Whole Foods Market Inc. is launching a more value-oriented chain, 365 by Whole Foods Market, with the first five stores (Los Angeles, Calif.; Santa Monica, Calif.; Portland, Ore.; Houston, Tex.; and Bellevue, Wash.) expected to open in the second half of 2016. The new stores target budget-minded, young-adult shoppers and attempt to counter the perception that Whole Foods is expensive.

The new chain will feature, along with lower prices, an environment that is “hip, cool and tech-oriented,” according to John Mackey, a co-founder and co-chief executive of Whole Foods. Co-CEO Walter Robb notes that while 365 products will anchor the stores, the chain will also have other items, including national brands. Whole Foods has experienced slow sales growth as organic and natural products have become more widely available at mainstream supermarket chains and big-box retailers.

44% of Millennials say there are not enough organic food and beverage options available

As the organic market has gone mainstream, demand has grown, and a wider range of consumers now seek healthier foods. Millennials, who may not have the income to be regular Whole Foods shoppers, are a prime target for a chain like 365. After all, Mintel’s Organic Food and Beverage Shoppers US 2015 report shows that 44% of Millennials say there are not enough organic food and beverage options available, while more than a third of all consumers indicate they are buying more organic foods/beverages this year compared to last year.

There is no doubt about the growing popularity of organics, and though Whole Foods remains the best known brand in the space, 365 will present an opportunity to reach consumers it has been losing to Trader Joe’s, Wal-Mart and other newcomers. In its initial announcement, Whole Foods said the new chain would be “geared toward Millennials.” However, Robb said that while 365 is inspired by younger generations, it is intended to appeal to anyone who wants a quick, convenient way to shop.

The chain will also have to consider prices, particularly as consumers find organic options available for less money and at more familiar locations, such as Target and Wal-Mart. The latter already has plans to introduce organic food options priced at the same point as mainstream brands. As such, Whole Foods – and 365, by extension – will have to take more than solely price into consideration when targeting consumers, suggesting that the vision of 365 as a “streamlined, hip, cool, technology-oriented store” could lure tech-savvy Millennial consumers, in particular.

Billy Roberts is a Senior Food and Drink Analyst at Mintel, based in the Chicago office. Billy previously worked as Executive Editor covering consumer insights and new food and beverage trends with a leading trade publication.

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