Whole Foods is known for selling high-quality organic food in a fairly upscale setting with a keen focus on customer satisfaction. But it’s changed a lot over the years, so why was Whole Foods successful initially?
Here’s what I know from working at the very first store:
Whole Foods Market’s initial success came from John Mackey’s decision to take the products from 1970’s-style health food CO-OPs and package them to look like a conventional grocery store. And at the time, most of these products were not sold in conventional supermarkets.
In addition to that, it’s a value-driven organization.
And its founders and team members (employees) were very driven by their mission. Because even as it was getting started, they had to face challenges that could have crushed most businesses. From a tiny store run by hippies, in Austin, Texas, to a multinational corporation. It’s truly an American success story.
Before I became a consultant, I worked at Whole Foods as a general manager for 20+ years and started at the very first store in the company.
In this article, I’ll share some riveting facts about why it knew success early and why (at a point) it floundered. I hope you’ve got your fave beverage close by.
The following are facts from a 20-year veteran.
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Was Whole Foods always successful?
Whole Foods Market was an instant success when it first opened its doors in 1980. But its success has fluctuated wildly over the years culminating with all-time low profitability at the time the company was sold to Amazon in 2017.
And well within its first year, the worst flood in Austin in 70 years damaged or destroyed most of the store and nearly caused Whole Foods to go out of business.
Thankfully, all the staff and loyal customers pitched in with product vendors to clean up the store, restock it, replace damaged equipment, and get the store back in operation in just under one month.
It is the first store that capitalized on the need for natural, organic food but was put into the layout of a traditional grocery store.
When it started, stores that sold natural, organic food were few and far between.
Most were CO-OPs or small, dirty mom-n-pop health food stores. Often they had very strict ingredient rules, and if you went in as an outsider it kind of felt like some exclusive club that you weren’t a part of.
But the idea that a company built on that concept could be successful was unrealistic; at least in the eyes of the people they approached to invest.
One financier even mocked the founders and refused to finance them by saying they were a bunch of hippies who sold to other hippies!
Apart from providing healthy, wholesome food, Whole Foods also made shopping a pleasant experience.
It’s a highly innovative company. It combined health-food stores and supermarkets. One proof of its acceptance and popularity is that millions were flocking to the store each week, despite its high prices.
Another key reason is that its leaders were top-notch.
Of course, most people know founder and current CEO John Mackey. But he had help back in the day. Lots of help from co-founders Craig Weller (an old friend and boss of mine) and Mark Skiles (who left before I started).
But together, along with a great team, they grew from one store to another. Slowly. But consider that within a few decades, from its humble store in Austin, Texas, it has grown to 500 stores!
I’ll like to tell you that everything always went as planned and that the company never tasted failure. But, more on that down below.
You’re probably curious about why it’s so popular all these years later. I thought a lot of people would.
That’s what I explored in a recent article of mine. It’s an insider scoop seeing as I worked at Whole Foods as a general manager for 20 years.
One of the reasons for its popularity, as I explained in the article, is that it made natural and organic food mainstream. It was sensitive to what was the “next stage” in the evolution of what kinds of food we’ll gravitate toward. I shared a lot of interesting facts in the article.
Just click the link to read it on my site.
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When did Whole Foods become popular?
Whole Foods Market gained nationwide popularity in 1993, shortly after the company went public and began major expansion into cities across the country.
But Whole Foods Market was popular locally and regionally from its beginnings in 1980.
From a tiny store in Austin, Texas, in the late 70s, Whole Foods grew to be the largest American chain of supermarkets focused on natural and organic food. In fact, it’s grown to become a multinational!
In the previous section, we learned that it saw a gap and filled it, but when did it start getting popular? It was in the early 90s. That’s about a decade after it was founded. At this time, consumers had become more conscious of healthy, natural food.
They yearned for it and were willing to pay for it. However, they were unwilling to shop a lot of the health stores that were still common then.
These were often mediocre, dirty, disorganized affairs.
In the early 90s, most conventional stores had little to no organic or natural products on offer. And apart from Wild Oats, no other stores were offering what Whole Foods were offering.
Whole Foods “wrote the book” on how to have a world-class natural and organic food store, and the market responded positively. It cracked the code on the natural and organic food supply chain, and it also created stores that were welcoming and alluring — the kind of environment for friends to gather.
Besides satisfying a need, it has excellent management who bought up smaller health stores. Thereby exposing the brand to more and more people, such that within a relatively short time, it’s become known all over the states.
Hey. We made these for you. 💚 pic.twitter.com/eJbcWE3jZM
— Whole Foods Market (@WholeFoods) February 14, 2020
When did Whole Foods start to fail?
Whole Foods Market’s sales began to stagnate in 2015, and profits started declining. And shortly before it was acquired by Amazon in 2017, its profitability had declined by more than 50%.
