Increased competition has been shown to increase consumer welfare. But does increased competition, especially when it arrives at the top of a vertically differentiated market, benefit all consumers equally? In this paper, I study the growing “better-for-you” segment of the food retail market, which at first seems like a positive transformation for both consumer welfare and the environment. However, these products are mainly targeted at high-income consumers. Increasing income inequality may have accelerated the development of this high-end market, with positive consequences on the welfare of these consumers, but possibly negative consequences for low-income consumers through decreased competition, higher prices and/or lower quality for basic groceries. In this paper, I test this hypothesis by studying the impact of the entry of Whole Foods in a new area - a symbol of gentrification - on the incumbent grocery stores' offers in terms of prices and quality. I find that on average incumbent stores increase prices for the same goods and decrease the variety of the goods their offer, which translates into a decrease in welfare for low-income households who cannot switch to the high-quality, high-price
entrant.