Key development: Expanded into Europe.
What's next: Development of GMO labeling standards.
John Mackey isn't modest about the legacy he hopes to build for Whole Foods Market.
"The beautiful thing about our growth is that we're changing the world," he told an audience of shareholders and analysts during his company's annual meeting in April.
The world may have to wait for now -- the company only recently ventured into Europe with its 2004 acquisition of Fresh & Wild. Nevertheless, Whole Foods' relentless success is certainly changing the competitive landscape of food retailing in the United States.
Sales per gross square foot at the chain rose $70 in 2004, to $786. Four out of every five Whole Foods stores set new weekly sales records last year. Comps spiked 15%. Total sales of $3.86 billion netted the company its first-ever ranking on the Fortune 500. Significantly, almost all of that growth was taken straight from the hide of conventional food retailers.
"When they open a new store, the market capture on a dollar basis occurs mostly from local, conventional competitors," said Jay Jacobowitz, president, Retail Insights, Brattleboro, Vt.
All of these factors last year inspired a 59% spike in Whole Foods' stock price, but Mackey consistently credits his company's success to the fact that pleasing Wall Street is not its primary goal.
"What the world wants business to do is care about more than just making money," Mackey said in a recent, rare interview with Texas Monthly. "And that's what business must evolve to do."
To that end, the company earlier this year established the Animal Compassion Foundation in an effort to raise living standards for farm animals. At the April shareholders meeting, Mackey also said Whole Foods would assume a leadership role with the controversy surrounding genetically modified foods, soon becoming the first company to label its store brands free of genetically modified organisms.
These efforts help the company maintain its allure to a certain breed of core customer, but Whole Foods' appeal has certainly grown to include "foodies" and weekend gourmets as well.
For those customers, Whole Foods' associates really set the chain apart, said Scott Van Winkle, managing director, equity research for Adams Harkness, Boston.
"I believe their culture is their No. 1 point of differentiation," Van Winkle said. "Anyone could replicate the products that Whole Foods has in their stores or replicate their [interior] design. But they have an empowered workforce that is not unionized, so they can pay premium wages, have lower turnover and deliver a level of service that is superior to really almost everyone."
To maintain that culture as it continues to expand into far-flung markets, Whole Foods this year launched Whole Foods Market University, a system of online learning modules geared toward complementing the unconventional employee management systems Mackey has honed since opening his first store. For example, store-level teams are required to vote on the selection and hiring of new associates after working with them for two weeks; store managers can spend up to $100,000 annually on any new idea without asking permission from headquarters; and regular bonuses are distributed to store-level teams that exceed sales goals.
For now, the biggest question is what could ultimately slow the company's growth? The perception that the stores charge higher prices could potentially present "a headwind" in some areas, Jacobowitz mused, and a handful of independent regionals, such as Wegmans Food Markets and H.E. Butt Grocery Co., are already fierce competitors for the "foodie" demographic.
Van Winkle, however, believes the only thing that could tap the brakes is the scarcity of prime real estate. "The trade radius for Whole Foods is probably larger than a conventional supermarket, and finding out how dense they can be in some of these markets is going to be a big question," he said. "But this is a 400-, 500- or 600-store chain -- I don't think they're anywhere close to hitting a wall."
