A Victim of the Recession, Maybe
The Ode: Planet Organic (1993 — 2010)
The grocery chain rode the rising natural foods wave until it bought a U.S. counterpart at the top of the market — with borrowed money.
Planet Organic Health Corp., which calls itself Canada's largest natural-foods retailer, began as a single 4,000-square-foot store on Edmonton's trendy Whyte Avenue. Diane Shaskin and husband Mark Craft, an organics pioneer who'd opened his first such store in 1978, bought High Level Natural Foods in 1993 and renamed it Terra Natural Food Market. The pair set about redesigning the store, reworking the product mix and moving the shopping experience from hippy-dippy toward a more accessible, suburban concept. Terra appealed to a new generation of customers who wanted a healthier alternative to the chemically grown and highly processed foods that then dominated the aisles of the major supermarket chains.
The concept was sufficiently appealing that Darren Krissie, a sales and marketing executive with a background in jewelry and heavy equipment, approached Craft and Shaskin with a proposal to roll out the store concept across Canada as Planet Organic. They took the company public in late 2000, moved the store to a larger location, then opened two additional outlets in Victoria and Calgary. A fourth store opened in Port Coquitlam, B.C., in 2003. By then Krissie had attracted funding from Penticton, B.C.–based angel investor Ron Francisco, who became Planet Organic's CEO and chair.
The next year the dream of a nationwide chain began to materialize as Planet Organic bought Great Ocean Natural Foods in Halifax and Sangster's Health Centres, a chain of vitamin and natural health stores. After adding grocery stores in Edmonton and Calgary, Planet Organic moved into Ontario with stores in Port Credit and Vaughan.
The growth then accelerated, financed largely by debt. In the spring of 2007, Planet Organic bought Mrs. Green's Natural Market, a chain of 11 stores in the northeastern United States, for US$33.7 million in cash. It also began to diversify further from the supermarkets, acquiring vitamin and herbal supplement manufacturer Trophic Canada (from Francisco) and Healthy's the Athlete's Edge Inc., a Toronto-area vitamin store chain.
At its peak, Planet Organic had 76 retail outlets and posted 2009 revenues of $127.7 million, but the chain repeatedly incurred losses as the natural-foods landscape became increasingly competitive. Whole Foods out of Austin, Texas, had become the prime consolidator in the sector with more than 280 stores, including four in the Vancouver area and two in Ontario. Planet Organic's Alberta stores were feeling heat from Sunterra Market, owned by Calgary's deep-pocketed Price family. Plus mainstream grocers, enticed by the higher margins, were adding natural-foods sections to their stores.
In March of 2009, Planet Organic defaulted on close to $40 million in debt, prompting a management shuffle. Francisco stepped down, while Shaskin and Craft were fired. The sale of the Sangster's, Trophic and Healthy's divisions earlier this year brought Planet Organic's debt load down to $31 million, consolidated under private equity firm Catalyst Capital. When Catalyst called the loan on April 28, Planet Organic sought and received protection from its creditors.
The bankruptcy leaves Planet Organic with few options. "There isn't somebody out there to sell it to," says Bob Gibson, head of equity research at Octagon Capital in Toronto. Whole Foods, he says, isn't a good fit for the company.
But Gibson insists the business model was sustainable. It was the interest payments from the Mrs. Green's purchase that "just crushed their earnings." The most likely scenarios point to the disappearance of the chain's name and identity, and with it Edmonton's contribution to the still-rising natural-food wave.
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