'The Onion' lampoons Whole Foods

Packer Managing Editor Fred Wilkinson here.

The satirical online newspaper spoof "The Onion" weighs in on Whole Foods' power as a kingmaker regarding food trendiness:

News In Photos

Whole Foods Transforms Another Ordinary Vegetable Into Status Symbol

Heads up: The site's decidedly off-color humor isn't to everyone's taste.

Whole Foods: Rough patch?

This AP story reports that Whole Foods has been downgraded by one analyst to "underperform."

Given the challenging economic times, the analyst said the company may have trouble improving its profile in the months ahead. In fact, he said, maintaining even flat sales looks to be an uphill climb late this year and into next.

When the organic market sneezes, Whole Foods will catch a cold, and so this anticipated belt tightening by consumers shouldn't be surprising. The company is scheduled to report its quarterly earnings Nov. 5.

What may be surprising is that the most recent retail sales figures reflect continued double digit growth for the organic produce category.

The United Fresh Fresh Facts report showed second quarter 2008 sales of organic fruits and vegetables were up strongly, with weekly sales of organic fruit up 26% over last year in the second quarter and organic fruit volume up 16%. Likewise, organic vegetables showed a 22% gain in weekly sales per store and a 14% increase in weekly volume per store in the second quarter. Overall, Fresh Facts reported that the average price of organic fruit was $.371 per pound, up 17% from last year. The average price for organic vegetable was $3.46 per pound, up 8% from a year ago.

Fresh Facts said organic fruit contributed 7.2% to total produce sales in the second quarter, while vegetables accounted to 5.5% of total produce sales.

Looking ahead, it will be closely watched to see how much sales of organic produce decelerate from second quarter performance to the July through September third quarter.

Wednesday headline roundup - Aug. 27

Headlines snatched from the Web and the Fresh Produce Industry Discussion Group this morning:


2 plead guilty in Hunts Point gambling ring - Big Apple From the post:

Two men with reputed ties to organized crime pleaded guilty on Tuesday to participating in an illegal gambling ring run out of a wholesale produce market at Hunts Point in the Bronx.

Systems approach for Chilean grape imports - Big Apple Pretty big news here in a FR proposed rule. From the post:

We are proposing to amend the fruits and vegetables regulations to allow fresh table grapes from Chile to be imported into the continental United States under a systems approach. Currently, as condition of entry, all table grapes from Chile must be fumigated with methyl bromide as a risk-mitigation measure for Brevipalpus chilensis. Under this proposal, we would allow a combination of risk-mitigation measures, or systems approach, to be employed in lieu of methyl bromide fumigation.

Hundreds of workers held in immigration raid NYT reports:

In another large-scale workplace immigration crackdown, federal officials raided a factory here on Monday, detaining at least 350 workers they said were in the country illegally

Cell phones seen as emerging payment device at grocery stores

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Supermarkets may be the next target market for near field communication phones, at least according to presentations during the recent IT Leadership Summit of the National Retail Federation.

One of the presenters, an executive for supermarket chain Cincinnati-based Kroger says NFC phones are a good fit for supermarkets because of their time-saving potential. “Nobody stands in a grocery line because it’s a pleasure. We are looking to shave more than seconds off that line,” he said. He was one of several panelists discussing “Mobility and Near-field Communication - The New Era of Ubiquitous Retailing.”

Chiquita signs deal for China venture From the story:

Under the agreement, which is subject to regulatory approval, Chiquita and Haitong will form Zhejiang Chiquita-Haitong Food Co. Ltd. The venture will operate a food-processing facility in Cixi, China, where it will produce packaged salads, fresh-cut fruits and vegetables and fresh chilled beverages, according to a news release.


Cafeteria trays disappear in bid to fight obesity

Grocers fight to hold on to customers

Survey says shoppers won't compromise on food quality The no-spin zone? Not exactly... a release from Whole Foods:

Whole Foods, the leading natural and organic foods supermarket, today announced results from a recent survey that found, despite rising food prices, nearly 80 percent of U.S. adults (79 percent) say they do not want to compromise on the quality of the food they buy and the majority (70 percent) are continuing to buy the same amount of natural and/or organic foods as they always have.

Immigration: too hot for DNC

Economy making us greener?

Housing recession builds

U.S. Economy: between zero growth and recession

Dole considers investment in Angola

Children Emulate Healthy Eating Patterns of Parents

WIC to offer fresh fruits and vegetables

Wal-Mart Canada expects bigger market share

FDA pursues jalapeno at root of salmonella investigation

Amish paradise ?

I recently received an email from a source who said one of the big questions about the USDA's Good Agricultural Practices audit is this: Should the use of horse drawn wagons by the Amish in their fields during harvest prevent those growers from passing a USDA Good Agricultural Practices audit? Apparently, as of now, the USDA has determined that such a practice wouldn't stop the farm passing a GAP audit. We'll try to get some clarification from the agency next week when I get back to the office. The issue is relevant one, given the rising importance of local sourcing by larger buyers. Here is some recent coverage from the Associated Press about local/homegrown produce and how that meshes with demand from big time buyers. From the story:

At the wholesale produce market in this Mennonite community, farming families arrive by horse and buggy and pallets are stacked high with freshly harvested Shenandoah Valley onions, corn, green peppers and squash.

