24/7 Wall St.

Apparently being all organic, natural or healthy is no longer an assured success in the grocery store business. A company called Natural Markets Food Group has announced that it will be closing its six Fresh & Green’s grocery stores located in the area around Washington D.C. and Maryland. These stores will wind down operations and all will be closed by the end of December 2013.

One of the issues is that these stores may have had legacy problems. After all, Whole Foods runs on operating margins which are unheard of by the likes of a Kroger or Safeway.

It turns out that NMFG acquired these stores as former SuperFresh stores from A&P in 2011. These stores were reopened as Fresh & Green’s locations, with one store in D.C. and five Maryland stores spread over Baltimore, Chestertown, Arnold, Brunswick and Cambridge.

The company statement said,

“Since the Natural Markets Food Group acquired Fresh & Green’s we have worked diligently to create a sustainable business model for the stores. Unfortunately, despite our best efforts, the stores remained unprofitable. Closing stores is never easy, given the impact on employees and the communities they serve…but there are times when it is necessary, and this is such a time. We’ve reached the point at which continuing to operate these stores does not make financial sense for the company.”

Fresh & Green’s apparently did not work out despite the rise of Whole Foods, The Fresh Market, Sprouts Farmers Market, Natural Grocers by Vitamin Cottage and many others. The store’s concept was to expand the selection of prepared meals and natural foods “while still providing all the conventional food products and brands you have enjoyed in the past.” It could have been a management and execution issue, a location issue, or simply that the stores were dogged by years under A&P before its bankruptcy.

NMFG operates several chains in the U.S. and Canada, under the names of Richtree, Wilde Greene, Planet Organic, and Mrs. Green’s.

Companies like Whole Foods and their competitors on the higher-end know that they are operating luxury retail destinations more than they are traditional grocery stores with razor-thin margins. Other stores might want to keep an eye on this, even if they did take this organic grocery trend to new levels. Whole Foods most recent year had $12.9 billion in sales, versus $1.5 billion for The Fresh Market and $2 billion for Sprouts Farmers Market. Natural Grocers by Vitamin Cottage generated $430 million in its most recent year’s sales.

There is a lot of money at stake here for these higher-end and natural grocery chains. And do not forget about higher offerings from Kroger and maybe even from Safeway, as well as Costco and Walmart. Everyone is getting into the game of natural and organic foods and products, or they are planning on it. That makes for a very competitive landscape, where prices may start to drive the train more than ever.