He won’t be leaving for nearly a year, but the announcement came late last month that John Mackey will be retiring as CEO of Whole Foods Market, the company he founded in 1980 as a single 10,500 square foot health food supermarket in Austin, TX.
However, it wasn’t until the mid-1980s that the rest of the world began to learn more about this seemingly folksy entrepreneur who had an unquenching desire to provide healthy and nutritious foods to his shoppers and those who would later become his customers. By the 1990s Whole Foods continued to expand to new markets with from-the-ground-up stores and a series of acquisitions including Bread & Circus, Mrs. Gooch’s, Bread of Life and Leo Kahn’s Fresh Fields and Nature’s Heartland stores. He reshaped those stores gained by acquisition into the operating and merchandising model that was evolving at WFM – more perishables, more retail foodservice and a continuing unwavering approach to promoting the value of health foods.
But the intangible “secret sauce” for the merchant was always its strong culture, where associates felt empowered to make decisions for the good of the enterprise and consumers acknowledged that extra touch of TLC was appreciated.
As his company continued to expand to new markets and Mackey became a personality in his own right, one other trait about him was becoming obvious: he was a tenacious competitor and a brilliant businessman. Mackey himself wrote about those beliefs in his insightful 2013 book “Conscious Capitalism.”
And sometimes that “consciousness” became a bit erratic such as in 2007 when he admitted at a Federal Trade Commission hearing that for several years he posted approximately1,400 messages on a Yahoo.com discussion board deriding WFM rival Wild Oats while using the fictional handle of Rahodeb (an anagram of his wife Deborah’s name). At the time of the hearing, Whole Foods had agreed to acquire Wild Oats in a deal that was challenged by the FTC with the net result being that by 2009 WFM had sold what was little was left of its one-time competitor.
It was during that period that I began referring to the charismatic CEO as “Wacky” Mackey. Clearly, Whole Foods had lost some of its luster; Mackey was continually being criticized for his defense of the retailer’s high prices, and more traditional supermarkets, who acknowledged the message and execution of WFM’s health-oriented mission, began to sharpen their focus on nutrition and wellness – at significantly lower prices.
The truth is that neither Mackey nor his baby were ever content to play in the middle of the road.
He addressed the “Whole Paycheck” issue by developing a more streamlined, friendlier priced offset model called 365. And while Whole Foods had penetrated most of the country’s most favorable demographic market, Mackey wasn’t afraid to cannibalize his stores, adding more locations in WFM’s best markets – California, Washington, New York, New Jersey, Washington DC/Northern Virginia and Chicago.
When Amazon offered Mackey $13.7 billion in cash in a “take-it-or-leave-it offer” to acquire WFM in 2017, of course, he accepted it.
By then, Whole Foods already had changed, becoming more centralized and process-driven in its approach. The intangible “secret sauce” was all but gone and new powerful ownership from the world’s fastest growing company would likely lead to even more corporatization.
Mackey remained upbeat about the deal, calling it a “happy marriage” and praising Amazon for using its scale and clout to make Whole Foods more efficient.
He hand-picked his successor, current COO Jason Buechel, to take the helm next year. Buechel, who joined WFM in 2013, is consider whip smart and personable with a deep skill set in analytics and data.
And Mackey is 68-years old. I’m certain he’s got other mountains to climb. Still, it won’t be easy to leave a company he said he loved as much as parent loves a child.
Oh, I never really answered the question of whether Mackey is the most influential grocery industry leader of the past 40 years?
Well, Mackey built a multi-billion business from the ground up; he influenced and educated two generations of people about the importance of nutrition and health; and forced (by example) conventional food retailers to adapt to his practices by adding more “good for you” products in their stores. He also performed with charisma and flair and was as tough a competitor as any retailer could imagine.
You could argue that Sam Walton was the most influential retailer of all-time and I would agree. However, when dealing with just food over the last 40 years, perhaps Sam shouldn’t be chosen (he died in 1992) because Walmart’s SuperCenter explosion didn’t really occur until the mid-90s. Danny Wegman and Charles Butt would be noteworthy considerations, but both men led regional organizations and didn’t actually begin the supermarkets that bear their names.
My vote is in. John Mackey – udaman.
