Amazing food. Wonderful stores. Incredible staff. Ask anybody about Whole Foods Market and they will describe (usually in great detail) all the things that make this US retailer stand out from the crowd. But this company is not just great at food retailing; it’s a great food retailer with a real conscience. Forget bland statements about corporate social responsibility. For 25 years, Whole Foods has put concerns about the environment, community and people at the heart of its business, and that is what makes it unique.
It has done something special by taking natural and organic foods into the mainstream, something that co-founder John Mackey says was always the plan. As he said in a recent interview: “Whole Foods is not a business for a clique or for the elite. We wanted the philosophy of our stores to spread throughout the culture. We wanted to change the world.”
The Whole Foods story began on September 20, 1980 - when Mackey and his then girlfriend Renee Lawson Hardy joined forces with two other budding retail entrepreneurs, Craig Weller and Mark Skiles, to open a store in Austin, Texas. They had all run shops before. But this time they wanted to create something more mainstream rather than just another cranky health food store.
“My first store was a tiny little store called Safer Way. It was a vegetarian store and we did $300,000 in our first year,” recalled Mackey, the chairman and CEO, in a recent blog. “When we decided to open a bigger store, we made a decision to sell products I didn’t think were healthy for people - meat, seafood, beer, wine, coffee - but we were a whole foods store, not a holy food store.”
By changing tack with their new venture, and deciding it was OK to sell ketchup and burgers alongside organic lentils, Mackey and his colleagues hit on something really special. And the people of Austin loved it. So much so that when the fledgling business faced ruin eight months later, after a massive flood ripped through the store, customers rallied round with mops and buckets to help get it open again in less than a month.
In many ways, that heart-warming tale captures the essence of the special relationship that Whole Foods Market has managed to nurture with customers throughout its 25 years in business. Such fierce loyalty has in turn helped transform the business from a one-store outfit in Austin to a behemoth in the natural and organic food sector - with 175 stores generating a staggering $4bn of sales a year.
Yes, the stores are pricey. But once people discover Whole Foods, they just keep coming back for more. Its like-for-like sales growth is truly mind-boggling - 15% in the third quarter of the current financial year, for instance, after a run of industry-beating figures throughout the decade. Put another way: its stores are doing something like $900 per sq ft. Little wonder its regular punters have dubbed the chain, somewhat ruefully, Whole Paycheck.
Despite the initial popularity of the store in Austin, the company grew its presence slowly at first and usually via the acquisition of like-minded regional food chains. Then, in the early 1990s, it floated on the Nasdaq and began accelerating its growth through an aggressive store-opening programme.
Today, it has something like 65 store developments in the pipeline - including its site on Kensington High Street in London - which is the equivalent of 65% of its existing
sales space. Clearly this is a company with serious ambitions.
“The question I am asked the most is ‘How many Whole Foods stores can there be?’ I don’t answer any more because I have always been wrong in the past,” says Mackey. “We certainly are not limited by opportunity, as demographically the world continues to move in our direction with an overall ageing of the population and a growing interest in health, wellbeing and longevity.”
So Whole Foods now has a new goal: building a global brand. It has set a target of $10bn sales by 2010 and recently Mackey has gone on record saying he believes the business could double that again by 2014. On current projections, it could be a $30bn business by 2025.
Clearly, globalisation will be key to that success. And Whole Foods has taken its first tentative steps overseas with recent expansion into Canada and its arrival in the UK via the acquisition of Fresh & Wild last year. It now plans to open a flagship store in London in 2007 and has made no secret of its desire to expand into mainland Europe.
Mackey says: “The UK was an obvious first choice due to the advanced acceptance of organic foods and the lack of a language barrier. We felt an acquisition was the right strategy for our first overseas venture because, as with other successful acquisitions, the infrastructure and intellectual capital we gained provided us with an immediate platform for expansion.”
Of course, such expansion will create one massive headache for the company. No, it’s not how to find food to put in the new stores, but how best to export the quirky store culture that has made it so famous in the US. That’s not as wishy-washy as it sounds.
Whole Foods has pioneered an egalitarian management style that has given it a motivated workforce. It starts at the top: executive pay is capped at no more than 14 times the salary of the average frontline employee. For every dollar that comes in to the business, 24 cents goes to team members in pay and benefits. And in-store, you don’t get hired, you get voted on to one of the teams by the people you will be working with.If you don’t fit in, you don’t get the gig.
“One of our secrets is what I refer to as our ‘yoghurt culture’. For example, in our Columbus Circle store in New York, about 25% of the team members transferred from existing stores. They were the starting culture for the fermentation that turned Columbus Circle into a true Whole Foods store,” says Mackey.
He adds: “I will always remember when we opened our second store back in 1982 and team members told me they feared we would get too corporate and lose what made us special. But we have proved that it doesn’t matter how large we get, as long as we stay true to our core values and maintain and attract team members who share our passion.”
The ‘yoghurt culture’ stems from the thinking that led Mackey and his colleagues to draft a mission statement dubbed the Declaration of Interdependence in 1985. It is still in use today and covers everything from how the company aims to delight customers, to how it will only sell the best foods, to a pledge to put team member happiness at its core. In short, it explains how the company will live up to its motto of Whole Foods, Whole People, Whole Planet.
Aside from this hippy-like philosophy, there’s another big difference between Whole Foods and other retail corporations. As Mackey recently explained: “We didn’t begin Whole Foods to maximise profit for our shareholders. We began because we thought it would be fun to create a business, we needed to earn a living and we wanted to contribute to the wellbeing of other people.”
He believes passionately that employees don’t get a buzz from trying to maximise profit for shareholders. But he says they do get excited and inspired by a business that has an important purpose - such as selling natural and organic foods - and teaches them to put customers first.
And he adds: “My company is a mission-driven business that puts the customer first, team members second and shareholders third. We have never had a store fail. Why? Because the profit-centred businesses we compete against cannot beat us.”
Sure, it all sounds a bit wacky. Yes, it’s very unconventional. And it has rightly led to Mackey being branded an anarchist by one former colleague (others call him the Bill Gates of organic or the Steve Jobs of natural foods). Whatever you think of his philosophy, or the business, you can’t dispute the figures.
You can’t help but be bowled over by what you see, hear, touch and taste whenever you enter a Whole Foods store. And you can’t ignore what our academy of global experts thinks, either. Whole Foods really is the finest food retailer in the world.