One food blogger, comparing the price of organic crackers noted that "Carr's crackers were only $3.79 at Whole Foods" but "$4.39 at Haight Street Market, $4.25 at Say Cheese" in her area (Levin 2011). This seems to be a wise strategy for Whole Foods, given that it cannot compete on price without sacrificing its core values. "There has been much consolidation in the supermarket industry in recent years. The surviving players have realized that they cannot be all things to all people. Instead, they are attempting to do the things they do best better than their competition" (Inlay 2006). In contrast, SuperValu's strategy has been to expand as swiftly as possible and offer value-based savings on a wide variety of goods, including fuel and pharmaceutical items as well as foods. It acquired the Albertson's grocery chain (another mega-store), further increasing its outreach across the nation.

One of the dangers of adopting a niche market strategy like Whole Foods is that if the demand for the niche product experiences a sharp downturn, than the profits of the company will likewise sink. SuperValu, in contrast, can hedge its bets against, for example, a poor crop and an upsurge in the cost of food because of its expansion into the drugstore industry. Consumers may try to buy less food, but certain aspects of their budget such as aspirin and soap are difficult to cut out entirely. Also, because SuperValu sells food based upon lower prices alone, even when consumers are cutting back on more expensive organic goods, they are still likely to go to SuperValu for the best deals on drugstore items and gas.

There is also danger, however, in adopting a low-price strategy without offering additional special value to the customer. There is no particular reason to patronize a SuperValu other than price, versus the 'experience' and ambiance of a Whole Foods. When consumers are able to go to Wal-Mart when it offers cheaper prices on the same wide range of products, they are inclined to choose this...

This is why, given its inability to compete with Wal-Mart and offer a comparable range of goods that spans from organic products to gas, SuperValu is struggling. At the beginning of 2011, it announced that it was forced to close 20 of its grocery stores nationwide and require many of its employees to take unpaid leave (Hughlett 2011). In contrast, in February 2011, one market analyst praised the success of Whole Foods' slow yet sustained expansion strategy combined with its niche marketing: "the economic climate may be rotten for grocery stocks in general, but Whole Foods Market just proved that it's still made of the good stuff. Whole Foods' first-quarter earnings increased 78.5%, to $88.7 million, or $0.51 per share. Sales increased 14%, to $3.0 billion, and comparable-store sales increased 9.1%" (Lomax 2011). Proof of its successful marketing approach appears to be in its (organic) pudding.
References

Hughlett, Mike. (2011, January 6). SuperValu to close stores. Star Tribune. Retrieved March 25,

2011 at http://www.startribune.com/business/113050249.html?elr=KArks:DCiU1OiP:DiiUiacyKUnciaec8O7EyUr

Imlay, Thom. (2006, May). Challenges in today's U.S. supermarket industry.

Microsoft retail and hospitality. Retrieved March 25, 2011 at http://msdn.microsoft.com/en-us/library/aa479076.aspx#chlussprmrkt_topic1

Levin, Rachel. (2011, March 24). Our love affair with Whole Foods. Huffington Post. Retrieved March 25, 2011 at http://www.huffingtonpost.com/rachel-levin/whole-foods_b_840259.html?view=print

Lomax, Alyce. (2011, February 10). Whole Foods has the right stuff. Motley Fool.

Retrieved March 25, 2011 at http://www.fool.com/investing/general/2011/02/10/whole-foods-has-the-right-stuff.aspx

Moore, John. (2007, February). Whole Foods acquires Wild Oats. Brand Autopsy.

Retrieved March 25, 2011 at http://brandautopsy.typepad.com/brandautopsy/2007/02/whole_foods_acq.html