In short, Whole Foods would have filed for bankruptcy had it not been purchased by Jeff Bezos. (source)
Other stores had started tapping into the same market Whole Foods had recognized and capitalized on. It’s only natural. After all, it’s not a monopoly. Now, you can find organic and natural products in all grocery stores.
In fact, what at a point seemed like a remnant of hippie culture became mainstream. It gradually lost its competitive edge since folks now had a variety of options.
There were many other stores offering what was once “its niche,” and they were cheaper to boot.
Its sales started declining, and some of its top management were leaving. A consulting company even had to be called in to help standardize its stores.
The sale to Amazon was a preemptive strategy since Whole Foods was facing the threat of being taken over by some activist investors. It was under pressure by Jana Partners (a hedge fund that had a stake in the company) to sell itself.
Eventually, the fund sold its stake.
It was the CEO of Whole Foods himself who approached Amazon in 2017 to acquire the company. The acquisition was valued at 13.7 billion dollars.
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— Whole Foods Market (@WholeFoods) March 21, 2020
Are Whole Foods’ core values still the same?
Whole Foods Market’s core values have expanded over the years to include the additions of supplier win-win partnerships, eliminating their edict about healthy eating education and changing the phrase “creating wealth through growth and profits” in favor of saying “profits and prosperity”.
But the original values of food quality, employee happiness, and customer service remain unchanged. And don’t worry, I list all their current core values in their entirety below.
It’s inconceivable that it’ll stop selling what made it one of the best in its category.
But, with the sale to Amazon, its values are evolving. And, they should. The focus on natural and organic products is morphing into offering a lot more.
There’s actually a huge overlap between its customer base and Amazon’s. Naturally, the latter’s values are gradually redefining WF. (He who pays the piper dictates the tune).
What is Whole Foods’ mission and values?
Its business, according to it, is “helping support the health, well-being, and healing of both people — customers, Team Members, and business organizations in general — and the planet.”
The following are its core values:
- We Sell the Highest Quality Natural and Organic Foods
- We satisfy and delight our customers
- We promote team member growth and happiness (it used to say team member happiness and excellence)
- We practice win-win partnerships with our suppliers
- We create profits and prosperity (it used to say creating wealth through growth and profits)
- We Care About our Community and the Environment
Like the company itself, Whole Foods’ core values have shifted and adjusted over the years in response to customers, employees (what they call Team Members), and growth and profits.
But the essentials are still there, so they really haven’t shifted that much from my perspective.
What customers want is a one-stop supermarket where they can buy all they want. That’s what Amazon is gradually turning WFM into.
But is it going to turn into an evil company? I don’t believe that at all.
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What is different about Whole Foods now compared to the past?
One of the most noticeable changes with Whole Foods Market is that Amazon almost immediately lowered prices at Whole Foods Market by 20%. But the acquisition by Amazon also caused Whole Foods Market to no longer be traded on the stock market.
Let’s face it. Whole Foods was pricey.
In fact, folks would joke that you needed a “whole paycheck” to be able to shop at the store because its products were expensive. Discounting was an alien concept.
Why is it expensive, and why were people flocking to the store despite its high prices?
I’m glad you asked. That’s why in a recent article, I examined why it’s expensive. But I also get into how some products on their shelves might actually be different from similar-looking products at Walmart or Kroger.
Just click the link to read it on my site.
Now, as a part of Amazon, and with the integration of the Prime option, some of its prices have been discounted. After all, Amazon is known for its low prices. Now regular sales are a part of the experience at Whole Foods, which is great for shoppers looking to stock up.
Another change was its partnership with Instacart, which handled online shopping and delivery for the company. It was supposed to be a 5-year contract, but it’s been terminated.
Now Amazon Fresh handles grocery pickup and delivery.
It makes sense seeing as Amazon is probably the best e-commerce company in the world. There’s really no need to outsource that function to Instacart, post-acquisition.
Compared to the past, Whole Foods’ online capabilities have been greatly enhanced. Prime Now offers customers the option of receiving grocery orders within two hours!
What’s been the impact of e-commerce on grocery sales?
A recent article of mine offers an in-depth expose on perhaps the most defining change in the grocery industry ever! Will the triple-digit growth of online pickup and delivery continue?
Just click the link to read it on my site.
The other big difference if you’re looking at the current company compared to the 1980s and 1990s is that the corporate purchasing staff has grown immensely.
And purchasing decisions have been largely removed from the Team Leaders and Buyers at the store level in favor of centralized buying power.
In the preceding paragraphs, we explored a host of interesting facts about Whole Foods, an iconic American company—a pacesetter and values-driven organization that’s one of the most riveting success stories.
We looked at its evolution, why and when it became a success when it started floundering, and how things are after it’s been acquired by Amazon.
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