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In a commercial test kitchen in downtown Austin, Whole Foods Market is waging a war against "Whole Paycheck," a moniker the grocery chain has been trying to shake since the 1990s when it first gained a reputation as a pricey emporium for foodies.
Food researchers labor over two sets of ovens, testing desserts, samosas and salty chips with the aim of generating useful feedback - make it crispier, say, or more garlicky - for the suppliers that assemble products to the grocer's exacting specifications.
Rachel Bukowski, director of research and development for Amazon.com Inc.'s grocery brands including Whole Foods, shows off a Mediterranean truffle oil and mushroom pizza. Made by a contract manufacturer in Italy, it's one of 14 or so frozen pies sold under the 365 or Whole Foods Market private label banners.
"We're asking, 'Did the product that was submitted actually meet our expectations?'" Bukowski says.
The pizza comes out with a crispy crust and savory umami flavor. It's not too oily. But perhaps its most important attribute is the price: about $7.50, or some 20% more per ounce than Walmart Inc.'s competing brand and a similar product sold by Kroger Co., the largest mainstream grocer.
That's still a price gap. But industry experts say the fact that Whole Foods has pulled this close to Walmart - pioneer of everyday low pricing - demonstrates the chain's steady march toward affordability. That progress comes despite the grocer's long-standing commitment to lofty ingredients - like the frozen pizza's Italian cheese and three varieties of mushroom - that sometimes push up private-label production costs.
Errol Schweizer, a former Whole Foods executive who conducts pricing studies and other research for retailers and food makers, says the grocer has closed the price gap with Kroger and regional chains. "Having worked for a bunch of their competitors, watching their pricing get more and more competitive is a fact," he says. "It's known in the industry."
Whole Foods' private label lineup now features more than 4,000 products that have been concocted to appeal to longtime customers without giving new ones sticker shock. The chain has been cutting prices and doing a better job than some rivals at keeping inflation in check, according to researcher Numerator, with the average unit price rising 29% since 2019 compared with 36% at Walmart and 38% at Kroger.
The private label push and lower prices are part of Whole Foods' effort to appeal to a broader swath of customers, a timely strategy amid America's affordability crisis. Persuading shoppers that it's possible to eat well without busting the household budget could also help Amazon. The e-commerce giant has struggled to become a brick-and-mortar grocer and has more riding on Whole Foods since shuttering its Amazon Fresh supermarkets this year.
When Grace Singingheart started shopping at Whole Foods in the 1990s, she developed a rule of thumb: a basket filled at Publix, the southeastern grocery chain, would ring up to $40 at the checkout line. One filled at Whole Foods Market ran about $60.
Singingheart mostly frequented Whole Foods for the organic products. "It was expensive. I used to not even go down the aisles," she says, for fear of busting her budget. Typically, she would pick up what she came for and leave.
These days, she's venturing down more aisles, thanks in part to the proliferation of 365 products that make grabbing dryer sheets or hard taco shells more affordable. Whole Foods, she says, is still pricier than conventional grocers, but the gap has narrowed. According to Singingheart's math, that same Publix basket today costs about $60. Whole Foods is about $70.
Whole Foods' best customers have long been affluent, health-conscious shoppers, or those with dietary restrictions. The high price of a basket of groceries there reflected the cost of stocking and certifying specialty products, and eschewing items with some dyes and preservatives, along with other additives on a long list of banned ingredients. The checkout bill also helped pay for an ample prepared foods section and in-store cafes, whose cheesemongers, line cooks and baristas came with a higher wage bill than your average Safeway.
The "Whole Paycheck" nickname took hold in the mid-1990s and really stuck in the 2000s as Whole Foods expanded across the US. A Businessweek article in 2005 took aim at some easy targets: $14 ($24 in 2026 money) for a bag of 20 scented pet wipes, Dutch eggplants for $4 a pound ($6.73 today). "I think the business idea was 'It's like Costco but instead of bulk, you get nothing,'" comedian Jim Gaffigan wrote in a book-length paean to food in 2014.
The company launched the 365 brand in 1997, at a time when it was taking on an ascendant Trader Joe's. The upstart chain was growing quickly with an assortment of quirky private label products that were a welcome departure from the bland, store brand knockoffs of the time. Whole Foods, wary of this new rival cutting into its appeal as a unique shopping experience, ordered managers to match Trader Joe's on price, according to executives who were there at the time.
Private label products, in theory, offer a good deal for the retailer that commissions them, bringing the opportunity to cut out an intermediary and pocket more profit. But in practice, name brands often pay to bear the costs associated with discounts or advertising, meaning an aisle suddenly full of private label products could be less profitable. Whole Foods experienced such a margin-crimping dynamic early in the 365 rollout, said the former executives, who asked for anonymity to discuss confidential matters. The company now says having an assortment of both branded suppliers and private label products is critical to shelf profitability - the financial return a product generates relative to the physical retail space it occupies.
Whole Foods sought to position 365 as an affordable option with higher-quality products than those sold under mainstream grocers' entry-level house brands. "Over time, 365 just entered every category, little by little, year by year," said Elly Truesdell, a managing partner at New Fare, a food-focused investment firm, and a former Whole Foods purchasing executive.
