WHOLE FOODS TO BREAK OUT INTERNET SUBSIDIARY FOR AGGRESSIVE APPROACH

KIM ANN ZIMMERMANN

AUSTIN, Texas -- Whole Foods Market Inc. here plans to launch a separate Internet subsidiary, WholePeople.com, next spring, a move company officials say will enable a much more aggressive Internet strategy and pave the way for substantial investments in technology and marketing.

"We anticipate that WholePeople will become profitable after its first two years of operation," said John Mackey, chairman and chief executive officer of Whole Foods Market. "We strongly believe that the Internet is having and will continue to have a huge impact on the way people shop and that there is a window of opportunity to be the on-line market leader in the $79 billion whole living industry."

Whole Foods Market executives said it was necessary to separate the on-line business to enable a more nimble business environment

"WholePeople.com is not intended to be just a grocery site or extension of our current retail business. We expect that within a short period of time, only a small percentage of our on-line sales will be from products that we carry in our bricks and mortar stores. The new site, WholePeople.com, will include a wider variety of product offerings in comparison to the existing site as well as a library of product, nutrition and healthcare information.

Product offerings will ultimately grow to include 25,000 stockkeeping units, including a selection of nutritional supplements, herbs and products related to alternative and holistic healthcare. A more diverse selection of natural and organic foods will be made available.

Mackey said Whole Food can leverage its powerful existing brand over the more than one million customers that visit its bricks and mortar stores each week, enabling the retailer to acquire on-line sales at a lower cost than that of its competitors.

He said kiosks will be placed at each store and staffed by WholePeople.com employees.

Mackey also pointed to the retailer's distribution experience in the bricks and mortar arena. WholePeople.com will operate nationwide from a 400,000-square-foot centralized warehouse in Thornton, Colo.