Whole Foods Market

Whole Foods Market

Type	Public (NASDAQ: WFMI)
Founded	1980 (Austin, Texas)
Headquarters	Austin, Texas
No. of locations	▲ 276
Key people	-John Mackey, CEO -Glenda Chamberlain, Executive Vice President and CFO -A.C. Gallo, Co-President and Chief Operating Officer -Walter Robb, Co-President and Chief Operating Officer -Jim Sud, Executive Vice President of Growth and Business Development -Lee Valkenaar, Executive Vice President of Global Support
Industry	Grocery store, Health food store
Revenue	▲ $6.6 billion USD (2007)[1]
Employees	41,500[2]
Website	www.wholefoodsmarket.com

Whole Foods Market (NASDAQ: WFMI) is an Austin, Texas-based foods grocer. As of September 2007^[update], the company operates over 270^[3] locations in the United States, Canada, and the United Kingdom.

Whole Foods Market is a food retailer of "natural" and organic products, including produce, seafood, grocery, meat and poultry, bakery, prepared foods and catering, beer, wine, cheese, whole body, floral, pet products, and household products. The company also sells a selection of conventional national brands.^[4] The company is consistently ranked among the most socially responsible businesses^[5] and placed second on the U.S. Environmental Protection Agency's list of Top 25 Green Power Partners.^[6]

History

Early years

In 1978, twenty-five-year-old college dropout John Mackey and Rene Lawson, his twenty-one year old girlfriend, borrowed $45,000 from family and friends to open a small natural foods store called SaferWay in Austin, Texas (the name being a spoof of Safeway). When the couple was evicted from their apartment for storing food products in it, they decided to live at the store. Because it was zoned for commercial use, there was no shower stall, so they bathed using a water hose attached to their dishwasher,.^[7][8][9]

Two years later, John Mackey partnered with Craig Weller and Mark Skiles to merge SaferWay with their Clarksville Natural Grocery, resulting in the opening of the original Whole Foods Market on September 20, 1980. At 12,500 square feet (1,160 m²) and with a staff of 19, the store was quite large in comparison to the standard health food store of the time.^[10]

Less than a year later, on Memorial Day in 1981, the worst flood in 70 years devastated the city of Austin,Texas. Caught in the flood waters, the store’s inventory was wiped out and most of the equipment was damaged. The losses were approximately $400,000 and Whole Foods Market had no insurance. Customers and neighbors voluntarily joined the staff to repair and clean up the damage. Creditors, vendors and investors all assisted in helping the store recover, and it reopened 28 days after the flood.^[10]

Expansion

The Whole Foods in New York City's East Village is the largest grocery store in the city.^[11]

Beginning in 1984, Whole Foods began its expansion out of Austin, first to Houston and Dallas and then into New Orleans with the purchase of The Whole Food Company in 1988. In 1989, the company expanded to the West Coast with a store in Palo Alto, California. While opening new stores, the company fueled rapid growth by acquiring other natural foods chains throughout the 1990s: Wellspring Grocery of North Carolina, Bread & Circus of Massachusetts and Rhode Island (banner retired in 2003), Mrs. Gooch’s Natural Foods Markets of Los Angeles, Bread of Life of Northern California, Fresh Fields Markets on the East Coast and in the Midwest, Florida Bread of Life stores, Detroit-area Merchant of Vino stores, and Nature’s Heartland of Boston.^[12] The company's 100th store was opened in Torrance, California, in 1999.

The Whole Foods headquarters in Austin, Texas, is located above its flagship store.

