco's Fresh & Easy Neighborhood Market concept. Retailers have to look at more detailed demographic and consumer buying pattern information to make sure locations work, he said. Even so, all retailers have been affected by the slower economy, he said.

"I don't think there's anybody that isn't re-pacing themselves," McDonald said about retailers' expansion plans.

Prices at Sunflower Farmers Market and Sprouts Farmers market tended to be lower than at a Whole Foods-owned Wild Oats store in Tucson, but Sunflower and Sprouts had fewer organic items than the Wild Oats store. Organic items must be grown according to strict standards and may be more expensive.

On Thursday, Wild Oats at 3360 E. Speedway was charging $3.49 per pound for non-organic strawberries, $1.50 each for non-organic avocados and $23.99 per pound for wild-caught king salmon. Sunflower Farmers Market on Speedway and Sprouts Farmers Market both charged considerably less for strawberries and 99 cents for avocados. The salmon at both stores ranged from $6.99 to $9.99 per pound, although none was advertised as "wild-caught."

Some shoppers at Sunflower Farmers Market said they prefer natural and organic food, but are watchful over their budgets.

"I tend to be price sensitive," said Tom Hood, a commercial real estate owner who was at Sunflower Farmers Market on East Speedway Thursday afternoon. Hood said he does most of his shopping at Sunflower Farmers Market and at natural foods chain Trader Joe's, but not often at the Whole Foods-owned Wild Oats stores in Tucson.

"I find their prices are somewhat higher," he said.

tucson stores

Sunflower Farmers Market:

Current locations: 4645 E. Speedway and 7877 E. Broadway

New stores coming: North First Avenue and East Limberlost Drive and North Thornydale and West Orange Grove roads.

Sprouts Farmers Market

Current location: 7665 N. Oracle Road

Future locations? No new stores yet, but the company is looking for more locations.

--Contact reporter Christie Smythe at 434-4083 or csmythe@azstarnet.com.

To see more of The Arizona Daily Star, or to subscribe to the newspaper, go to
http://www.azstarnet.com. Copyright (c) 2008, The Arizona Daily Star, Tucson
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Christie Smythe

Copyright (C) 2008 The Arizona Daily Star, Tucson

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