Whole Foods: Radical Experiment in Democratic Capitalism

1. Janli Gwo Management & Organizations Raymond Ro March 31, 2014 “Whole Foods, Whole People, Whole Planet”

3. WFM has been called a 'radical experiment in democratic capitalism’ Quick Background Forbes ranked WFM at #3 best ‘100 Best Companies to Work For” in the US among large companies (Jan 2006) WFM is known for its high growth rate in an industry characterized by zero to negative same store sales growth • 2003: Whole Foods became the US’s first national “organic” grocer

4. Beginning John Mackey, CEO “My girlfriend at the time, Renee Lawson Hardy, and I started SaferWay in 1978. It was a small natural foods store with a vegetarian restaurant located in a historic home in downtown Austin. Two years later, we merged with two other local grocers to open the first Whole Foods Market”

5. Success: Rapid Fire Growth “While continuing to open new stores from the ground up, we fueled rapid growth by acquiring other natural foods chains throughout the '90s”

6. "The growth opportunity in this category has led to increased competition from many players, most of whom are not dedicated natural- and organic-foods supermarkets, but are considerably larger than we are” - CEO John Mackey

7. Company Culture • Trust & Transparency • Teamwork • Grassroots Management • Autonomy

8. Company Culture – Trust & Transparency High Level of Trust and Openness • “Salary Book”: Discloses the annual salaries and bonuses of all its 6,500 employees in this book, available at all its locations • Salary cap: restricts CEO John Mackey's pay to 14 times the average annual salary of all full time employees

9. Company Culture - Teamwork “Hiring Vote”/Democratic Capitalism: Teams, and only teams, have the power to approve new hires for full-time jobs “Gain-Sharing Program” (Money) This program ties bonuses directly to team performance (sales per labor hour) the most important productivity measurement at Whole Foods.

10. Company Culture – Grassroots Management • The work culture at is centered on the company's grassroots level management, which helps eliminate bureaucracy. • Decentralization • Allows it to adjust each specific store to the local community

11. CEO John Mackey Organizational Structure Co-CEO Walter Robb Chairman of the Board Dr. John B. Elstrott Board of Directors • 6 Regional Presidents • | • Team Leaders in Each Store • | • 10 self-managed teams in each one of the 360 stores in the US • | • 30 people per team - 300 people working in each store, managing poultry, cheese, wines, etc

12. Company Culture – Autonomy “Store Tour” On a periodic schedule, each Whole Foods store is toured by a group of as many as 40 visitors from another region. It's not a casual visit. The touring group (regional leaders, store team leaders and associate store team leaders) have a two-day mix of social interaction, reviews, performance audits, and structured feedback sessions. TCS Reviews (The Customer Snapshot) 10 times a year, each store is toured by headquarters official or regional leader and rated on 300 items on a surprise inspection.

13. Relevant News - Regulation of Organics in the US • Whole Foods has a good relation with the USDA • 2000: They hosted the USDA’s announcement of new standards • 2009: Whole Food’s Joe Dickson moved to USDA’s National Organic Standards Board

14. Relevant News - Regulation of Organics in the US • However… • The USDA Regulations (updated in 2000) are outdatedand have too many loop holes • There aren’t really any definitions for “natural” foods.

15. Relevant Events – Corn Subsidies • When last year’s drought drove corn prices to record highs, farmers with “harvest price option” policies were paid those inflated prices for what didn’t grow -- contributing to a record bill for taxpayers and record income for farmers. • The program insured $117 billion worth of crops last year, including almost all the corn, soybeans, cotton and wheat grown in the U.S. • Controversy: Taxpayers are helping farmers pay their bills even as farm income this year is expected to top $120 billion, its highest inflation-adjusted mark since 1973, according to the USDA’s Economic Research Service. Farm income has doubled over the past four years thanks to rising land values and surging exports.” • “Farming the Program”: Subsidized insurance also gives farmers an incentive to plant on land where crops may or may not flourish

16. Porter’s Five Forces Low Medium High Medium High

17. -Amazing website -Acquisition portfolio -Very good fit between their vision and their products -Young, hip consumer base -Wide brand recognition Wide variety of events for customers Government subsidizing corn Supply chain for organic food is underdeveloped “Whole Paycheck” (cannot enter China) Lack of use of social media No e-commerce offerings World is becoming more aware of how important it is to eat healthy As an expensive brand, WF must find a way to give back to the customer (loyalty card) Cut prices, step up advertising Competition is constantly increasing that are re-branding and jumping on the bandwagon Copycats Any changes in government regulations on organic food

18. The Future of Whole Foods: Tony’s Farm • “I want to build the Whole Foods of China” • “Trust and quality are the DNA of our brand.” • 100,000 subscribers—individuals, families, companies, schools, restaurants, boutique markets, and large retailers in Shanghai and Beijing—submit their orders online, and the company delivers the food, grown on its farms, within 24 to 48 hours.