Leading U.S. food retailer shares dived, pundits pontificated and it seems the traditional bricks-and-mortar world of food is now all but doomed. All this from the announcement by Amazon that it was to acquire Whole Foods Market – the food retailer maverick that transformed food shopping in the United States for those with deep enough pockets – for $13.7 billion.
Yet behind the June 16th headline-grabbing story of Amazon’s major move into the real world of food, there is a deeper case study about the complexities, challenges, compromises and contradictions inherent in how to build a business based on “conscious capitalism” as John Mackey, CEO and co-founder of Whole Foods Market, describes the company’s approach to business.
It is a stance that has enabled a market-shifting 37-year rise for Whole Foods Market, which pioneered natural and organic food retailing, to become a $16 billion business operating 460 stores in the U.S. from its humble one-store origins in Austin, Texas.
Journalist Tom Foster provides such as deep case study in his detailed and long-length feature on John Mackey and Whole Foods in the June issue of Texas Monthly – and published before the Amazon acquisition was known (see link at end to access article). Foster’s article is highly recommended especially for those thinking about the relationships between ‘stakeholder’ and ‘shareholder’ priorities or sustainability business leadership.
Foster’s article covers a lot of ground and provides interesting and important background on Whole Foods and, by good luck, provides some interesting context in which to see the Amazon acquisition. For example, what now, with hindsight, looks important was the move on April 10th by New York hedge fund Jana Partners when it bought a 9% stake in Whole Foods and started to put pressure on the company to overhaul its business or sell itself, according to Foster.
The timing was good from the hedge fund’s point of view as Whole Foods had been losing its lustre for a couple of years. Foster writes how Whole Foods stocks peeked in October 2013 at around $65 having over the previous seven years doubled its revenues and tripled its profits. Then things began to slide and by 2015 the stock had halved and became stuck around the $30 mark for two years, while same-store sales also started to decline.
Competitors were also getting stronger – Kroger, the U.S.’s largest mainstream supermarket chain, passed Whole Foods in annual sales of natural and organic sales in 2016 and there is stiff food competition from other food retailers such as Trader Joe’s and Sprouts Farmers Market.
Tom Foster clearly spent a fair bit of time with John Mackey researching his article and says the Whole Foods CEO kept coming back to the company being a “mission-driven company” and that it was fulfilling a purpose. ‘Conscious capitalism’, Foster writes, is Mackey’s term for a way of thinking about business as having a higher purpose than just creating value for shareholders. This is set out in Mackey’s 2012 book, co-written with Professor Raj Sisodia, Conscious Capitalism: Liberating the Heroic Spirit.
Contrasting styles of capitalism
But before we start thinking this is a new type of business ‘socialism’, Mackey’s conscious capitalism is moulded in the libertarian world-view. What is heroic for Mackey are entrepreneurs (like him) and free-enterprise capitalism. And Mackey does walk the talk – Foster writes since 2007 Mackey has only taken a $1-dollar-a-year annual salary from Whole Foods (including no stock options or other bonuses). It is interesting to contrast this to the fact revealed later in Foster’s article that the man behind the hedge fund Jana Partners, Barry Rosenstein, recently bought the most expensive house ever sold in America for $147 million.
Remembering the article came out before the Amazon announcement, Foster quotes Mackey as saying he sees the Whole Foods story as a: “morality play between conscious capitalism and greedy, short-term financial capitalism”.
For the future, and importantly, Amazon said when announcing its bid for Whole Foods Market, that John Mackey will remain as CEO and the company’s headquarters will stay in Austin, Texas.
You can read Tom Foster’s article “The Shelf Life of John Mackey” published in Texas Monthly (June 2017) here: http://features.texasmonthly.com/editorial/shelf-life-john-mackey/