‘Round The Trade
A few thoughts on Kroger’s recent announcement that it will expand its e-commerce initiative by adding to its presence in Florida and California and will be entering the Northeast for the first time. First, it’s a relatively low cost strategy (not inexpensive, but nothing like adding a fleet of stores and the accompanying infrastructure that would go with it) in most retailer’s fastest growing silo (digital). And there’s the market reality factor. Kroger (and other large supermarket chains) need to play offense if they are going to be able to remain competitive with the likes of Amazon and Walmart, which have more established e-commerce platforms. Still, entering the Northeast will remain a daunting challenge where a new set of competitors including ShopRite, Ahold/Delhaize and Wegmans awaits the nation’s largest supermarket chain.
More stinging news as its affects retailers and consumers: the Consumer Price Index (CPI) rose 5.4 percent last month (vs. September 2020) with meat, poultry, eggs and fish skyrocketing 10.5 percent. On top of that, the U.S. economy only added 194,000 new jobs in September. Not surprisingly, the grocery store sector was one of the poorest performers with 12,300 jobs lost last month, a number that continues to decline. And the discontinuation or reduction of unemployment benefits from the American Rescue Plan seems to have provided little incentive for people to return to the workforce. Those statistics make it even more baffling as to how Walmart, Amazon, Instacart and others plan to add hundreds of thousands of new jobs over the next few months. The sad reality is that you can’t find that many qualified live bodies to work retail jobs, even at $20+ an hour. And BTW, inflation continues unabated and supply chain challenges remain vexing…interesting story in New York magazine on a new effort to organize Amazon – this time by the Teamsters. I’ll grant you that labor unions have been as strong as they’ve been since the late 1970s, but unionizing “Godzilla?” That’s a task taller than I think is possible.
Another non-union merchant – Walmart – has reorganized its c-suite by naming Chris Nicholas as its new U.S. COO and adding Seth Dellaire, most recently of Instacart, as the “Behemoth’s” new chief revenue officer. Both positions are newly created. Nicholas was formerly CFO of Walmart’s U.S. business. Dacona Smith, who was named Walmart U.S. COO in 2020, remains an executive VP at the chain, and will now report to Nicholas. Both Nicholas and Dallaire will report to Walmart U.S. president and CEO John Furner. Walmart has also announced that it has landed the first major client – Home Depot – for its new “Go Local” delivery service which was rolled out in August to provide last-mile deliveries for other businesses…Home Depot, Walmart, Costco and Target are dealing with the container ship shortage that it is hindering the delivery of holiday goods primarily from Asia and they are leasing their own smaller ships in an effort to open up that choked pipeline and unload those ships at smaller ports on the East and West Coasts.
And speaking of Instacart, in an interview with the Associated Press, new company CEO Fidgi Simo noted that grocery e-commerce (including delivery) can potentially carve out 30 percent of all food sales (I think that’s highly optimistic) and that soliciting advertising revenue directly from manufacturers will become “an important part of the consumer experience. We think that, through advertising, they’re going to be able to discover brands they wouldn’t have discovered otherwise. But it’s also an important part of our business model because it allows us to make the service cheaper for consumers and charge grocers less. And I fundamentally believe that if we want 30 percent of people to shop online, we are going to have to make online grocery delivery cheaper overall.” And it makes you wonder why retailers are expanding their services with a company that’s more clearly becoming a powerful direct competitor.
I’ve been following with interest the testimony of former Safeway CEO Steve Burd against Elizabeth Holmes, founder and former CEO of the defunct and fraudulent blood-testing firm Theranos. Burd told jurors that, based on data provided by Holmes, her company’s technology could provide faster and more accurate tests that could quickly test for diseases like cancer and diabetes. In turn, Safeway invested nearly $400 million to build in-store clinics that would provide the tests, which ultimately never occurred. The trial, which is expected to end later this month, is a fascinating study of a brilliant mind having gone totally corrupt. Holmes faces up to 20 years in prison if she’s found guilty.
Local Notes
I was very impressed by this year’s Weis Markets annual vendor meeting. Feeling confident from its record sales and earnings achieved in 2020, the Sunbury, PA-based merchant has continued its forward progress even after the strong COVID-19 sales tailwinds have subsided. The virtual meeting’s four speakers – COO Kurt Schertle; SVP- merchandising & marketing Bob Gleeson; VP-advertising & marketing Ron Bonacci; and director of grocery Brian Bosworth – provided crisp and concise commentary, detailing the regional chain’s ambitious plans for 2022. And my vibe seemed very much in-synch with about a dozen other vendors who tuned into the 90-minute session. Several specifically focused on Weis’ aggressive e-commerce initiatives and its upgraded fresh department plan. Earlier last month, the company announced a new partnership with DoorDash (note: not Instacart) that would provide on-demand grocery delivery of over 47,000 items from more than 170 Weis Markets covering the retailer’s entire geographic footprint. The deal calls for DoorDash to offer deliveries to Weis’ digital customers in one hour.