The setting evokes a simpler, pre-industrial era. In reality, small-scale farmers are experiencing growing pains as they adapt to the country's expanding diet for locally grown foods and the exacting demands of high-volume distributors of their produce.

Companies such as Sysco Corp., Whole Foods Market Inc. and Wal-Mart Stores Inc. want guaranteed volumes, set prices for an entire season and the ability to trace produce back to its source in the event of a food-related health scare, among other things.

However, such standards, and other formal trappings of the business world — contracts, attorneys, technology — often conflict with the ethics, and practical considerations, of small-scale farmers, especially those who are deeply religious.

"They feel they are producing something as safe and secure as their relationship with the Lord," said David Watson of the Association of Family Farms.

Moreover, growers in temperate climates don't have a 12-month supply of produce. "Trying to match what the buyers need with what's being planted" is one of the biggest challenges, said Richard Rohrer, a Mennonite farmer and manager of the Shenandoah Valley Produce Auction.

When one large buyer recently demanded insurance — which is needed in case a fruit or vegetable makes someone ill — the Dayton farmers balked.

"We deal more on the handshake, personal commitment — look the grower in the eye," said farmer Vernon Hoover, the Dayton auction's independent buyer.

Still, Amish and Mennonite and even non-religious small-scale growers in Virginia, Pennsylvania, Ohio, Iowa, Tennessee, New York and other states are mindful of the money to be made from this emerging relationship with big distributors. And they are willing to engage in some horse trading to create business relationships.

For example, they want industry demands such as specialty boxes and company labels to be factored into their price, according to Rich Pirog, associate director of the Leopold Center for Sustainable Agriculture at Iowa State University. And while wholesale markets, or auctions, benefit the food industry by bringing together larger numbers of growers in one location, they also make it easier for smaller growers to make connections to representatives of big companies and their resources, including refrigerated trucks and bar-code labels.

"If you have a quality product, consistently packaged, don't top dress by taking the worst and putting it on the bottom — all that is the way you build your name here at the auction," Charlie Martin, the Dayton auction's board chairman, said. He proudly stood before a large stack of unblemished yellow and green squash that his 16-year-old daughter picked that morning, wearing surgical gloves to avoid marring their flesh.

The demand for what small-scale farmers have to offer is burgeoning.

_ Wal-Mart last month said it would sell $400 million worth of locally grown produce this year, making it the largest player in that market. Its suppliers include "many Amish and Mennonite growers" who work through third party suppliers, spokeswoman Deisha Galberth said.

Wal-Mart's Hispanic community store

This link tells the story of what is being called the first Hispanic themed Wal-Mart Supercenter. From the story:


In Garland, Texas, today, Wal-Mart opened its first superstore targeted to Hispanic customers. Wal-Mart wanted to meet the need of the surrounding community. It's stocked with tortillas, Spanish movies and games. Stacey Vanek-Smith reports.

Scott Jagow: Wal-Mart closed its original hyperstore in Garland, Texas, yesterday. That was the first one that combined food and retail. But it won't be closed for long. It's reopening today as the company's first Hispanic Community Store. Stacey Vanek-Smith has more.

---

Stacey Vanek-Smith: The Garland Wal-Mart will offer fresh tortillas. Spanish-language music, movies and games will be the rule. And the in-store bank will specialize in money transfers. It might seem strange to rebrand a store when the economy has hit the skids, but it's smart timing says Phil Lempert, editor of Supermarketguru.com

Phil Lempert: When a bad economy hits, what you've got is people looking for value. And value isn't just price. It's a combination of price and service and quality and relationship. And if you can put together that right formula for a big enough group of people, you're going to be successful in a recessionary time.

Lempert says supermarkets are madly trying to distinguish themselves. He says Whole Foods has done a great job appealing to the wealthy, health-conscious crowd, and supermarket chain Vons is working to match individual stores to local clientele. And now, he says, Wal-Mart is catching up, catering to the booming Latino market.

TK: More coverage here on the store from Progressive Grocer.

Paper or Resuable?

Are plastic bags going to go the way of the horse-drawn buggy? I'm thinking they will, given the enormous push to reduce waste and bolster sustainability. Here is a link to a good article from The Washington Post on the issue. But what about those of us who use plastic bags for kitchen trash bags - that counts for something, no? From the story:

I jumped on the eco-bandwagon two years ago and bought my first reusable shopping bag at Giant for 99 cents. I went to the cash register flushed with pride, only to watch the clerk try to stuff my bag into a plastic one. I was furious, but that was just the beginning.

I've had to stop workers multiple times from packing my groceries in plastic bags before placing them inside my resuable bag. I rarely get the discount for bringing my own bag, and when I've asked for it, I've gotten blank stares. It's only three cents, but it's about the principle. What gives? Has plastic become our societal default?