The company started its third decade with additional acquisitions. The first was Natural Abilities in 2000, which did business as Food for Thought in Northern California.^[13] In 2001, Whole Foods also moved into Manhattan.^[14] Later that year, Whole Foods acquired the assets of Harry’s Farmers Market, which included three stores in Atlanta.^[15] The year 2002 saw Whole Foods expand outside the U.S. when a store was opened in Toronto, Ontario.^[16] Continuing its expansion, Select Fish of Seattle was acquired in 2003.^[17] In 2005, Whole Foods opened its 80,000-square-foot (7,400 m²) flagship store in downtown Austin. The company's headquarters moved into offices above the store.^[18]

Whole Foods' expansion has increased the need for products and processing plants. In response, the company added its 365 Everyday Value product line and purchased Allegro Coffee Company in 1997. A seafood processing plant was opened in Atlanta in 2003, the year in which Whole Foods became United States' first national "certified organic" grocer.^[19]

As of August 2007^[update], Whole Foods Market plans four stores in the state of Hawaii.^[20] On Oʻahu, two of these are in development in Honolulu, at Kāhala Mall in Kāhala^[21] and at Ward Village in Kakaʻako.^[22][23]

United Kingdom

In 2004, Whole Foods entered the United Kingdom with the acquisition of seven Fresh & Wild stores.^[12][24] In June 2007, it opened its first full-size store, a total of 80,000 sq ft (7,400 m²). on three levels, on the site of the old Barker’s department store in Kensington High Street, West London. According to company executives, as many as forty stores may eventually be opened throughout the United Kingdom.^[25]

Acquisition of Wild Oats Markets and FTC Antitrust Complaint

On February 21, 2007, Whole Foods Market, Inc. and Wild Oats Markets Inc. announced the signing of a merger agreement under which Whole Foods Market, Inc. would acquire Wild Oats Markets Inc.’s outstanding common stock in a cash tender offer of $18.50 per share, or approximately $565 million based on fully diluted shares. Under the agreement, Whole Foods Market, Inc. would also assume Wild Oats Markets Inc.'s existing net debt totaling approximately $106 million as reported on September 30, 2006.^[26][27][28]

On June 27, 2007, the Federal Trade Commission issued an administrative complaint challenging Whole Foods Market, Inc.’s acquisition of Wild Oats Markets Inc. According to the complaint, the FTC believed that the proposed transaction would violate federal antitrust laws by eliminating the substantial competition between two close competitors in the operation of premium natural and organic supermarkets nationwide. The FTC contended that if the transaction were to proceed Whole Foods would have the ability to raise prices and reduce quality and services. Both Whole Foods Market and Wild Oats stated their intention to vigorously oppose the FTC’s complaint and a court hearing on the issue was scheduled for July 31 and August 1, 2007. Whole Foods Market CEO John Mackey took the unusual step of initiating a blog on the subject to explain his opposition to the FTC’s stance. Papers filed by the FTC revealed that for several years Mackey posted highly opinionated comments under the pseudonym "Rahodeb" on the Whole Foods Yahoo! investment message board, raising serious legal and ethical questions.

On August 23, 2007, the federal appeals court for the D.C. circuit refused to block the deal. The court cited increasing competition in the organic grocery business from traditional grocers like Safeway and Kroger as reasoning for allowing the deal.^[29] Whole Foods officially completed its buyout of Wild Oats on August 27, 2007.^[30] Whole Foods plans to upgrade and improve some Wild Oats locations before rebranding them to the "Whole Foods" name. Other Wild Oats locations will either be relocated or closed.^[31]

In October 2007, the company completed the sale of all 35 Henry's Farmers Market and Sun Harvest Market stores to a subsidiary of Los Angeles grocer Smart & Final Inc. for $166 million.^[32]

On October 2008, as part of the ongoing FTC antitrust investigation, Whole Foods subpoened detailed financial records, market studies, future strategic plans, and other information from a regional competitor based out of the Portland area, New Seasons Market. Full subpoena text On the official New Seasons blog, CEO Brian Rohter has expressed concern about handing sensitive information over to a direct competitor, and has filed a motion with the FTC to block the subpoena.

SEC investigation

Customers waiting in line at the East Village Whole Foods.

