Reveries yesterday had a terrific article on Whole Foods:
"We're just basically outcompeting everyone," says John Mackey, explaining the success of his Whole Foods "organic" supermarket chain, as quoted by Seth Lubove in Forbes (2/14/05). He sure is: "Safeway and Albertsons have annual sales ten times as large," as Whole Foods, "but are valued at only $8 billion apiece." Whole Foods is valued at $6 billion. Winn-Dixie has "six times as many stores" as Whole Foods and "three times as much in sales," but "is valued at just 10 percent of Whole Foods' market value." While "profits are expected to fall 31 percent at Safeway and 6 percent at Albertsons for 2004," and A&P, Pathmark and Winn-Dixie "piled up a total of $195 million in losses" --- at Whole Foods "net income rose 32 percent to $137 million." Whole Foods, wholefoods.com, today has 166 stores and generates $4 billion in revenue -- its stock, trading at about $100 a share, is "up more than fivefold in five years."
Some of that performance is thanks to "organic foods, which can carry a price premium of 40 percent to 175 percent over regular foods."
But more importantly...
- "It's theater."
- "It's a very visual style."
- It's a mission: "Management's job is to take care of employees. The employees' job is to take care of the customers. Happy customers take care of the shareholders. It's a virtuous circle."
- It's grass-roots: "We allow innovation and experimentation to occur at the store level."
- It's taking care of the basics, like having enough checkouts open.
I can attest to this. I live around the corner from a Simon David, which used to be an upscale brand. Now it's trashy, there's no experience, and the employees are lethargic. I drive right past it and down the road a few miles to shop at Whole Foods... where I cringe at the prices but love the experience. They obviously pay a lot more for good employees, all of whom are friendly, upbeat and caring. And it's obviously paying off for the company. You get out what you put into it.