What the continued decline of Whole Foods means for Publix

Jul 31, 2015, 2:01pm EDT Updated Jul 31, 2015, 2:32pm EDT

INDUSTRIES & TAGSPublix Super Markets Inc.

PUBLIX SUPER MARKETS INC.

Publix Supermarkets Inc. recently reopened this store on Fourth Street North in St.… more

While Whole Foods Market Inc. appears to be falling prey to new specialty grocers, Publix Super Markets Inc. is rolling with the punches.

Texas-based Whole Foods (NASDAQ: WFM) on Thursday reported quarterly earnings that show while the grocer is still growing, it's not growing as fast as it was a few years ago — and investors aren't impressed, as shares fell 10 percent Thursday upon the report.

One reason Whole Foods' growth has slowed, USA Today reports, is an influx of specialty grocers that are eating up Whole Foods' market share. Those boutique grocers are on the move in Tampa Bay. Trader Joe's and Aldi have opened several locations here, and Sprouts Farmers Market Inc. (NASDAQ: SFM) and Earth Fareare actively looking for sites

But Lakeland-Publix is already answering any potential threats from new competitors, one analyst says.

"They’re doing it, and they’re responding quite well to that," said David J. Livingston, principal of DJL Research, a grocery industry consulting firm based in Wisconsin. "I think they know what they have to do, and they’re doing it. Publix is a very proactive company."

Publix in recent years has focused on hybrid stores that combine some upscale offerings with a traditional grocery market, a move that's succeeding in taking market share from every end of the grocery spectrum from Walmart to Whole Foods. It's also focusing on millennial shoppers with its Aprons program, teaching them to cook with its Simple Meals recipes, with a goal of luring back the market share grocers have lost to restaurants.

The real grocery battle, Livingston says, is for the middle market — which Publix dominates in the Southeast. It has more than 1,100 stores in eight states and took in a record $30.6 billion in revenue in 2014.

"Publix is a middle-of-the-road grocer try to be everything to everybody," Livingston says. "What happened to Albertsons, to Kash n Karry? They’re gone.Food Lion, gone. They’ve really destroyed that middle of the road market."

Publix's biggest competitor in that realm is Kroger Co. (NYSE: KR). While Kroger is yet to enter the Florida market— aside from one store near the Georgia line, a byproduct of its Harris Teeter acquisition — Kroger and Publix do go head to head in other key markets, including Atlanta and the Carolinas.

Kroger is much larger than Publix, with more than 2,000 stores in 31 states and fiscal sales of $108.5 billion in 2014. Both are well-respected in the grocery world as premier operators— and their competition has benefitted both grocers.

"They can both win and share it, because everybody else lost," Livingston said. "There have been a lot of casualties in their wake — there's a lot of skeletal remains of grocery stores sitting around because of the battle Publix and Kroger have waged."