According to Reusablebags.com , an estimated 500 billion to 1 trillion plastic bags are consumed worldwide each year -- or over one million per minute. Billions end up as litter each year. Wind-blown plastic bags have become so common in Africa that groups are now harvesting them to weave into bowls and hats. And apparently, lots of cute sea turtles die because they mistake the discarded bags for jellyfish, one of their favorite snacks.

I called Giant and Safeway to ask about their reusable bag policies and why the workers I sometimes encountered seemed to be so confused. Turtles lives hang in the balance, people! From Jamie Miller, Giant spokesman:

"The program is communicated to our cashiers. I'll be honest, we probably -- at the front end with our cashiers -- we probably haven't executed as well as we'd like to and we're going to beef up the training that we do. We really want to encourage our customers to purchase the reusable bags and reuse those."

Greg TenEyck, a spokesman for Safeway, said the company trains checkers on paper vs. plastic but hasn't really taken reusable into account. But customers' main complaint is that checkers don't fill the plastic bags that they do use, he said. Buy 10 items, and walk out with 10 bags -- even more if the checker performs the dreaded "double bag."

It turns out that each of Safeway's plastic bags can hold up to 20 pounds of weight. The company even has a local Director of Industrial Engineering whose job is to make sure the bags hold up. This guy keeps a Safeway plastic bag filled with at least 20 pounds of stuff hanging on a hook outside his office for months at a time to prove his point. Which is basically a long way of saying that double-bagging is totally unnecessary.

But the most eco-friendly option of all is to simply bring your own bag. That's why Whole Foods will stop carrying plastic bags at its stores starting on Earth Day (April 22). The company started giving out reusable bags as a marketing campaign and to raise money for charity in 2005, and they were so popular they began selling them in stores, said spokeswoman Michelle Guerrero. Customers get 5 cents back for each bag they bring. Guerrero said Whole Foods has distributed about 1.2 million reusable bags in the Mid-Atlantic region alone since it started the program.

Upmarket retailing in the UK

Guest blogger Lance Jungmeyer chiming in ...

UK retail behemoth Tesco is joining upscale retailers as it opens a slate of two- to three-story department stores. It is taking square aim at the likes of Marks & Spencer, Debenhams and others.

According to this Financial Times article, the thinking behind this store is that it is all-encompassing.

'In a marketing document describing the multi-level town centre store as a "whole new concept", Tesco said the shops would sell food, televisions, clothing, homewares and toys over two or three floors, with escalators linking the levels.'

The article notes that, one way or another, Tesco already gets one out of every seven pounds spent in all of British retail. This new format is a way to shave more market share from top-end competitors.

Speaking of the upper crust, if you have ever been to the granddaddy of all retail stores, the nine-story KaDeWe in Berlin, you can understand the appeal of a high-end retailer of foods, spirits, clothing, books, hi fidelity audio/video and more. A good chunk of one floor is dedicated to toy trains alone.

The food retailing floors (Yes, floors) are a sight to behold. From the cooking stations to the monster meat department and spotless produce department, it is a virtual circus of sights, smells and tastes.

Learning from Whole Foods

Who shops at Whole Foods? We don't. Distance from our home (7 miles or so), lack of familiarity and perceived expense (whole paycheck) are factors that keep us very much outside the orbit of the retail phenomenon. On the other hand, I know of a couple who help account for why Whole Foods seems to have such a loyal following. My brother's in-laws, who live in North Sioux City, S.D. are committed Whole Foods customers, though the closest one to their residence is in Omaha, Neb. This week the couple visited Kansas City to rendezvous with my brother's family for a Christmas celebration. At the same time, they brought coolers so they could make a big stock up shopping trip to a KC Whole Foods before their return to North Sioux City. What makes them true blue customers of Whole Foods and devoted organic food aficionados?

Mary, my brother's mother in law, is a cancer survivor and is scrupulous about what she puts in her body. Randy, My brother's father in law is an endodontist, suggesting a level of disposable income that easily defeats resistance to higher prices.

How has Whole Foods captured the hearts and minds of customers like Mary and Randy? There is a book review in The New York Times on the Gary Hamel book "On the Future of Management" that profiles the Whole Foods business model. From the book review by William Holstein:

If companies now innovate by creating new products or new business models, he asks, why can’t they do the same in how they manage organizations? Might not a more modern approach to management be just the ticket to keep American companies ahead of their global competitors? This would entail moving from a century-old command-and-control model to a more latticed, networked style of organization.
If industrialization and world wars created one model of management hierarchy shared by business and the military, perhaps the next set of management ideas should be spawned by the Internet and the upheaval it has prompted in how humans think about information and community.
Mr. Hamel, who wrote this book with Bill Breen, critiques three companies that he argues may be harbingers of the future: Whole Foods Market, W. L. Gore & Associates (a privately held company that invented Gore-Tex, among other products) and Google.
Whole Foods has organized itself into roughly eight teams at individual stores, all of whom have the mission of improving the food that Americans eat. These teams, which have the right to hire and fire their own members, are given wide latitude about what to stock on the shelves and how to manage their stores as a whole.
But their performance numbers are open to all to behold, and their compensation is strongly linked to team, not individual, performance. “Unlike so many other companies, front-line employees at Whole Foods have both the freedom to do the right thing for customers, and the incentive to do the right thing for profits,” Mr. Hamel writes.
The fact that front-line employees are empowered to respond to the changing tastes of finicky shoppers is powerful. “In a more hierarchical company,” Mr. Hamel argues, “top management only sees problems once they’ve become pervasive and, therefore, expensive to fix.”

