Time to Short Whole Foods

The CEO of Whole Foods is apparently operating under the delusion that his company’s business model involved making people healthy.  In that vein, he says his company sells “a bunch of junk.” and is vowing to help his customers eat healthier.

He went on to say that Whole Foods was going to launch a healthy eating education initiative to encourage customers and employees to reduce obesity.

But Mackey told the Wall Street Journal: “Basically, we used to think it was enough just to sell healthy food, but we know it is not enough. We sell all kinds of candy. We sell a bunch of junk.”

Mackey, dude.  I don’t know if anyone’s told you this, but at the end of the day, you sell food.  That’s your business.  If you’re encouraging people to eat less of it, unless you can turn up the margins, something that’s going to be tough in this economy, you’re screwing your shareholders.  Whole Foods has a simple business model: selling overpriced food to people who care about Mother Gaia, and who think an overworked Filipino adolescent driving a pair of oxen around a rice patty are all the farming technology the world needs.

Whole Foods provides somewhere to go to buy food so they can feel good about themselves.   That’s what you’re selling, Mack.  You’re selling a dream to hippies, and at a much higher profit margin than your typical supermarket.  If those folks come to Whole Foods, and feel good about themselves when they buy a box of organic, fair trade ho-hos, that’s a win win situation.  You win, because you just sold an overpriced box of ho-hos, and the consumer wins, because they can feel good knowing they are buying the best product subsistence farming has to offer.  It’s what capitalism is all about!

Whole Foods needs to ditch the true believer, and hire someone who’s more interested in making money for their shareholders.  I have no CEO experience, but I understand what Whole Foods sells, so I offer my services.  I would never shop at a Whole Foods store myself, but I know plenty of folks who do, and they have money to burn.  I’ll keep selling them the dream, and promise to cry for Mother Gaia all the way to the bank, and print your dividend checks on 100% recycled, organic bleach free paper.  Wouldn’t want any of our shareholders feeling bad about themselves, now would I?

18 thoughts on “Time to Short Whole Foods”

  1. Doesn’t whole foods also sell overpriced dietary alternatives for people with food allergies? If so that’s an important product niche.

    But yes, the first rule of business is that you have to give the consumer what they want. Sometimes you have to use marketing and advertising to make them want it first.

  2. Hmmmm.

    On the other hand dry-aged ribeye steaks at Whole Foods are very good.

  3. I don’t shop at Whole Foods to feel good about myself, I shop there to get things I can’t get at other places.

    I think you’re using way too broad a brush to paint, here. Might as well be saying people own guns because they’re insecure about their penises.

  4. Probably, but in business you paint with a broad brushes, because everything is based on demographics. If people who aren’t the target demographic shop there, all the better, but you’ll typically have a target demographic you need to cater to.

  5. Caveat: I don’t know the profit margin that Whole Foods operates at.

    However, I suspect that a significant percentage of their cost is passed on from the producers. Organic/specialty food is more expensive per unit to produce.

    Of course, it is also a specialty shop with a snob-factor. The “snob-factor” is part of the pricing. I don’t know if that is passed on to employees in better wages, or held by the shareholders as profit, or split between the two.

    However, the core argument is still the same: as a specialty shop, you have to cater to the specialty that keeps you in business.

  6. Karrde:

    Businesses don’t price their foods based on a “snob factor”. The price is determined buy supply and demand. If high prices and low volume yields a greater profit than low prices and high volume, then the price will be high. Snob has *nothing* to do with it.

  7. I believe the argument is that the demand is influenced by a “snob factor.” So, yes, the price is set by demand, but the demand is somewhat based on a perception about what buying from Whole Foods says about you.

  8. Apple markets their computers as an upscale and snooty brand, and try to create the impression that an Apple says something about you.

    As a long time Mac user, I hate Apple’s marketing, and I am definitely not among their target demographic. I spend the extra money for their overpriced machines because there’s really no equal in the market for the MacOS.

  9. 1)If you run a pair of oxen through a rice patty, you’ll ruin it.

    2)It’s probably just a sales gimmick. It doesn’t sound like he’s going to stop carrying this “junk” just put nice “health consultants” or whatever out there to help people eat healthy … So I see no problems in a new strategy to try and get more customers by making it easier for them to use the foods he’s already bringing them.

    “Oi! you! Away from the candy! That stuff’s not good for you! Try these soy beans!” Yeah, that would probably be a bad idea.

    @Alex you’re exactly right and exactly wrong at the same time. How you pulled it off, I’ll never know. Of course supply and demand has everything to do it, but if Snob#1 buys a snobby organic candle and all his snobby friends just *love* how snobbily organic it is, and they all go out and buy it and eventually it becomes popular with everyone in the country, then, viola, you’ve just increased demand, driving up the prices by pure snobbery. Enter Starbucks, bottled water, and pretty much everything that comes form California.

  10. “As a long time Mac user, I hate Apple’s marketing, and I am definitely not among their target demographic. I spend the extra money for their overpriced machines because there’s really no equal in the market for the MacOS.”

    Well, that, and I want a Mercedes machine to work on, not a Ford Focus. And in the premium machine market, which my Mac Pro would fall into, Apple compares very favorably. Or at least, did… I haven’t done a side-by-side in awhile. When I did (whcih was when I was buying), the equivalent 2 socket, 8 core Dell was $1k more.

    Back to the parent… Whole Foods do have better meat cuts than Kroger. The bakery is pretty good. And the bigger farmer’s market style places (wasn’t it Whole Foods that took over when Harry’s Farmer’s Market collapsed? ) items are pretty fresh, though I pricier than the Marietta farmer’s market. Day to day items? Kroger it is.

  11. Kendall,

    I also thought it was just a marketing ploy and they would continue to sell the same products. However, if you read farther down, they specifically say they are going to cut products.

    Mackey said Whole Foods would attempt to rid its stores of unhealthy food, starting with a campaign to get its employees healthier, and would be going back to its roots in selling healthy food.

    That sounds dangerous for business if that stuff is really selling.

  12. Well, then, yes, that would be stupid. I guess we’ll find out if those were big sellers when whole foods sinks or swims

    And, can I just say, that is a terrible sentence? who writes this? “Mackey said Whole Foods would attempt to rid its stores of unhealthy food, starting with a campaign to get its employees healthier, and would be going back to its roots in selling healthy food.”
    In what way does getting employes healthier start them off on ridding their stores of unhealthy food?

  13. I shop at Whole Foods. Generally the things that I get there are cheaper there than they are at Giant Eagle etc (despite the billboard advertising the opposite in the parking lot of Whole Foods) He probably wants to get rid of some of the things that I buy there. Whatever. I’ll buy them someplace else. It doesn’t really hurt me one way or the other.

  14. I love their jump in same-store sales.

    Those with ideological baggage affecting their investment decisions are free to lose their money betting betting against Whole Foods.

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