It looks like Walmart is about to gain share in NYC without opening any stores in the five boroughs. The “Behemoth,” which has been thwarted (primarily by union pressure) from entering the country’s largest urban area for more than a decade, will enter parts of Brooklyn, Queens and the Bronx by utilizing Instacart to deliver groceries that are assembled at existing Walmart units in Westchester County, Northern New Jersey and on Long Island. This isn’t the first time that the world’s largest retailer has attempted to enter NYC via the delivery route. In 2019, it ended deliveries from its jet.com subsidiary that it acquired in 2016. In 2018, it formed JetBlack, a high-end rapid delivery service that covered Manhattan. In 2020, that, too, was shuttered.
Some new store info to report around in the Northeast. In the Metro New York area, Aldi opened its third Brooklyn unit last month on Flatbush Avenue (near Brooklyn College). The fast-growing discounter also operates stores in Gateway Drive and an Nostrand Avenue in Kings County as well as other Big Apple locations in Rego Park (Queens) and E. 117th Street in Manhattan. Trader Joe’s, which remains the retailer with the highest sales per square foot in the country, has announced that it will open a store in the Williamsburg section of Brooklyn (200 Kent Avenue) which will likely debut next year. The specialty food merchant has two other new units planned for NYC – 1st Ave & E. 59 Street, and 55th Street & Broadway, both in Manhattan. TJs currently operates 12 units in the five boroughs. In Atlantic City, NJ, it looks like a ShopRite will be coming to town after the city’s Casino Reinvestment Development Authority (CRDA) moved the proposal forward. A formal vote on the proposal, which has been in the works for more than a year, is slated for September 21. If approved, the new store, located in a food desert in the economically challenged city (which has not had a full-service supermarket for more than 15 years) would be 44,000 square feet in size and owned by Village Super Markets, the second largest Wakefern/ShopRite member.
In the past month, as part of its initiative to become fully self-supplied by 2023, Ahold Delhaize USA opened its new grocery distribution center in Manchester, CT. The 945,00 square foot depot, which will supply grocery items to the company’s Stop & Shop stores, was acquired from commercial developer Winstanley Enterprises. It is expected the new facility will add approximately 700 additional jobs. And in related distribution news, sister firm The Giant Company’s perishables distribution center in Carlisle will transition this month from a facility that C&S Wholesale Grocers manages to one that will be under the supervision of ADUSA’s distribution umbrella.
Dealing with the realities of inflation, Chesapeake, VA-based Dollar Tree Stores has begun selling items that will cost more than a buck. While CEO Mike Wytynski is spinning as the news as a result of customers’ desire to seek a broader (and more expensive) product assortment, the fact that being able to maintain a $1 threshold for some of its offerings isn’t realistic anymore and promises to become even more challenging over the next six months. At this point, the number of items affected is in the hundreds (a typical DT store carries about 6,000 SKUs) but expect the number of products that will be sold for more than a dollar to increase as all discount merchants struggle with their pricing models. In fact, in August, the chain noted that rising shipping costs would impact year-end earnings by $1.50-$1.60 per share.
The National Grocers Association, which just concluded a very successful convention in Las Vegas, has named Baltimore’s Eddie’s of Roland Park as its “outstanding marketer” winner as part of the trade group’s “Creative Choice” awards. “For a small business like ours, it is especially meaningful to have our hard work and creativity celebrated in this way. We are overjoyed and grateful to be recognized by the National Grocers Association and our peer in the independent grocery industry – you won’t find a more dedicated, hard-working, or innovative bunch in any other trade,” said Nancy Cohen, the dynamic CEO of the two-store merchant. Additionally, Jared Earley, who oversees marketing at Eddie’s, was awarded a $2,500 scholarship by the NGA as he pursues a master’s degree in digital marketing and data analytics at Emerson University. Kudos to all.