The online postings of Whole Foods Market's CEO, John Mackey, have become the subject of an informal inquiry by the Securities and Exchange Commission, according to the Wall Street Journal.^[33] Mackey posted numerous messages on a Yahoo financial forum under the user name "rahodeb", ^[34] according to a court document filed by the U.S. Federal Trade Commission and postings on Yahoo. The postings came to light during an FTC investigation of Whole Foods' planned takeover of Wild Oats Markets Inc. Mackey's messages painted a bright future for Whole Foods Market Inc., the largest U.S. natural and organic grocer, and downplayed the threat posed by competitors. While it isn’t clear that Mackey violated any laws in his postings, the issue has raised numerous legal questions. The newspaper also reported the SEC is likely to examine whether Mackey’s comments contradicted what the company previously said or were overly optimistic about the firm’s performance.

The SEC considered whether or not the CEO had selectively disclosed material corporate information, which could violate a securities law passed in 2000 (known as Regulation Fair Disclosure) designed to prevent executives from sharing information with favored clients or analysts. On July 17, 2007, Whole Foods stated that its board has formed an independent committee to investigate the postings. The SEC cleared Mackey of the charges on April 25, 2008.^[35]

E. coli

On August 8, 2008, Whole Foods Market announced a voluntary multi-state recall of the fresh ground beef it has sold between June 2 and August 6, 2008 after outbreaks of E. coli 0157:H7 in Massachusetts and Pennsylvania were linked to Whole Foods stores. Whole Foods Market was informed that the beef in question had come from Coleman Natural Beef whose Nebraska Beef processing plant was previously subject to a nationwide recall for E. coli 0157:H7 contamination. Although the illnesses linked to Whole Foods Market were reported in Massachusetts and Pennsylvania, the company broadened the voluntary recall to many other states as a cautionary measure.

Historical financial highlights

• January 1992: Whole Foods goes public, trading shares on the Nasdaq Stock Market as WFMI.^[12]
• November 1993: WFMI stock splits 2 for 1.^[12]
• June 2001: WFMI stock splits 2 for 1.^[12]
• October 2001: Moody's upgrades WFMI debt ratings.^[12]
• May 2002: WFMI added to S&P MidCap 400 Index.^[12]
• December 2002: WFMI added to the NASDAQ-100 Index.^[12]
• January 2004: Whole Foods Market paid its first dividend ever, 15 cents on each share of the company's stock.^[12]
• November 2004: Board of Directors approves 27 percent increase in quarterly dividend to $0.19 per share.^[12]
• March 2005: WFMI joins the ranks of the Fortune 500, entering the list for the first time at No. 479.^[36]
• April 2005: Board of Directors approves 32 percent increase in quarterly dividend to $0.25 per share.^[12]
• November 2005: Board of Directors approves 20 percent increase in quarterly dividend to $0.30 per share and announces special $4.00-per-share dividend.^[12]
• December 2005: Whole Foods Market stock splits 2 for 1, the third stock split in the company’s history.^[12]
• November 2006: The company's salary cap was raised from 14 times the average pay of a full-time worker to 19 times the average pay. This is up from the original eight-times cap that was set in the late 80’s.^[37] Additionally, the company announced that CEO John Mackey will receive a salary of one dollar (started January 1, 2007), and will forgo any future stock option awards.^[37]
• November 2006: Whole Foods Market's stock dropped 18 percent after the company lowered its 2007 sales forecasts.^[38]
• August 2007: A federal judge cleared the way for Whole Foods to merge with its rival Wild Oats Markets Inc., discounting recent arguments that the reduced competition would lead to higher prices.

Product quality

Produce in Cary, North Carolina store

Whole Foods Market only sells products that meet its self-imposed quality standards for being "natural", which the store defines as: minimally processed foods that are free of hydrogenated fats as well as artificial flavors, colors, sweeteners preservatives, and many others as listed on their online "Unacceptable Food Ingredients" list.^[39] Whole Foods has also announced that it does not intend to sell meat or milk from cloned animals or their offspring, even though the FDA has ruled them safe to eat.^[40][41] The company also sells many USDA-certified organic foods and products that aim to be environmentally friendly and ecologically responsible. Stores do not carry foie gras or eggs from hens confined to battery cages due to animal cruelty concerns, as a result of successful advocacy by animal welfare groups. The Whole Foods Market website details the company's criteria for selling food, dietary supplements, and personal care products.^[39]

