Is Whole Foods Just Another Evil Corporation?
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But another secret to Whole Foods' success is its shockingly high prices. When Wal-Mart began promoting its own organic products last year, Whole Foods' Southwest Regional President Michael Besancon scoffed at the notion that Wal-Mart could present serious competition.
"There's no way in the world that we'd win a price battle with Wal-Mart," he told the Rocky Mountain News. "I'm relatively smarter than that." On the contrary, Whole Foods orients to a higher-income clientele willing to pay significantly more for somewhat higher-quality foods. Whereas the average supermarket chain's profits traditionally hover at around 1 percent, Whole Foods was able to sustain a profit margin of 3 percent for 14 years after it went public in 1992.
After hitting a low of 1 percent in the economic downturn in late 2008, "now the margins are expanding again," according to the Cabot report's investment adviser Mike Cintolo on April 26.
Indeed, Mackey is no progressive, but rather a self-described libertarian in the tradition of the Cato Institute. He combines this with a strong dose of paternalism toward the company's employees.
Mackey complained about his unique dilemma at the helm of Whole Foods to fellow executives in an October 2004 speech: "I co-founded the company, so I'm like this father figure at Whole Foods. I'm this rich father figure, and everybody's pulling at me saying, 'Daddy, Daddy, can we have this, can we have that, can we have this, can we have that?' And I'm either like the kind, generous daddy or the mean, scrooge daddy who says 'No.' "
Using a carrot and very large stick, Mackey managed to "convince" Whole Foods workers across the country to vote in 2004 to dramatically downgrade their own health care benefits by switching to a so-called consumer-driven health plan – corporate double-speak for the high-deductible/low-coverage savings account plans preferred by profit-driven enterprises.
Mackey advised other executives in the same 2004 speech, "[I]f you want to set up a consumer-driven health plan, I strongly urge you not to put it as one option in a cafeteria plan, but to make it the only option."
There have been setbacks for Mackey, to be sure. He suffered public humiliation in 2007 when he was exposed as having blogged under the false user name "rahodeb" -- his wife's name spelled in reverse -- between 1999 and 2006 at online financial chat boards hosted by Yahoo. For seven years, he backstabbed his rivals -- including the Wild Oats franchise that Mackey later purchased as an addition to the Whole Foods empire.
The Wall Street Journal reported a typical post: " 'Would Whole Foods buy (Wild Oats)? Almost surely not at current prices,' rahodeb wrote. ‘What would they gain? (Their) locations are too small.' " At one point, rahodeb even admired Mackey's latest haircut, gushing, "I think he looks cute!"
Preventing Whole Foods workers from unionizing has always been at the top of Mackey's agenda, and the company has been successful thus far at crushing every attempt. Perhaps the company's most notorious attack on workers' right to unionize occurred in Madison, Wis., in 2002. Even after a majority of workers voted for the union, Whole Foods spent the next year canceling and stalling negotiation sessions -- knowing that after a year, they could legally engineer a vote to decertify the union. Mission accomplished.
At the mere mention of the word "union," Whole Foods turns ferocious. Even when United Farm Workers activists turned up outside a Whole Foods store in Austin, Texas, where Mackey is based, the company called the police and had them arrested for the "crime" of passing out informational literature on their current grape boycott.