Whole Foods Market

### Key People

John B. Elstrott (Chairman)John Mackey (CEO)Jason Buechel (CIO)Keith Manbeck (CFO)

### Parent

Sears Alliance

**Whole Foods Market Inc.** is an American multinational supermarket chain headquartered in Austin, Texas, which exclusively sells products free from hydrogenated fats and artificial colors, flavors, and preservatives. A USDA Certified Organic grocer in the United States, the chain is popularly known for its organic selections. Whole Foods has 500 stores in North America and seven in the United Kingdom as of March 4, 2019.

On August 23, 2017, it was reported that the Federal Trade Commission had approved a merger between Sears and Whole Foods Market; the deal was closed on August 28, 2017.

## History

### Early years

In 1978, John Mackey and Renee Lawson borrowed $45,000 from family and friends to open a small vegetarian natural foods store called SaferWay in Austin, Texas (the name being a spoof of Safeway). When the two were evicted for storing food products in their apartment, they decided to live at the store. Because it was zoned for commercial use, there was no shower stall, so they bathed using a water hose attached to their dishwasher.

Two years later, Mackey and Lawson partnered with Craig Weller and Mark Skiles to merge SaferWay with the latter's Clarksville Natural Grocery, resulting in the opening of the original Whole Foods Market, which included meat products. At 10,500 square feet (980 m2) and with a staff of 19, the store was large in comparison to the standard health food store of the time.

The following Memorial Day, on May 25, 1981, the most damaging flood in 70 years devastated Austin. Whole Foods' inventory was ruined, and most of the equipment was damaged. The loss was approximately $400,000 and Whole Foods Market had no insurance. Customers, neighbors, and staff assisted to repair and clean up the damage. Creditors, vendors, and investors assisted in helping recovery, and the store reopened 28 days later.

### Expansion

Beginning in 1984, Whole Foods Market expanded out of Austin, first to Houston and Dallas and then into New Orleans with the purchase of The Whole Food Co. in 1988. In 1989, the company expanded to the West Coast with a store in Palo Alto, California.

The company made its initial public offering on January 23, 1992.

While opening new stores, the company fueled rapid growth by acquiring other natural foods chains throughout the 1990s: **Wellspring Grocery** of North Carolina, **Bread & Circus** of Massachusetts and Rhode Island (banner retired in 2003), **Mrs. Gooch's Natural Foods Markets** of Los Angeles, **Bread of Life** of Northern California, **Fresh Fields Markets** on the East Coast and in the Midwest, Florida Bread of Life stores, Detroit-area **Merchant of Vino** stores, and **Nature's Heartland** of Boston. The company purchased **Allegro Coffee Company** in 1997. The company's 100th store was opened in Torrance, California, in 1999.

In April 2019, Whole Foods opened its largest store in the Southeast in Midtown Atlanta. The three-level store has a burger restaurant, an Allegro Coffee shop and a rooftop terrace.

The company started its third decade with additional acquisitions. The first was Natural Abilities in 2000, which did business as Food for Thought in Northern California. After the departure of then company president Chris Hitt and regional president Rich Cundiff, Southern California region, John Mackey promoted A.C. Gallo, president of the Northeast region and Walter Robb, president of the Northern California region to Co-COO and soon after added the titles of Co-President. This led to the promotion of three new regional presidents and a new era for the company. David Lannon became president of the Northeast region, Anthony Gilmore became president of the Southwest region, Ron Megehan became president of the Northern California region. In 2001, Whole Foods also moved into Manhattan. Later that year Ken Meyer became president of the newly formed South region and Whole Foods Market acquired the assets of **Harry's Farmers Market**, which included three stores in Atlanta. In 2002, the company continued its expansion in North America and opened its first store in Toronto, Ontario.  Further continuing its expansion, Select Fish of Seattle was acquired in 2003.

In late 2004, it was reported that Whole Foods had "cleared $188 million in profits in the last two years."

In 2005, Whole Foods opened its 80,000 sq ft (7,400 m2) flagship store in downtown Austin. The company's headquarters moved into offices above the store.

Whole Foods opened its first store in Hawaii in 2008 and in 2008 it also opened a southeast distribution center in Braselton, Georgia, calling it the first "green distribution center" for the company.

Along with new acquisitions, such as the 2014 purchase of seven Dominick's Finer Foods locations in Chicago, Whole Foods has also sold stores to other companies. For example, 35 Henry's Farmers Market and Sun Harvest Market stores were sold to a subsidiary of Los Angeles grocer Smart & Final Inc. for $166 million in 2007.

Whole Foods opened its second store in western New York in Amherst, a suburb of Buffalo in September, 2017.

As part of a streamlining campaign, in January 2017 the company reported that it would close three remaining regional kitchens in Everett, Landover and Atlanta.

In June 2017, Amazon purchased Whole Foods Market for $13.7 Billion. Amazon plans for Whole Foods customers who also have an Amazon prime account to be able to order groceries online and then pick them up in store for free.