Whole Foods has been criticized that its products may not be as progressive as they are touted to be. Author Michael Pollan has contended that the supermarket chain has done well in expanding the organic market, but has done so at the cost of local foods, regional producers, and distributors.^[42] Parts of the debate have taken place publicly through a series of letters between Pollan and Whole Foods CEO John Mackey.^[43]

Ronnie Cummins, national director of the United States Organic Consumers Association, said that Whole Foods simply uses the term natural as a marketing tool.^[44] Cummins concluded that "Whole Foods now is a big-box retailer – and it's much more concerned about competing with the other big boxes than issues of ethics and sustainability."^[45]

Purchasing

Whole Foods Market has opened wine and beer shops to cater to their upmarket brand. Above, the imported beer case at a Whole Foods beer shop.

Whole Foods Market purchases products for retail sale from local, regional, and international wholesale suppliers and vendors. The majority of purchasing occurs at the regional and national levels in order to negotiate volume discounts with major vendors and distributors. Regional and store buyers are focused on local products and any unique products necessary to ensure a neighborhood market feel in the stores. Whole Foods says that company is committed to buying from local producers that meet its quality standards while also increasingly focusing more of their purchasing on producer- and manufacture-direct programs.^[46] Each region has an employee known as a "forager", whose sole duty is to source local products for each store.^[47]

Whole Trade Guarantee

In April 2007, Whole Foods Market launched the Whole Trade Guarantee, a purchasing initiative emphasizing ethics and social responsibility concerning products imported from the developing world. The criteria include fair prices for crops, environmentally sound practices, better wages and labor conditions for workers and premium product quality. Whole Foods will work with TransFair USA and the Rainforest Alliance to ensure the transparency and integrity of the program. One percent of proceeds from Whole Trade certified products will go to the Whole Planet Foundation to support micro-loan programs in developing countries. The company’s goal is to have at least half of its imported products from these countries fully certified within ten years.^[48][49]

Environmental record

Whole Foods placed fifth on the U.S. Environmental Protection Agency’s list of the "Top 25 Green Power Partners". The company also received the EPA Green Power Award in 2004 and 2005 and Partner of the Year award in 2006 and 2007. ^[50] The company plans on purchasing 458 gigawatt hours of wind energy credits. This will keep about 700 million pounds (300 t) of carbon dioxide emissions out of the atmosphere. This is equivalent to taking 60,000 cars off the road or planting 90,000 acres (360 km²) of trees.^[51]

Stakeholder philosophy

See also Labor relations

In 1985, Whole Foods Market created its "Declaration of Interdependence", which emphasizes a stakeholder philosophy.^[52][53] Walter Robb, Whole Foods Market co-President, details the company's core values: "The deepest core of Whole Foods, the heartbeat, if you will, is this mission, this stakeholder philosophy: customers first, then team members, balanced with what’s good for other stakeholders, such as shareholders, vendors, the community, and the environment. If I put our mission in simple terms, it would be, No. 1, to change the way the world eats, and No. 2, to create a workplace based on love and respect. We believe business should meet the needs of all the stakeholders, as opposed to operating it for shareholders."^[54] CEO John Mackey describes how the stakeholder philosophy combines with capitalism: "We've always been unique in that we have a stakeholder philosophy, and it continues to guide us," Mackey says. "The beauty, in my opinion, of capitalism is that it has a harmony of interests. All these stakeholders are important. It is important that the owners and workers cooperate together to provide value for the customer. That's what all business is about, and I'd say that's a beautiful thing."^[52]

Causes

Environmental involvement

In May 1999, Whole Foods Market joined the Marine Stewardship Council (MSC), a global independent, not-for-profit organization promoting sustainable fisheries and responsible fishing practices world-wide to help preserve fish stocks for future generations.^[55] Whole Foods Market was one of the first American companies to partner with the Marine Stewardship Council, and continues to actively support its efforts in ensuring the sustainability of the oceans. The company first began selling MSC-certified seafood in 2000, and a growing selection of MSC-certified fish continues to be available.^[56]

