Whole Foods: Looking At The Whole Picture

Source: Investor’s Business Daily: Looking At The Whole Picture.

For John Mackey, it’s all about living your passion.

His enthusiasm has helped Whole Foods become a major player. Sales in 1995 vaulted 86%; earnings growth hit triple digits the next two years. Sales grew an average 20% annually the last five years, from $2.3 billion in 2001 to $4.7 billion in 2005. Earnings per share nearly doubled during the same period, from $1.05 to $1.98.

How? Simple, Mackey says. "As much as anything, I followed my heart," he said in a recent interview. "Whole Foods Market had a dream of creating the highest-quality food store, and we created core values."

At its heart, the mother of Whole Foods’ core values is to make the customer happy — as well as employees, investors, vendors, communities and the environment. To do that, the company won’t sell food made with hydrogenated oils or artificial preservatives. It buys from organic producers and sustainable fisheries. Its meats contain no hormones. Employees vote on benefits packages and new hires. They wear no uniforms.

In addition, the company aims to double annual sales to $10 billion in the next five years — largely by using internal capital for growth. Mackey calls it "stakeholder capitalism." "Maximizing shareholder value doesn’t get employees, customers or the community at large excited," he noted.

While delivering on the earnings end, Mackey’s recipe for a fabulous store has made the company a darling of the organic food movement. It’s pleased employees enough with some innovative labor practices that they’ve shrugged off most unionization attempts — without Whole Foods incurring charges that it’s tried to quash organized labor.

Simple Start

Long intrigued by the inner life, Mackey studied philosophy and religion at two Texas colleges before dropping out. A stint living in a vegetarian co-op drove home the message, "you are what you eat."

In 1978, Mackey and then-girlfriend Renee Lawson Hardy decided they could express their ideals and still make a living. Passionate about food, he used an inheritance and borrowed money from his father to start a natural food store called Safer Way in Austin.

While it offered organic products, Safer Way distinguished itself from other local health food stores by selling refined sugar and eggs.

After a year, Mackey decided to build on his modest profitability. With $200,000 in financing, including a loan from a customer, Mackey and Hardy merged Safer Way with a cross-town rival. In 1980, the first Whole Foods Market opened with a staff of 19 and a structure that broke new ground for health food retailers. It was big, so it could carry many more organic products. And the aisles were organized like a typical grocery store.

Appealing to increasingly health-conscious and college-educated consumers has worked well. True to Safer Way’s original strategy, Whole Foods carries what’s good for you, plus what tastes and looks good. That includes gleaming fresh displays, racks of imported cheese and hand-made gelato.