Whole Foods to Emphasize "Health"

In an interview with the WSJ, Whole Foods CEO John Mackey unveiled a new health emphasis at the company, saying the company is going back to its roots and away from its 15-year emphasis as a foodie Mecca. (Frank Talk From Whole Foods' John Mackey - WSJ.com.)

Mackey: The biggest thing that is going to happen is beginning in the fall. We're going to begin a Healthy Eating Education initiative. We've just added a seventh core value (to the company's mission), which is Healthy Eating. Basically, we used to think it was enough just to sell healthy food, but we know it is not enough. We sell all kinds of candy. We sell a bunch of junk. There will be someone in a kiosk to answer questions, they'll have cookbooks and health books, there will be some cooking classes. It will be about how to select food, because people don't know."

WSJ: Will you get rid of the unhealthy items? You have aisle after aisle of absolutely delicious looking candies and chocolates and fudge and cakes and then you'll have someone up front at a kiosk looking through cookbooks?

Mr. Mackey: "Customers, we hope, are going to vote them out. You're just seeing the most tentative efforts at this point because the details are not ready for public release. You need to be fair. I've got to plan the revolution."

The key statement -- "customers, we hope, are going to vote them out." It's clear in the current recession that people are holding back from the more expensive food items, but my question is whether they will actually shift towards the whole foods and bulk bins that Mackey notes were a key component in the company's early days. Now those foods represent just 1% of sales and he recognizes that people aren't cooking -- hence, the plethora of prepared foods that the company also sells. In a nearby store in Virginia, for example, the prepared foods section now takes up perhaps 20% of the store, far bigger than it had until a renovation in the past year. Will bulk foods now be given more store real estate and be easier to navigate? Will the company reduce the number of packaged goods?

To push this initiative, Whole Foods will also have to become more transparent on the contents of its prepared food  items (like providing calorie labeling in addition to an ingredient list at its salad bar and prepared foods counter). That seems like an easy fix, with more information steering people towards healthier choices.

As Mackey says, "Americans are sick of being sick and fat." That's true but whether this sentiment will prompt them to cook -- as Michael Pollan advocated in his Times piece this Sunday -- and thus lose weight is another issue altogether. I, for one, hope so, and will be curious to see how Whole Foods fares with this new strategy.

- Samuel Fromartz

Whole Foods Isn't a Supermarket?

By Samuel Fromartz

A supermarket is a supermarket except when it's not, the Federal Trade Commission said this week.

The commission threw down the gauntlet and opposed the combination of Whole Foods and Wild Oats, because their merger would create a monopoly in that protected enclave, the natural foods business. This would lead to higher natural and organic food prices and store quality would go down. Whole Foods already gets slammed for its prices. Now they would move higher? And the stores are going to look like crap? This is a recipe for business success?

I find this view, at the very least, myopic and want to send the staff copies of my book. (Anybody willing to put up the chump change for this action?) Considering that every other supermarket chain has launched a surprising array of organic food products and that leading products, such as organic bagged lettuce, are sold in three out of every four grocery stores in the nation, the idea of a separate natural foods business is something of a fantasy. According to the Times:

Neil Currie, an analyst at UBS Investment Research, said in a note to investors that the F.T.C.’s actions were “somewhat at odds” with the recent blurring of lines between stores like Whole Foods and Trader Joe’s and more conventional chains like Publix and Wegmans. He said that 74 percent of natural and organic foods were now sold through mass-market channels like conventional supermarkets.

Yesterday, Natural Food Merchandiser came out with its survey which pegged the retail natural foods business at $46 billion. The share held by conventional grocery stores: 50 percent, or $23 billion. Whole Foods does not have the remaining 50 percent. In fact, its sales last year were $6 billion. Wild Oats annual sales were a little over $1 billion, which gives them a combined 15 percent of natural food sales.

Whole Foods also decided to pursue this merger with a very old nemesis once it became clear that  competition was arising from new entrants, such as traditional grocery stores. Even Wal-Mart, the biggest supermarket in the nation, whose sales are bigger than the next-six biggest chains, is selling organic food. In other words, this merger was a defensive strategy by Whole Foods to protect against new competitors, not to get a lock on the market. That's impossible, now that natural and organic foods have gone mainstream.

Maybe if Whole Foods sold Coca-Cola, or other products with a lot of high-fructose corn syrup and artificial flavors and colors, the merger would go through. After all, then it would be just be another supermarket. But it doesn't, so it's not.

Advice to Whole Foods CEO John Mackey: Call Bill Gates and get the number for his lawyer. Microsoft's a true monopoly and through many legal actions they are still doing just fine.