In 2006, Whole Foods Market became the only Fortune 500 company to offset 100 percent of its energy cost with the purchase of wind power credits.^[57] A January 8, 2007, Environmental Protection Agency (EPA) report listed Whole Foods Market as the second-highest purchaser of green power nationwide, citing its actions as helping drive the development of new renewable energy sources for electricity generation. The EPA report showed Whole Foods Market using 463.1 million kilowatt hours annually. It was covered, 100 percent net-wise, by its total electricity from biomass, geothermal, small-hydro, solar, and wind sources.^[6]

Eliminating plastic

On Earth Day, April 22, 2008, Whole Foods Market eliminated the use of disposable plastic grocery bags company-wide.^[58] Customers can now choose between paper bags made from 100% recycled paper or from a selection of reusable bags. The company also began offering "Better Bags", a large and colorful grocery bag made primarily from recycled bottles. The move from the traditional paper/plastic system to environmentally friendly and reusable bags has been packaged as an initiative the company calls "BYOB – Bring Your Own Bag".^[59] The campaign is aimed at reducing pollution by eliminating plastic bags and reducing waste by encouraging bag reuse with "bag refunds" of 5–10 cents, depending on the store.

Humane treatment of animals

In 2002, People for the Ethical Treatment of Animals (PETA) began petitioning Whole Foods to take steps to ensure the improvement of treatment of animals sold in the stores. In June 2003, members of PETA gathered in front of Whole Foods headquarters in Austin, Texas, to protest the company’s practice of purchasing duck liver (foie gras) obtained from factories in which workers force-feed enormous amounts of food to the ducks and chop off the end of their bills to keep them from mutilating other ducks.^[60]

Whole Foods created the Animal Compassion Foundation in January 2005, a separate nonprofit organization, to help other producers evolve their practices to raise animals naturally and humanely. According to Whole Foods Natural Meat Quality Standards and Animal Compassionate Standards, pulling feathers from live ducks, bill trimming, bill heat treatment, toe punching, slitting the webs of the feet, and toe removal are all prohibited in the raising of ducks for Whole Foods Market. Any ducks treated in this manner, treated with antibiotics or antimicrobials, cloned, genetically modified, or not allowed medical treatment when necessary are to be removed from Whole Foods Market stock.^[61][41]

Whole Foods announced in June 2006 that it would stop selling live lobsters and crabs, but in February 2007 made an exception for a new Portland, Maine store that is able to meet humane standards. The lobsters will be kept in private compartments instead of being piled on top of one another in a tank, and employees will use a device that gives them a 110-volt shock so that they are not boiled alive in a pot of water. Whole Foods will not be selling live lobsters at its other stores because they are not close enough to the lobster grounds.^[62] This decision has been criticized by some as damaging an important New England tradition and as removing people's connection to where their food actually comes from.^[63]

Community involvement

Whole Foods Market commits to a policy of donating at least five percent of its annual net profits to charitable causes. These donations are accomplished in multiple ways. Each store has the authority to donate food, labor or dollars to local not-for-profit organizations. Individual stores also hold 5% Days approximately four times a year, during which they donate 5% of that day's net sales to a local or regional non-profit or educational organization.

In 2005, the company created two foundations designed to effect solutions to global problems. The Animal Compassion Foundation strives to improve the quality of life for farm animals and the Whole Planet Foundation works to combat poverty in rural communities around the world through microlending.^[64] In 2006, the company announced that it would be providing $10 million a year in low-interest loans to local producers.^[65] The Local Producer Loan Program provided its first loan in February 2007.