TK: More than a philosophy about food, Whole Foods also has ownership of a distinctive management approach that delivers a customer experience that is satisfying for Mary, Randy and millions more. Hamel suggests this management approach, at least, is transferable to other organizations.

Mixed messages

Danny Dempster of the Canadian Produce Marketing Association has drawn some flak for his column about produce safety. Some academic critics have called him to task for painting too rosy a picture on produce safety. This Barfblog post is an example of the criticism:
From Ben Chapman:

While Dempster plays down the FBI statistics, he forgets to mention one that I like to use -- the Ontario Ministry of Agriculture Food and Rural Affair (OMAFRA) Food Safety Science Unit (FSSU) estimates that 41 per cent of foodborne illness in Ontario can be attributed to produce. This exceeds every other food group including meat, fish, dairy and eggs. So is produce the safest thing you can eat in other parts of Canada, just not Ontario?, as

Bob Brackett of the FDA addressed the issue of what was happening with produce related foodborne illnesses in December 2005 when I visited the FDA offices. Remember this is before the spinach related foodborne illness. From the archive:

A new focus: In the past, Brackett said, produce has been considered one of the least risky of all foods, with less than 1% of foodborne illness outbreaks linked to fruit and vegetables.
Now that percentage is from 12% to 15%, and Brackett said produce is associated with foodborne illness outbreaks nearly as much as any food the FDA regulates -- at about the same level of seafood.
"This is something that has happened in the last decade," he said, adding that there is only speculation why fresh produce is linked to greater numbers of outbreaks. For one thing, people may be eating more produce and have more exposure. A second possibility, Brackett said, is that more produce being consumed comes from large distribution centers throughout the country. Any mistake in handling from those facilities can be spread more easily, he said.
Another potential reason might be that regulators are paying more attention to produce in their surveillance of foodborne illness outbreaks than they have before.
"Whereas in the past, there was an assumption that (an outbreak) couldn't have come from produce, they are now looking at (the link) harder and finding it," he said.
Brackett notes high profile outbreaks of foodborne illness in recent years have been tied to honeydew melons, cantaloupe, sprouts, green onions and lettuce.
"The ones that are really alarming to me involve E. coli O157:H7 because it is so virulent it can be life threatening," he said.
Brackett said there is a sense of urgency at the FDA to handle food safety problems, particularly for commodities that have been associated with the outbreaks.
"Those are the ones we want to see very specific guidance, to really look at and get much more detailed," he said.
Lettuce has attracted attention, and Brackett said the value-added component of the industry merits further study.
While the development of new value-added fresh-cut products may have focused on shelf life, texture and taste, Brackett wonders if enough research has been devoted to food safety.
"There has not been as much research on the environmental ecology of pathogens, and there's a gap there," he said. "The more we know, the more we can do to prevent it."
By December 2006, Brackett said, the guidance for lettuce should be completed, with details not only about whole lettuce but also fresh-cut lettuce.
"That's the next priority," he said.
Brackett said the government's message to encourage greater consumption of fresh fruits and vegetables is challenged by the increase in illness outbreaks.
He said the food safety question is truly in the industry's court.
"We want to see them succeed," he said.

Full steam ahead

Don Harris of Wild Oats is speaking tomorrow at the U.S. Apple Association marketing conference on "Retail Perspectives on Organics." Visiting with him briefly at a reception tonight after my presentation of the 2007 Apple Man of the Year award to Jeff Crist of Crist Bros. Orchards, Inc., Walden, N.Y., Harris passed on the news that the U.S. Court of Appeals denied the Federal Trade Commission's request for a stay on the Whole Foods-Wild Oats merger, and that transaction is cleared to go forward.
Of course that leaves much of the Wild Oats team up in the air as to what will happen next. How many will be assigned to Whole Foods Rocky Mountains, how many will go to Austin, how many will be released? Those are all questions that now loom large.

