Texas Monthly:
Monday, April 10, was going to be a big day for John Mackey, but he had no idea how big it would turn out to be. The co-founder, CEO, and spirit animal of Austin-based Whole Foods Market was flying to New York to launch a tour to promote the publication of his second book, The Whole Foods Diet (summary: Go vegan, or mostly vegan).
And:
As he stepped off the American Airlines flight at JFK (Whole Foods doesn’t own a jet, and Mackey flies coach), his phone lit up with urgent text messages and voice mails. A hedge fund in New York called Jana Partners had snatched up almost 9 percent of Whole Foods’ stock and announced that it would pressure the company to either overhaul its business or sell itself—perhaps to another grocery giant, such as Kroger, or to a less traditional player, such as Amazon. Mackey and other leaders might have to be replaced. A media frenzy ensued, and the PR team who had carefully staged what should have been a traveling celebration of their boss as a thought leader shifted into immediate crisis mode.
“From that moment on, I was drowning in it,” Mackey says.
Mackey built Whole Foods from scratch, instilled a set of principal beliefs, built a management team that followed those beliefs. Whole Foods continued to grow, and then the hedge fund folks smelled the deal that was possible.
Fascinating, horrifying (depending which side of the fence you’re on), and a tale as old as Wall Street.
I grew up with Whole Foods as a kid in Texas way back when. What it is today is not what it was then, but I can still feel the spirit of the place when I go to into my nearby NY store. Feels bad they’ve become a casualty of a hedge fund douchebag, greenmailer, but that’s the risk when you decide to play in the global public market. I’d prefer to see them go back to their roots a bit, more focus on quality over quantity, but now that Amazon owns them, all bets are off. Rosenstein’s set for a nice payday, however. Goes to reinforce the belief that shareholder fiduciary responsibility, trumps “Conscious capitalism.”
Hedge funds and private equity firms destroy businesses.
“Shareholder fiduciary responsibility” is a fictive, catch-all excuse for a lot of behavior that will never benefit most shareholders.
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Whole Paycheck is about to have their lunch eaten by faster, nimbler, cheaper competitors. Long gone are the days when it was the go-to chain to get organic/healthy type stuff. Their prices were simply unjustifiable for many (for example, Harmless Harvest coconut water is literally half the cost at Costco). Their declining sales made it clear that if they did nothing they’d slowly wither and die (like what’s happening to the Gap). The hedge funds just helped them along to save their bacon.
Helped them along how, by forcing a buyout/merger? Probably.
But I also think they could have weathered the consumer-backlash storm. They didn’t play the political game very well and their expansion put them too far out on a limb when the public turned against them. Texans like to think BIG, ‘its in their DNA’. But that can also be their Achilles heel without the proper experience.
In a market like Texas, Whole Foods was the one outlier that provided quality organic, even if it was more expensive. More recently, though, their super expansion, fueled by an ever expanding, vigilant consumer, contributed to the premium prices they put on their products. High demand, yields high prices. IMHO, a bad strategy, probably based on bad advice.
Unfortunately for me, Whole Foods no longer sells some of the unique products I used to buy, and I can’t find anywhere else. They’ve homogenized to cater to a larger consumer base. Save the 365 brand, which I dislike, and their in-store prepared food, many products they sell are available at other stores.
If I consumed Harmless Harvest coconut water, I too would buy it at Costco. But Costco caters to the mass populous by focusing on high-demand kinds of products, and you don’t typically find the same quality produce, seafood, or meats that you’ll find at Whole Foods. If I shop there now, its for those kinds of products.
I don’t know where you’re at, but here in Texas, Central Market has a lot better selection of high-end produce/meats/seafood than Whole Foods, not to mention things like hard to find imports. For example, you can get dry aged USDA prime and Waygu at CM, but not my local Whole Foods.
So for me, it’s CM or (less often) WF) for that kind of stuff, but we buy a lot of staples at Costco.
Of the three Whole Foods around me, only one caters to real people who cook (the store surrounded by neighborhoods with lots of families), while the other two (in flashier/fancier neighborhoods) seem to be more focused on their wine bars/ready to eat areas (which are likely very profitable given the surrounding demographic).
Yeah, I was in Texas way back in 1997, and don’t know Central MArket.
Currently in NYC. Whole Foods in NY ebbs and flows to the grocery mafia that controls the NJ/NY markets, so quality control is inconsistent.