Toxins

Chocolate fountain at the flagship Whole Foods in Austin, Texas

In January 2004, in California, the Environmental Working Group and the Center for Environmental Health presented a notice of intent to file an anti-toxin lawsuit against salmon producers. This was in large part due to Whole Foods' involvement, including highlighting companies' failure to warn consumers the fish contained potentially dangerous levels of cancer causing chemicals known as PCBs.^[66]

In February 2006, Shareholders of Whole Foods filed a resolution asking Whole Foods to report toxic chemicals found in its products.^[67] Substances such as Bisphenol A (BPA), found in products such as baby bottles and children’s cups, are controversial. While most manufacturers have dismissed the claims and have continued to use BPA, Whole Foods no longer sells baby bottles and children’s cups made with BPA.^[68]

In the wake of concern over the safety of seafood imports from China, on July 10, 2007, The Washington Post reported that Whole Foods imports a small amount of frozen shrimp from China, accounting for less than 2% of the company's total seafood sales. A Whole Foods spokesperson addressed the issue, saying "We're not concerned about the less than 2 percent. It's business as usual for us."^[69]

Awards and recognition

• Whole Foods Market has been included in Fortune magazine's annual list of the "100 Best Companies to Work For"^[70] every year since the list's inception in 1998, most recently at No. 5 in 2007.^[2][71]

• CEO John Mackey was named to Barron's list of the world's best CEOs, which recognizes 30 top corporate leaders who excel in not only profit growth and stock-price gains but also leadership strength and industry stature.^[72]

• The Environmental Protection Agency awarded Whole Foods Market its top honor of Green Power Partner of the Year for 2006. The company was also presented with the Green Power Leadership Award in 2004 and 2005.^[73]

• Based on 2005 revenue, Whole Foods Market is the fifty-fifth largest retailer in the United States.^[74]

• In the 2006 Harris Interactive/The Wall Street Journal ranking of the world's best and worst corporate reputations, Whole Foods placed 12th overall and received the best score of any company for social responsibility.^[5]

• Whole Foods was included in Corporate Responsibility Officer magazine's annual "100 Best Corporate Citizens" list for 2007, ranking No. 54 out of 1,100 U.S. public companies surveyed.^[75] The ranking is based on measures of corporate service to eight groups: shareholders, community, governance, diversity, employees, environment, human rights and product.

• Supermarket News ranked Whole Foods No. 23 in the 2007 "Top 75 North American Food Retailers" based on 2006 fiscal year sales of $5.6 billion.^[76]

• CEO John Mackey was named the 2003 Overall National Ernst & Young Entrepreneur Of The Year.^[77]

• Whole Foods was named 'World's Greatest Food Retailer' by the British trade magazine The Grocer in 2006.^[78]

Labor relations

Among its core values, the company lists "supporting team member happiness and excellence".^[79] The company argues that its treatment of workers obviates the needs for unions: full-time workers are given free health insurance that includes a personal wellness account, and the starting pay at most stores is highly competitive.^[80]

Whole Foods Market suburban store in Redwood City, California

CEO John Mackey, a libertarian, makes no secret of his opposition to unions in Whole Foods. Mackey believes that unions facilitate an adversarial relationship between management and labor.^[9][81] An attempt at unionizing in Madison, Wisconsin, in 2002 was met with resistance from store management and Whole Foods was accused by labor activists of union busting. A 2004 ruling by the National Labor Relations Board upheld the actions of Whole Foods at the Madison store, although some workers considered its tactics unethical. Further attempts at unionizing Whole Foods Market stores have been unsuccessful. Michael Henneberry of the United Food and Commercial Workers Union said they failed to attract the interest of the employees at Berkeley's Whole Foods despite rallying there for seven years.^[82]

Whole Foods was criticized for its refusal to support a campaign by the United Farm Workers (UFW) on behalf of agricultural workers laboring on strawberry farms.^[83] During the late 1990s, the UFW persuaded several large supermarket chains to sign a pledge in support of improved wages and working conditions for strawberry pickers. Whole Foods chose instead to support the farmworkers directly by holding a "National 5% Day" where five percent of that day's sales — $125,000 — were donated to organizations which provide social services to farmworkers.^[84]

See also

• Organic food
• Sustainable business
• Supermarket

References

External links

• Official site
• Whole Foods Market YouTube Channel
• Whole Planet Foundation
• Animal Compassion Foundation
• Local Producer Loan Program