John Mackey blog

John Mackey, CEO of Whole Foods, has written a long blog post that Pamela Riemenschneider of The Packer keyed me to recently. It was a rare and candid commentary from a CEO; the follow on comments also were entertaining.


Here is Mackey's reason #2 for the acquisition of Wild Oats:

2. Elimination of a competitor — they compete with us for sites, customers and Team Members. Reason #2 seems to be one that particularly bothers the FTC—eliminating a competitor. I'm not sure why this is so troubling to the FTC because every merger between companies that compete with each other necessarily means eliminating a competitor. If eliminating a competitor is inherently "bad" or "wrong" then the FTC should probably never allow any mergers to ever occur, because most mergers necessarily mean the elimination of a competitor from the marketplace. Whole Foods has a 27 year long history of buying companies and eliminating them as competitors. Indeed, Whole Foods was created back in 1980 when two small competitive natural foods companies merged together-Safer Way Natural Foods and Clarksville Natural Grocery in Austin, Texas. Since then we have bought 18 different retail companies including such companies as Bread & Circus, Mrs. Gooch's, Fresh Fields, and Harry's Farmers Markets. In each case we eliminated a competitor, but we also greatly improved the stores that we acquired from these companies (the proof of this is the very significant increase of sales that occurred in virtually every store that we have ever acquired).

It is very important to understand that eliminating any one particular competitor such as Wild Oats doesn't mean eliminating all of our competitors—quite the contrary. Whole Foods has more competition today than we have ever had in our entire history! Numerous competitors to Whole Foods exist in every market we do business in, whether Wild Oats is in that market or not.
For the FTC to prove its case against this merger they would need to do at least two things:
A. Prove that quality or service would probably decrease at Whole Foods or Wild Oats as a result of this deal.
B. Prove that prices at Whole Foods or Wild Oats would increase as a result of this deal.
However, the FTC will never be able to prove either of these allegations because the exact opposite will happen (just as it has always happened before with all of our previous 18 retail acquisitions).


TK: I think Mackey is fighting an uphill battle here. Arguments like "We have a 27 year history of buying companies and eliminating them as competitors" may not score points at the FTC. By the way, Pamela is in mere days moving to Texas and leaving our office here in Lenexa. The good news is that Pamela will continue to be a part of The Packer team. Besides her irrepressible personality, we will miss her frequent contributions to the OBF (over by Fred) food shelf here at the home office. Pamela regularly brought jicama and other produce to share, not to mention that memorable day when she provided the ingredients for fluffer nutter sandwiches.