Trader Joe's sells twice as much as Whole Foods -- and now the grocery chain has a massive plan to catch up

Whole foods california paper bag compostable bagDavid McNew/GettyPASADENA, CA – APRIL 22: Cashier Michelle Yulo hands out free reusable grocery bags at a Whole Foods Market natural and organic foods stores which is ending the use of disposable plastic grocery bags in its 270 stores in the US Canada and UK on Earth Day, April 22, 2008 in Pasadena California. The use of reusable bags has increased since a statewide plastic bag recycling law was enacted in July 2007 requiring grocers to provide in-store plastic bag recycling and to sell reusable shopping bags. Some communities have banned disposable single-use plastic shopping bags because they don?t break down in landfills, and clog waterways, endangering wildlife, and are a major source of litter. (Photo by David McNew/Getty Images)

Whole Foods’ new millennial-focused discount chain will be called 365 by Whole Foods Market, the company revealed Thursday.

The name comes from Whole Foods’ private label brand, also called 365.

This is more evidence that the concept will be similar to the popular grocery chain Trader Joe’s, which sells primarily private label products at cheap prices.

The new chain, which will start opening stores in 2016, will be led by 20-year Whole Foods veteran Jeff Turnas Turnas was previously president of the company’s North Atlantic region.

“We are excited to introduce 365 by Whole Foods Market to bring healthy foods to even more communities with a fresh, quality-meets-value shopping experience that’s fun and convenient,” Turnas said in a statement. “A modern, streamlined design with innovative technology and a carefully curated product mix will offer an efficient and rewarding way to grocery shop.”

The new chain is meant to fend off growing competition in the organic foods market and catch up with Trader Joe’s, which sells twice as much per square foot as Whole Foods.

But the cheaper prices could end up hurting Whole Foods’ existing stores, according to Deutsche Bank analysts.

“It could backfire if price points are materially different, because an obvious price spread between the two formats could create doubts with their existing loyal customer base, and this could lead to erosion of their very strong brand equity,” analysts write in a recent research note.

Whole Foods could also face a challenge keeping rent and labour costs low enough to make the “mini-me millennial” stores profitable, according to the note.

“Real estate and labour are both becoming scarcer, which could complicate this endeavour,” the analysts write.

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