Here is the report from CNN via PR Newswire:

Whole Foods Market, Inc. and Wild Oats Markets, Inc. today have announced they are now legally cleared to proceed with their merger as the U.S. Court of Appeals for the District of Columbia has denied the FTC's request for a stay to preclude the closing of the merger pending the FTC's appeal and has dissolved the August 20, 2007 administrative injunction, which had prevented the transaction from going forward while the court considered the FTC's motion.
"We are pleased to have cleared what we expect to be our last legal hurdle," said John Mackey, Chairman, CEO, and co-founder of Whole Foods Market. "We look forward to closing this merger and believe the synergies gained from this combination will create long-term value for our customers, vendors and shareholders as well as exciting opportunities for our new and existing team members."
Whole Foods Market's tender offer to purchase outstanding shares of common stock of Wild Oats expires Monday, August 27, 2007, at 5:00 p.m., Eastern Time.
On February 21, 2007, Whole Foods Market entered into a merger agreement with Wild Oats, pursuant to which Whole Foods Market, through a wholly-owned subsidiary, has commenced a tender offer to purchase all of the outstanding shares of Wild Oats at a purchase price of $18.50 per share in cash. On June 6, 2007, the FTC filed a suit in the federal district court to block the proposed acquisition on antitrust grounds and seeking a temporary restraining order and preliminary injunction pending a trial on the merits. Whole Foods Market and Wild Oats consented to a temporary restraining order pending a hearing on the preliminary injunction, which concluded on August 1, 2007. On August 16, 2007, the U.S. District Court for the District of Columbia denied the FTC's motion for a preliminary injunction. In order to permit an orderly review by the District Court and the Court of Appeals, Whole Foods and Wild Oats agreed not to consummate the transaction until noon on Monday, August 20, 2007 in order to permit the FTC to have an opportunity to request a stay of the District Court's decision pending appeal. On August 17, 2007, the FTC filed with the District Court a motion for a stay pending appeal, which was denied the same day. The FTC also filed a motion with the U.S. Court of Appeals for the District of Columbia for a stay pending appeal the District Court's order. On August 20, 2007, the United States Court of Appeals for the District of Columbia Circuit issued an administrative injunction preventing the transaction from going forward, pending further order of the Court of Appeals, in order to allow the court sufficient opportunity to review the FTC's motion

FTC said WHAT?

Pamela Riemenschneider in Austin, Texas, here. I snuck down to the Whole Foods corporate headquarters this weekend to enjoy what some call the Disneyland of grocery stores and I have to agree -- the fresh tomato risotto I had was divine.

But the big news is, for now, that District Judge Paul Friedman released his ruling yesterday in the Whole Foods/Wild Oats merger.

If you're up to reading all 93 pages, go for it. It can be found here.

I pored over it this morning and man, I can't really fathom some of the Federal Trade Commission's arguments against the merger.

Here's one that really stuck out to me:

FTC believes the relevant product market is premium natural and organic supermarkets of which it alleges there are four in the entire country -- Whole Foods, Wild Oats, Earth Fare (with 13 stores in only four states) and New Seasons (with eight stores, all in oregon).

Say what?

What about Trader Joes? What about HEB's Central Market? What about Dean and Deluca? Sunflower Farmers Market (started by Wild Oats founder Mike Gilliand)? What about the army of Natural Food Co-ops in just about every town?!

It kind of seems like the FTC doesn't really understand the market. Whole Foods argued that it doesn't even really pay that much attention to Wild Oats, rather, it is focusing on the ever expanding market of mainstream spinoffs, like Safeway's Lifestyle, Publix's Greenwise, SuperValu's Sunflower Market.

The ruling had this to say about Whole Foods' competition:

"Whole foods believes it faces 'eroding product differentiation' as other supermarkets continue to stock many of the same products that Whole Foods offers."

"That it is in 'a time of unprecedented competition' where it increasingly does not have the 'advantage of offereing a unique selection of products."

"Many supermarket companies have invested significant resources into developing and opening new stores, some of which mimic Whole Foods' store designs and product offerings."

It seems that the court recognized something that many of us who watch the retail industry have been seeing for the past several years -- that big chains are putting big money and resources into making their own little Whole Foods (Whole Paycheck, anyone? I'm sure there are a lot of retailers that would like a piece of that).

Apparently, Whole Foods doesn't really pay too much attention to Wild Oats when it comes to pricing, either. More often, Whole Foods checks Trader Joe's and other area supermarkets because most of the time, according to the ruling, Wild Oats prices are higher.

Whole Foods also lives up to its "Disneyland" description, in that customers don't have the luxury of shopping there every day. The cross-shop at other retailers, according to the ruling, at least once a week.

Bottom line, according to Judge Friedman, this merger isn't likely to hurt the market because Whole Foods realizes this:

A fundamental problem ith the FTC's reasoning is that it addresses whether Whole Foods has any customers who are so dedicated to that stores's product array and other qualities that they would not switch any of their purchases to another supermarket if Whole Foods began to compete less vigorously by raising prices or decreasing quality.

The question is whether enough customers would switch enough of their purchases that a post-merger price increase or quality decline would be unprofitable for Whole Foods.

The evidence presented persuades the court that certainly beyond the point of critical loss, enough customers would answer this question in the affrimitave and switch all of their purchases to other food retailers, thus rendering unprofitable any post merger effort by Whole Foods to increase prices beyond a certain point.

So, if Whole Foods raises prices too far, customers go to Safeway, or HEB, or SuperValu or somewhere else.

You get the point.

Oh, and if you're up for a laugh, there's a new channel on YouTube encouragaing people to send videos of them doing funny things at Whole Foods here. So far, there's a teenager riding a tricycle through the produce department, among other things. It was supposedly launched by Whole Foods and will give prizes to the video maker with the most hits in a month.