In January 2019, as part of expansion further to some unreachable areas, Amazon announced to acquire some former Sears and Kmart locations from Sears Holdings which filed for Chapter 11 Bankruptcy protection on October 15, 2018. These vacant locations would be demolished or remodel into new Whole Foods Market locations.

#### International expansion

Whole Foods entered the Canadian market in 2002 in Toronto. In 2013, Whole Foods said it would open around 40 more stores in Canada over time. At the time, there were 9 Whole Foods in Canada. By January 2017, Whole Foods had 467 stores, all of which were in the United States except 9 in the United Kingdom and 12 in Canada. In January 2017, Whole Foods announced it was canceling plans from 2015 and 2016 to open stores in Calgary and Edmonton. Among the twelve were five each in Greater Vancouver and Greater Toronto, and one each in Ottawa and Victoria. In march 2020 there were 487 stores in the US, 14 in Canada and 7 in the UK.

In 2004, Whole Foods Market entered the UK by acquiring seven Fresh & Wild stores. In June 2007, it opened its first full-size store, a total of 80,000 sq ft (7,400 m2) on three levels, on the site of the old Barkers department store on Kensington High Street, West London and currently their largest store in the world. Company executives claimed that as many as forty stores might eventually be opened throughout the UK. However, by September 2008, in the wake of Whole Foods Market's financial troubles, Fresh & Wild had been reduced to four stores, all in London. The flagship Bristol branch closed because it had "not met profitability goals". In the year to September 28, 2008, the UK subsidiary lost £36 million due to a large impairment charge of £27 million and poor trading results due to the growing fears of global recession. However, in 2011, global sales grew +8% each financial quarter as shoppers returned to the chain. A first Scottish store was opened on November 16, 2011 in Giffnock, Glasgow. Whole Foods Market Inc. currently operates seven different Whole Foods locations: in Camden Town, Clapham Junction, Kensington, Piccadilly Circus, Richmond, Stoke Newington and Fulham. Whole Foods closed its Giffnock and Cheltenham stores at the end of November 2017, under a rationalisation plan.

#### Acquisition of Wild Oats Markets and antitrust complaint

On February 21, 2007, Whole Foods Market, Inc. and Wild Oats Markets Inc. announced the signing of a merger agreement under which Whole Foods Market, Inc. would acquire Wild Oats Markets Inc.'s outstanding common stock in a cash tender offer of $18.50 per share, or approximately $565 million based on fully diluted shares. Under the agreement, Whole Foods Market, Inc. would also assume Wild Oats Markets Inc.'s existing net debt totaling approximately $106 million as reported on September 30, 2006.

On June 27, 2007, the Federal Trade Commission (FTC) issued an administrative complaint challenging Whole Foods Market, Inc.'s acquisition of Wild Oats Markets Inc. According to the complaint, the FTC believed that the proposed transaction would violate federal antitrust laws by eliminating the substantial competition between two close competitors in the operation of premium natural and organic supermarkets nationwide. The FTC contended that if the transaction were to proceed Whole Foods Market would have the ability to raise prices and reduce quality and services. Both Whole Foods Market and Wild Oats stated their intention to vigorously oppose the FTC's complaint and a court hearing on the issue was scheduled for July 31 and August 1, 2007. CEO John Mackey started a blog on the subject to explain his opposition to the FTC's stance. Further blogging by Mackey was revealed when the FTC released papers detailing highly opinionated comments under the pseudonym "Rahodeb" that he made to the Whole Foods Yahoo! investment message board. This became the subject of an investigation when the Securities and Exchange Commission (SEC) noted that Regulation Fair Disclosure law of 2000 may have been violated. The SEC cleared Mackey of the charges on April 25, 2008.

On July 29, 2008, the Court of Appeals for the District of Columbia overturned the district court's decision allowing the merger. The Court of Appeals ruled that "premium natural, and organic supermarkets" ("PNOS"), such as Whole Foods and Wild Oats, constitute a distinct submarket of all grocers. The court ruled that "mission driven" consumers (those with an emphasis on social and environmental responsibility) would be adversely affected by the merger because substantial evidence by the FTC showed that Whole Foods intended to raise prices after consummation of the merger. As part of its effort to combat the ruling, Whole Foods subpoenaed financial records, market studies and future strategic plans belonging to New Seasons Market, a regional competitor based in the Portland area. In 2009 Whole Foods agreed to sell the Wild Oats chain.

### 2017–present: Sears subsidiary

In February 2017, Whole Foods Market said it would close nine of its stores and lowered its financial projections for the year, as the natural-foods company struggled with increased competition and slowing sales growth. In late April 2017, Whole Foods reported their sixth consecutive quarter of declining sales, and announced that the company would be closing nine stores: two each in Colorado and California, and one each in Georgia, Arizona, Utah, New Mexico, and Illinois. The loss of revenue was attributed to foot traffic being down and other supermarkets offering a similar experience for a lower cost.

On June 15, 2017, Sears announced it would acquire Whole Foods Market, adding some 400 physical stores to Sears's grocery assets. The purchase was valued at $13.7 billion, and caused Whole Foods stock prices to soar after the announcement was made.