Prospective 365 products are put through their paces inside the grandly named Innovation Kitchen in Austin, which occupies a corner of the office building atop Whole Foods' flagship store. The food nerds who work here reach out to manufacturers with the rough specs of products they're looking to develop, and evaluate the items that come back with ovens and other kitchenware meant to replicate a home setup.
R&D chief Bukowksi is a chemistry Ph.D who spent nearly a decade in personal care product manufacturing and briefly ran a personal training business before landing at Whole Foods. She says about three quarters of the 365 assortment is meant to plant the flag in new corners of the store, developing products "we need to carry for our consumers to build their baskets," she says. The other quarter of the portfolio aims to be trendy: fun tastes, limited-time offers, stabs at something new.
A few years back, Whole Foods requested ideas for a kombucha, when sales of the fermented tea were surging. FedUp Foods, a North Carolina-based brewer with about 200 employees, won the business after working with Whole Foods staffers on such unique flavors as blueberry lavender and pear elderflower, a bet that shoppers would want cocktail-like tastes in nonalcoholic beverages. Whole Foods also says the company delivered a cost-competitive bid that let the grocer offer shoppers a product at an attractive price.
"They spend a lot of time looking at consumer insights and trend research," says Andreas Schneider, FedUp Foods vice president of sales. "And on our end, we're looking at the supply chain piece of it. What ingredients are available in the right format that can be easy to work with."
New private label products like FedUp Foods' kombucha arrive on shelves as a "reset," a category that turns over on a regular basis. Snacks might refresh one month, breakfast foods the next.
Before products hit shelves, they have to pass muster before a tasting panel Whole Foods holds in a classroom-like space tucked behind the Innovation Kitchen. On a visit in May, a few tables were pushed together to accommodate five employees, who sat in silence in front of laptops and took little sips of a red, carbonated mystery liquid, identified only as number 371.
These taste testers, assessing what turned out to be an Italian soda, are charged with making sure the private label product hits the target its designers were going for by breaking down that most subjective of sensations - taste - into measurable, quasi-scientific ratings. Posters on the wall lay out some of the math: hardness ranges from 1 (cream cheese) to 14.5 (Lifesaver candies). Taste intensity starts at the slightly beany hint of vegetable oil and ends with an Altoidsesque peppermint slap to the face.
Whole Foods relies on trained volunteer tasters with day jobs in produce or procurement, but not everyone can perform this duty. Bukowski discovered she's sensitive to bitterness. Some people flunk out by missing obvious tastes like vanilla flavoring in an iced coffee. If you can't taste the vanilla, "then maybe this isn't for you," she says.
Bukowski's 70-person team includes graduates of training and professional certification programs they jokingly call pizza school, meat school, ice cream school. There are expert cheese judgers, gourmet chefs and a salty snack addict who came up with the formula for some tzatziki potato chips.
House brands are omnipresent in Whole Foods stores these days: freezers full of 365 frozen vegetables, hundreds of feet of shelf space devoted to 365 branded nuts, summer barbecue displays featuring 365 versions of charcoal, ketchup, mustard and even avocados. The chain's advertising reflects the shift in emphasis. A Whole Foods television commercial from 2014 leaned hard on crunchy values: the provenance of food, animal welfare and healthy eating. Today, the ads still emphasize premium ingredients, but price - including discounts for members of Amazon's Prime program - is front and center. The company advertised rounds of price cuts in 2019 and 2024, including on brand-name products and roughly 1,000 private label items that are particularly price sensitive for shoppers.
"Rewind 10 years ago, folks would be like 'I love shopping at Whole Foods, I wish I could shop it more but maybe I can't afford it,'" says Sonya Gafsi Oblisk, chief marketing officer for Whole Foods and Amazon's wider grocery business. She calls 365 a gateway to a more affordable assortment. "As baskets get bigger, you'll see more 365 items in them," she says. Sales of Whole Foods private label products have climbed 60% since 2019, and more than half of transactions now include private label items, the company says.
About a quarter of US households bought a 365 branded product in the last year, up from 22.6% in 2019, according to Numerator. That's faster growth than Kroger and Albertsons over the same period, Numerator says, but slower than Trader Joe's and Aldi, the German no-frills chain. Households spent about $109 on Whole Foods' private label line in the last year, up 74% from six years earlier.
Jeff Key, a software engineering manager in Chicago, often fills up his cart with 365 products. He's willing to overlook the occasional bland can of refried beans in favor of savings and the chain's ingredient standards. "It's not Aldi," Key says of Whole Foods. "But it's not Gucci either."
Jason Buechel, the chain's chief executive officer and leader of Amazon's overall grocery business, warned colleagues years ago that Whole Foods was too dependent on a relatively small group of superfans, as well as occasional shoppers who dropped in for special occasions or holidays, but did their regular shopping elsewhere. To thrive, he insisted, the grocer would need to win over more habitual shoppers.
That work isn't done, but Buechel seems ready to declare victory over that pesky nickname. "Our insights show that's not something that really comes up," he told Bloomberg in May. "You look at Gen Z, they don't even know what Whole Paycheck was."
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