A blog about Whole Foods and the eternal debate about Wal-Mart

The whole truth of food that you must know From the Health Knowledge blog:
Sad to say, you probably won’t help the environment that much by shopping at Whole Foods.
Many contend that the real damage done to the earth by fruits and veggies is not how they are grown but how much fuel has to be burned to get them to you. After all, those organic strawberries didn’t walk from Mexico. Whole Foods offers only a limited supply of local produce. Even in summer months, no more than 30 percent of the produce in the average Whole Foods store is grown locally - but it is clearly labeled. On one visit, just the veggies above were local. In early spring, only rhubarb was available.

Wal-Mart killed our Jewell Interesting food group discussion thread on how Wal-Mart closed our Jewell...
Original point by Mitch;
Jewel announced today they will be closing the doors in Sept. because of the newest Super WalMart. That sucks. The produce at WalMart sucks, the meat is horrible (Solution), the chicken breast is always $4.99/pound. What joke. I never pay more than $1.89 at Kroger.
WalMart killed our Eagle, and now Jewel. I can't even buy horseradish at WalMart. Only mayo "sauce" with a slight horseradish flavoring.

Greg writes:
Nope, *Jewel* killed Jewel...
My local Jewel (Lakeview 'hood on the north side of Chicago, it's the Broadway & Addison location) is ghastly. A new Whole Foods opened two blocks away from them; with WH's lower prices (YES, you read that right, Jewel is more expensive than WH), superior stock, and better service hopefully this BLIGHT of a Jewel will be put out of business or forced to change it's ways...


Ed writes:
It has nothing to do with Wal Mart. In the history of the chain, they have never closed another store. It is the lack of customers that causes stores to close. Wal Mart meats and produce are junk, IMO, so you need to move to a neighborhood that has people of good taste


Steve writes:

Fortunately, HEB here in Texas is holding it's ground even if Walmart has 220 stores in Texas alone. Everything is better at HEB. Many of the other local chains in other states are trying to follow HEB's lead, but it may be too late for most of them.

And Gloria, with the inevitable point:
Hang on tight and prepare to lose your hardware store, your local pharmacy, sporting goods store, bike shop, craft store, shoe store, and probably your entire downtown. Wait till they build another Super Walmart three or four miles away. It's like the Monster that Devoured Cleveland....

Blogger has a poll

Yee-haw. Blogger has a poll function. And I'm trying it out on blog readers over the next week. The question is about use of the terminal market inspection service, and you can find it in the right hand column.

Pamela, I think we still have time to run a poll about Whole Foods and Wild Oats. So give me your best wordsmithing for a poll question and I'll post it next, if it is not too late.

Whole Foods CEO Strikes Again

Greetings from Austin, Texas!

This is Pamela Riemenschneider, The Packer's Austin-based staff writer here.

I'm an avid blog reader, but have never posted other than in comments, so this first post is a doozy. It reminds all of us in the blogosphere to always think about who's reading what we're writing.

Here's a story from the front page of today's Austin American-Statesman about the bloggings of John Mackey, fellow Austinite and chief executive officer of Whole Foods.

Whole Foods CEO revealed as anonymous poster on message boards

It seems that Mr. Mackey, who frequently, and very candidly, blogs on the Whole Foods corporate site, has been lurking on the boards of Yahoo finance under the handle "rahodeb" (his wife's name backwards -- that one's real clever, eh?).

His posts included, according to the Statesman:

• "Why would anyone want to buy OATS?" from January 2005. (OATS is Wild Oats' stock ticker) He later stated that Whole Foods wouldn't want it because its shares were overpriced.
• In March 2005, he dissed Wild Oats again, saying the company had "no intellectual capital, bad real estate, significant future writeoffs, negative brand equity."
• In Nov. 2005, he kept on dogging Oats, saying it was "steadily running out of cash and continues to borrow money to stay afloat."

And who wouldn't want a chance to defend themselves against criticsm? Mackey reportedly said of himself:

• "John Mackey is a fellow Texan that I know and like and I deeply resent the bashing he frequently undergoes on this board!"

While most analysts have said that what Mackey said wasn't illegal, it seems very ill-advised to me. Mackey reportedly stopped blogging on the site last fall, well before the merger was announced.

But who knows? This guy, so far, has built a small "hippie-fied" natural foods co-op into a multinational force to be reckoned with, a model for many retailers out there where people blindly fork over their "Whole Paycheck."

He might be crazy for posting stuff like this, or maybe crazy like a fox.

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.

FTC v. Wild Oats

Here is the link to the PDF file that outlines the Federal Trade Commission case against the Whole Foods-Wild Oats merger.

From the complaint for a temporary restraining order (that was granted). Some of the file is redacted.
From the FTC complaint:


This merger, involving the two leading operators of premium natural and organic supermarkets, will increase prices and reduce quality and services in a number of geographic markets throughout the United States. Consumers spent a combined total of $6.5 billion in fiscal 2006 at Whole Foods and Wild Oats.

