19 June 2007

Unsealed FTC docs reveal Whole Foods' business strategy, provoke blog rant from CEO

Via the Boulder County Business Report:

Whole Foods Chief Executive Officer John Mackey told his board of directors the purpose of buying Wild Oats would be to "eliminate forever" the chance that a mainstream grocer like Kroger or Safeway would launch "a competing national natural/organic food chain to rival us," according to a document revealed today by the Federal Trade Commission.

"Eliminating them means eliminating this threat forever, or almost forever," Mackey said.

Whole Foods had requested that parts of the company's testimony related to its motive for the Wild Oats buyout be blacked out of the injunction order, but the FTC had the documents unsealed. Mackey promises he'll explain why he asked for the testimony to be kept secret on his blog -- more on this soon. Meanwhile, his post today covers his views on what the FTC has done wrong, so far, in their investigation of the merger. Overall, his issues fall into three categories:

1. The FTC are big bullies (evidenced by burdensome requests for info, deadline extensions, and insistence on having access to all company documents).
2. The FTC failed to collect any comparative pricing data before voting against the merger.
3. The FTC wishes to consider competition only within the special category of 'premium natural and organic supermarkets,' rather than among supermarkets generally.

I don't have much to say about 1 and 2, but here's Mackey on this last point:

A big part of the FTC's argument is their belief that Wild Oats and Whole Foods exist in a very narrowly defined category that they call "premium natural and organic food supermarkets". We aren't sure exactly what other companies the FTC believes exist in this narrowly defined category, perhaps only Earth Fare, with about 10 stores all existing in the southern United States. The "premium natural and organic food supermarket" category therefore apparently consists of only three companies-Whole Foods Market, Wild Oats, and Earth Fare.-and of course the FTC apparently believes that if Whole Foods Market acquires Wild Oats then there would only be two companies left in this category.

Is there actually a separate category of "premium natural and organic supermarkets"? Let me state quite clearly up front that there absolutely is! However, that category actually consists of only one company-Whole Foods Market. We created the category and to-date we are the only company that actually belongs in it.

Mackey wants to say that even though Whole Foods looks like the big bad national chain compared to niche stores like Wild Oats, they're actually just a little fish in the big pond of supermarkets. Which is supported by the newly unsealed testimony, but doesn't look so good for Whole Foods -- it seems like Americans love to support the 'little guy,' as long as he doesn't show any signs of wanting to become the big guy.


Anonymous said...

NOt to mention, they buy up companies(Allegro, now Welshire) so compettion can not sell there popular prodcuts