Whole Foods could hit back at mainstream grocers like Publix, Kroger with new 365 stores

May 31, 2016, 2:58pm EDT Updated May 31, 2016, 3:24pm EDT

Ashley Gurbal KritzerReporterTampa Bay Business Journal

A look at Whole Foods Market Inc.'s new millennial-inspired grocery stores shows a concept that could punch back at mainstream grocers like Publix Super Markets Inc.

Whole Foods (NASDAQ: WFM) unveiled its first 365 by Whole Foods store in California. The 365 stores are meant to be Whole Foods' value-driven brand, featuring its private label products that bear the 365 name.

Ordering kiosks for prepared foods at the new 365 by Whole Foods store in California.

MarketWatch went inside the new store here, painting an image of a store with less staff and more conventional produce than Whole Foods' traditional stores. But there are other upscale touches meant to appeal to millennial foodies, including a coffee bar with a customizable tea machine and a fresh cut fruit bar.

Analyst reaction to the store and what it means to Whole Foods' future has beenmixed. But if 365 is able to offer a pleasant shopping experience and deals on quality products, it could win back some of the market share that Whole Foods has lost to grocers like Publix and Kroger Co. (NYSE: KR).

The new 365 store features a self-serve ordering kiosk for prepared foods like hot dogs, bowls made with quinoa, rice and veggies and pizza. The large grab-and-go selection includes international offerings like "rotating items like bibimbap and kimchi fried rice, chicken verde enchiladas and shichimi togarashi brussels sprouts," according to a release from Whole Foods.

Both Publix and Kroger have taken market share from Whole Foods in recent years by adding upscale touches to stores, including expanded hot bar selections and in some Kroger locations, in-store growler filling stations.

Whole Foods is yet to confirm a 365 location in the Tampa Bay region, but one of the 19 confirmed locations is under construction in Gainesville. Whole Foods executives have said the company could eventually have hundreds of the 365 stores.

The 365 stores are just one of the mounting headwinds against Lakeland-based Publix, the largest private employer in the Tampa Bay region. Amazon is doubling down on the grocery business, with two-hour delivery in select markets and private-label goods expected to roll out in the near future.

New specialty concepts, including Sprouts Farmers Market Inc. (NASDAQ: SFM), are also moving into Publix's turf. Both Sprouts and 365 compete on price, which could lure in some Publix shoppers.

Kroger is backing organic grocer Lucky's Market, which has big growth plans for Florida and could also make Kroger a stronger competitor in the organics realm.

Discount grocers like Aldi and Lidl are growing rapidly in the U.S. Aldi is working to improve its shopping experience, aiming to lure in more Publix shoppers.

To stay relevant, the burden is on Publix to deliver a good shopping experience — alongside competitive prices and, in some cases, a blissful foodie experience.