On February 21, 2007, Whole Foods and Wild Oats executed an agreement whereby Whole Foods proposes to acquire all of the voting securities of Wild Oats through WFMI Merger Co., a wholly-owned subsidiary of Whole Foods. The purchase will be effected through tender offer for all shares of Wild Oats common stock. The total cost of the acquisition is expected to be approximately $671 million in cash and assumed debt. The closing of the transaction is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act, 15 U.S.C. § 18a. The defendants have advised the Commission that, in the absence of a court order to the contrary, Defendant Whole Foods will be free to acquire all shares of Wild Oats common stock after 11:59 pm June 6, 2007. Defendant Whole Foods intends to then merge Wild Oats into Whole Foods; to close Wild Oats stores; and to operate the remainder as Whole Foods stores.
On June 5, 2007, following a three-month investigation, the Commission determined that it has reason to believe that the Acquisition would violate Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act because the Acquisition may substantially lessen competition and/or tend to create a monopoly in the operation of premium natural and organic supermarkets across the United States.

TK: It seems a stretch to believe that Whole Foods' acquisition of Wild Oats would cause a "monopoly" in the operation of premium natural and organic supermarkets. At least, the resulting monopoly would likely be short-lived.

Locally grown goes big time

Here is a report from an Ohio weekly concerning the surging demand for local produce from Wal-Mart, Whole Foods and others.
From the story:

But, to the chagrin of Rife, that doesn’t necessarily mean a local grocer. Large corporate grocery store chains are scrambling to give the masses what they seem to want: local foods at the same place they do much of their other shopping.
Wal-Mart, Kroger, Whole Foods and others are setting aside shelf space for local produce. The evidence is sparse right now—Ohio’s harvest season is just beginning—but June through September, shoppers will have increasing opportunities to go local at their neighborhood megastores.
It’s a development rich with irony. If buying locally grown food becomes a widespread habit in Columbus—rather than a crusade for the Birkenstock crowd or a quaint diversion for the average shopper—it will probably be corporate behemoths that make it happen.
“I think the large grocery stores have a huge role in this,” said Martha Balint, co-founder of Local Matters, a Columbus-based organization that helps match local chefs with local farmers. “These are the guys that can pull the supply in."


The article goes on to describethe challenge that Wal-Mart faces in sourcing local produce, both as a Johnny come lately and a corporate denizen that lacks the relational feel of a smaller store.


Even then, the big stores are unlikely to win over every hardcore local-food advocate. Balint said she believes there’s still a difference between the local produce Wal-Mart sells and the local produce sold at farmers’ markets and small stores such as Rife’s.
“Huge factory farms can be local farms,” she said. “It’s about more than just local; it’s about the humanity in the food you eat. It’s really about building communities.”
Comparing Wal-Mart to the Clintonville Community Market, Balint said you might find locally grown produce at both, but what’s missing from Wal-Mart is the personal bond consumers develop with farmers when they buy direct.


TK: It will be interesting to see how long lasting and solid the movement to buy local becomes. Is it the fad of 2007 or is it a business model that will endure for a generation? Right now it has the feel of a fad. If I was a small grower near a large city, I wouldn't bet the farm on future demand from Wal-Mart and Kroger.

Ron's explanation

Ron McCormick, vp of produce and floral at Wal-Mart, gave an interview to a Reuters reporter about Wal-Mart's organic produce business. The April 23 story is here

While Wal-Mart said last year that it would double its offerings of organic, the reporter notes that the number of organic produce items in Wal-Mart has been scrutinized, with some surmising that the retailer's organic push has fallen flat. The reporter sets up the story with the line that "many are wondering if Wal-Mart has pulled back" from its commitment to organic.

McCormick doesn't get into specifics, but he did say that "really very few stores" could not sell 20 to 25 organic produce items on a consistent basis. At the same time, McCormick said that the chain has moved away from exclusively organic lines.

From the story:

McCormick said Wal-Mart began testing organic produce at a store near Albuquerque, New Mexico, about three years ago, after noticing that virtually all of its competitors had moved into the category.
"We thought if it was a high population, fast-growing market like this, and there's that many people into it, it takes it beyond the world of a Whole Foods or a specialty store -- there must be something there," he said.
So the company set up a 12-foot section in its produce area, combining natural foods, vegetarian items and organic produce.
"I think we added initially about 45 items, and we were getting it from local sources, so it was easy to do," he said.
Some items sold well, others did not, and McCormick said his team played around with the section for a year before organics garnered company-wide interest, with talk of expanding it across the country.
One way Wal-Mart figured it would tackle the category on such a large scale was to go exclusive -- find certain products that were relatively as easy to grow organically as they were to grow conventionally, and then sell only the organic version.
But by only offering three-packs of organic romaine hearts, the company was unable to take advantage of local supply and times when farmers would offer deals on conventional lettuce.
"We were having to say no because our program was exclusively organic on that item. So it got to be foolish not to take advantage of those opportunities," McCormick said.
Wal-Mart also ran into supply issues.
"The growers were straining to meet our volume, which I think also pushes you into an unenviable position in produce," he said.
"We're now trying to build a network of good suppliers that will be able to grow with us and be consistent. Our ideal supplier is one that has a passion for what they're doing and also has the ability to grow as we grow, so you don't have thousands and thousands of suppliers," he said.


