South-Western - Management  
The Green Machine; Whole Foods Has Come a Long Way Since Its Hippie Roots
Topic Internal Environment and Culture
Key Words Culture, leadership, expansion
InfoTrac Reference A130287230
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News Story

John Mackey, the CEO of Whole Foods has some very unconventional business ideas for the CEO of a $4 billion company. For example, when an animal rights protestor took over the microphone at a 2003 shareholders meeting, Mackey not only listened to what she had to say, he gave her his personal email address, corresponded with her, and eventually worked together with her to make changes in Whole Foods policies on farm-animal treatment.

Mackey's unconventional approach seems to be helping, rather than hurting the company. In a sector that is notorious for slim margins, Whole Foods comparable store sales were up 14.9% last year. Mackey predicts that the number of stores (now 168) will double by 2010 and revenue ($4 billion) should quadruple by 2010, making Whole Foods almost as big as the Gap today.

Whole Foods began as a natural-food shop Mackey and his girlfriend opened in Austin in 1978. The company grew slowly in the 1980s and experienced a growth spurt in 1992, when its IPO came out, allowing them to buy natural food retailers across the country and learn from their best practices. Acquisition was key to Whole Food's growth strategy, but it also built 70% of its new stores from scratch. Its ideal new market has a lot of college graduates and a vibrant restaurant scene with a lot of unique choices.

David Bell, a marketing professor at Harvard Business School says that Whole Foods has modified its philosophy to appeal to upscale customers. Mackey believes the shift happened naturally, as consumers began to show a preference for more natural foods. The growth at Whole Foods has also been helped by the recent popularity of gourmet cooking and a barrage of conflicting health news. Grocery consultant Bill Bishop says that "what everyone is looking for is a mother," and because Whole Foods has edited its selections so that only healthy foods are featured, the store is fulfilling this need.

Some of the greatest resistance to Whole Foods has been to its high prices, which have led critics to label the chain "Whole Paycheck." In response, the company has launched a lower priced brand called 365 everyday value, but Mackey firmly believes that if Americans want better food, they should be prepared to pay more for it.

Whole Foods' unique culture is often credited as another reason for its tremendous growth. To boost employee morale, executive salaries are capped at 14 times the average worker's paycheck, and 93% of stock options awarded last year went to non-executives. Whole Foods has turned higher compensation into a competitive advantage by proving that happy workers provide better service.

According to Mackey, the growth strategy for the company is just to fulfill their mission. Shareholders take a back seat to customers and workers, and profits are a byproduct of treating people well.

Questions
1.

Describe the culture at Whole Foods. In what ways does the company's culture contribute to its overall success?

2.

Refer to the leadership styles in your textbook. What kind of leader is John Mackey?

Source "The Green Machine; Whole Foods Has Come a Long Way Since Its Hippie Roots" Newsweek, Mar. 21, 2005, p.36.
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