And on a related NGA note, the Washington, DC-based association for independent retailers has formally filed its comments with the Federal Trade Commission citing that “predatory” practices by the grocery industry’s largest retailers creates supplier contractual agreements with that are unfair to independent grocers. “This unchecked anti-competitive behavior leads independent store owners and their customers with fewer options and paying more for products.” NGA is asking the FTC to investigate companies like Walmart and Amazon about those alleged predatory practices. As I’ve said before, the NGA and its CEO Greg Ferrara have good intentions, and in some instances likely have provable examples to substantiate their case, but how many believe when this process is exhausted, there will be no or minimal change to the status quo?
Market Wagon, an online ordering and delivery service, created in 2016 to bring together local farmers and food producers, has arrived in Maryland (eight counties) and Washington DC. The Indianapolis-based “online farmers market” serves as digital hub for those local growers who want to sell their products to consumers in the area on a broader basis. Deliveries are made on Tuesday afternoons. With the addition of Maryland to its coverage area, Market Wagon now provides service in 19 states. Among the local farmers/producers participating are: A Friendly Bread (Baltimore); GreenIsland Bakery (DC) and Kitchen Girl Farm (Parkton).
We have two deaths to report this month, two from the food industry that brought personal sadness. Howard Klein, one of the owners of Klein’s Family Markets (ShopRite), died last month at the way too young age of 63. Howard was one of three sons of Ralph and Shirley Klein, who helped build the powerhouse independent during a 60-year period beginning in the 1950s. Ralph, and his brothers Michael and Andy (who died tragically in 2018), continued the family’s great tradition of retailing which now includes their children. My relationship with Howard didn’t start off as a bouquet of roses – an attorney by trade, Howard was somewhat wary of the media (he later called it “cautious”). After all, he supervised all media and communications for a low-profile, privately-held company and I was a rather aggressive (pushy?) reporter trying to learn more about an operator that dominated the Harford County landscape. However, after a few in-person meetings, the chill began to thaw, and we learned we had a lot in common including our taste in music and a somewhat caustic sense of humor. When there were questions about Baltimore City politics (as it pertained to the grocery business), or I needed a clear and intelligible voice about industry issues (he possessed a 30-pound brain), Howard Klein was always my go-to guy. I’m gonna miss him.
I’m also gonna miss Lou Denrich, the former CEO of Valu Food who passed away earlier this month at the age of 71. Even though he left the grocery business in 2000 after filing bankruptcy and then liquidating the company’s operation, Lou was an unforgettable personality. Opinionated? Absolutely. Unpredictable? Without a doubt. Risk taker? You can check that box, too. To some, those traits might not fit the mold of a typical chief executive. But it’s exactly those characteristics that made Denrich successful for a nearly 10-year period beginning in 1991 when he took the helm of the Baltimore-based independent that was started in 1959 by his father Steve, a Polish immigrant, in Baltimore City with a single small store on Lexington and Paca Streets in the city and a 23-store discount chain by the mid-90s. Riding on the growth train was exciting and Lou enjoyed every minute of it. However, by the late 1990s when the market became more crowded, diverse and competitive and some of Valu Food’s newer stores underperformed, the problems accelerated. By late 1998, the company filed for Chapter 11 protection. By early 2000, the reorg plan collapsed, and a once-vibrant company and its leader faded into the sunset. But it’s not the final chapter that I remember most – it was Lou Denrich, the rock star whose off-the charts intellect and mercurial personality made him even more interesting and endearing – especially after hours.
Also recently passing on was comedian Norm MacDonald. MacDonald’s deadpan, deliberate and original style of comedy wasn’t for everyone, but few could deny his ability to make people laugh and laugh loudly, especially his comic peers. “Norm had the most unique comedic voice I have ever encountered and he was so relentlessly and uncompromisingly funny. I will never laugh that hard again. I’m so sad for all of us today, said Conan O’Brien. Adam Sadler noted: “Every one of us loved Norm. Some of the hardest laughs of my life with this man. Most fearless funny original guy we knew.” Some of MacDonald’s best work came in his four seasons on “Saturday Night Live” where he hosted the show famous “Weekend Update” segment. Compared to other “Weekend Update” anchors who delivered one-line jokes, MacDonald’s understated delivery and use of non-sequiturs was unique, and in my opinion, hilarious. And nobody ever did a better impersonation of Burt Reynolds, whose character often appeared as a panelist on SNL’s long-running “Jeopardy” skit (with a droll Will Ferrell playing Alex Trebek). In one episode, Reynolds (MacDonald) inexplicably changes his name to Turd Ferguson mid-game and reappears wearing a ridiculously oversized yellow hat. Sadly, MacDonald was only 61 when he passed.