TK: It would be helpful to know Wal-Mart's organic sales, but that information won't be forthcoming. Not surprisingly, McCormick clearly signals Wal-Mart is looking to team with the largest organic suppliers and grow business with them.

An organic first

Caren Wilcox, executive director of the Organic Trade Association testified before the House Ag Committee's horticulture and organic agriculture subcommittee on Wednesday. Her presentation is published here.

Here are a few excerpts:

We believe that this is the first informational hearing on organic issues ever conducted by a Congressional committee. Thank you.

TK: First? It won't be the last....

The U.S. organic industry grew 17 percent overall to reach $14.6 billion in retail sales in 2005, according to The Organic Trade Association’s 2006 Manufacturer Survey. Organic foods grew 16.2 percent in 2005 and accounted for $13.8 billion in sales. Organic foods’ share of total retail food sales is up to 2.5 percent. The fastest growing food categories and their rates of growth over the previous year are organic meat (55.4 percent – from a very small sales base), organic sauces and condiments (24.2 percent) and dairy products (23.5 percent). The fastest-growing non-food categories are organic flowers (50 percent), pet food (46 percent), and fiber (44 percent).
Large natural food chains, along with small natural food chains or independent natural groceries and health food stores, represented about 47 percent of organic food sales.

TK Take a bow, Whole Foods and Wild Oats....


Organic is driving demand for raw materials. In the OTA survey, fifty-two percent of respondents reported that a lack of dependable supply of organic raw materials has restricted their company from generating more sales of organic products. This highlights the need for additional measures to increase the supply of organic ingredients, and the opportunities for U.S. farmers to supply those needs.

TK: Wow. 52% say their business has been limited by a shortage of product...


Almost three-quarters (73 percent) of the U.S. population buy organic products at least occasionally, up from 55 percent in 2000, according to The Hartman Group. Core buyers, who buy organic products at least weekly, represent 23 percent of U.S. consumers, according to the report, Organic2006: Consumer Attitudes & Behavior, Five Years Later & Into the Future.
Meanwhile, The Natural Marketing Institute’s (NMI’s) 2005 Health and Wellness Trends study estimated 56 percent of consumers use organic products in varying frequencies across six product categories. Household penetration by category is as follows: fresh fruits and vegetables = 44%; packaged foods = 29%; dairy and milk = 24%; personal care = 21%; beverages (excluding milk) = 20%; and clothing/linens = 7%.
Shoppers who chose organic products cross all demographic, geographic, and economic boundaries. There is no typical organic consumer anymore.

TK: That's quite a statement - "there is no typical organic consumer." She later notes, however that those most devoted to organic consumption have a high concern for personal and planetary health, and they like their food local or from sustainable farms.

Wilcox notes that consumers get introduced to organics through fruits and vegetables and then expand organic purchases from there. A "gateway" food, if you will. She also notes statistics highlighting that demand for organic food is growing faster than production, which is fueling big growth in imports.

There is a ton of valuable data in her testimony, and members of Congress are taking note. Like specialty crops, organic agriculture now has a "seat at the table" in farm policy talk.

Another success story

One of the speaker's at the March 6 Senate Agriculture Committee hearing on Child Nutrition and the School Setting was Teresa Nece, director of Food and Nutrition at the Des Moines Public Schools. She had quite a lot to say about the fruit and vegetable program, and all of it was good.
Some excerpts from her testimony, which can be accessed here:

Our students have definitely enjoyed the experience of not only eating familiar items such as carrots, apples, and oranges, but also trying new fresh fruits and vegetables. Even some of our teachers have experienced tasting fruits and vegetables for the first time. Some of the new favorites are fresh pears, fresh berries, jicama, fresh pineapple and the large variety of apples now available.

One of our first learning experiences in a middle school was offering fresh Bartlett pears as a choice in the classrooms. We discovered that these 6th, 7th and 8th grade students thought fresh pears were white, soft, and sliced. Many of the students had never seen or tasted a whole fresh pear. Classroom teachers discovered that they had many teachable moments with the fresh fruits and vegetables; they embraced the program and encouraged their students to try the new foods each day. What more could we ask of our teachers.

The students even tell their younger brothers and sisters about the fruits and vegetables they will get to eat when they go to Harding Middle School next year. The parents have told us that their students look forward to the fresh fruits and vegetables at school and ask for fresh fruits and vegetables at home. We have had parents tell us about shopping at the grocery store and children requesting that the parent buy for the family the same type of fruit that they had at school that week.

The teachers and principals in the schools have stated many times one of the unexpected benefits to the program is the opportunity for students and teachers to talk about something in the classroom other than just the academics.


TK: This is a great endorsement of the program. I think one of the best things about the fruit and vegetable snack program is the sense of wonder about new varieties and tastes, and the fact that it is free to all students in participating schools. That's got to have kids feeling "cared for." The last point Nece made was strong, too. The program can be a point of discussion and education for both students and teachers.