Friday, June 13, 2008

Retail Memo: Whole Foods' CEO John Mackey Speaks Out On 'Conscious Capitalism,' the Integration of Wild Oats, Competitors and Giving 'Appreciations'

As we've been writing about on Natural~Specialty Foods Memo for a few weeks now, Whole Foods Market, Inc. CEO John Mackey is back to his seemingly liberated self after recently receiving a clean bill of behavior from the U.S. Securities and Exchange Commission (SEC) regarding the postings it was discovered last year he had been making on 'Yahoo Finance' financial message boards about Whole Foods (positive) and Wild Oats (negative), under the screename "Rahodeb" during the run up to Whole Foods' friendly acquisition-merger last year of Wild Oats Markets, Inc.

As we wrote about here, Mackey devoted the first post in nearly a year in his blog on the Whole Foods Market, Inc. website to the issue, offering an explanation and discussing how he was going forward.

We also recently wrote about the May commencement speech the not so public for the last year John Mackey made to the 2008 graduating class of Bentley College.

Last night, the increasingly public John Mackey stepped back on stage at St. David's Episcopal Church in Austin, Texas to give a speech and participate in an audience question and answer session for an event sponsored by FLOW, an organization co-founded by Mackey that "is dedicated to liberating the entrepreneurial spirit for good and directing it towards creating sustainable peace, prosperity, and happiness for all in our lifetime."

The focus of Mackey's talk at the Austin Episcopal church last night was "Conscious Capitalism." The Whole Foods' CEO also touched on a variety of other topics at the $30 per-person, sold-out fundraising event for FLOW, including: the integration of Wild Oats Markets, Inc. into Whole Foods' operations and culture; his experience with the SEC and Whole Foods' board of directors over the online message board affair; the grocer's competitors; and the little known Whole Foods Market company practice of asking team members to deliver "appreciations" to each other at the end of every team meeting, according to a Natural~Specialty Foods Memo correspondent (who we appreciate much) who attended the event.

"Corporations have become the most influential institutions in the world today," Mackey told his audience last night. "But they are widely perceived as greedy, selfish and exploitive."

He said unlike other professions like medicine, in which doctors take an oath to heal the sick, or education, where teachers make a commitment to help students to learn, businesses have for too long focused mostly on maximizing profits as their reason for being.

"The current business thinking lacks a new kind of awareness of a deeper business purpose," Mackey said in his speech last night. "They need to make a deeper responsibility to stakeholders, which include customers, employees, suppliers, the community and investors."

Mackey said when he founded Whole Foods, then called "Saferway," in 1978, he didn't have a clear vision or purpose beyond wanting to sell healthier food than most supermarkets did at the time.

However, Whole Foods' purpose and mission has evolved over time since those early beginnings, he told the audience. For example, Whole Foods just added a sixth "core value," which is to now include its suppliers at part of the supernatural foods retailer's mission statement because they wanted to know why they weren't previously included in the company's core values, Mackey said.

"Great companies have great purposes,” Mackey told the audience. "This includes, the good, the true, the beautiful and the heroic," he said by way of explaining "Conscious Capitalism."

The Whole Foods CEO even offered a brief list of company's he said have a larger purpose and that he admires. These include Apple Computer, Southwest Airlines, Google, Wikipedia and retailer the Container Store.

He also said he recently has lunch with Indra Nooyi, the first female CEO of food and beverage giant PepsiCo, and is adding the company to his admired list because he was impressed with her plans to create greater purpose for PepsiCo, including making a major effort in corporate philanthropy, a value and purpose Mackey told the crown is major to him and Whole Foods Market, Inc.

Mackey told the audience he isn't a hick in an organic oat field however when it comes to stockholder ownership of Whole Foods and making a profit. He said investors must ultimately control the business. "Customers are the most important stakeholders of Whole Foods, with employees coming second," he said. Investors are right up there, he added.

"The investors need to own and control the corporation, they get paid last," Mackey said. "If they don’t have the ultimate control they are going to be exploited by management and other stakeholder groups. I have never argued or never will argue for anything that weakens the property rights of investors."

Commenting briefly on the fact Whole Foods' stock share price is nearly 30% less than it was in June of 2007, Mackey attributed it to investors being cautious while the grocer completes its integration of Wild Oats into its operations and culture, and the resulting concerns over same-store sales because of this process.

Following his speech last night, which according to the Natural~Specialty Foods Memo correspondent attending the event was received warmly by the audience, Mackey then sat down for an audience question and answer session, which was moderated by a woman named Tami Simon, who runs a spiritual-based organization called Sounds True.

One audience member asked Mackey about the U.S. Federal Trade Commission's (FTC) ongoing court challenge against the Whole Foods-Wild Oats merger/acquisition, in which the FTC continues to claim Whole Foods is a natural foods retailing monopoly, an issue we've written extensively about (we disagree with the FTC) regularly since last year.

Mackey's answer: "Although the FTC thinks we are a monopoly, everybody in Austin knows we’re not," he said. "If Whole Foods doesn't satisfy your needs, you are not going to shop there."

Another audience member's question was about Mackey's well-known competitive nature.

My competitiveness gets me in trouble now and then and got me in a lot of trouble in the last year,” Mackey said, referring to the 'Yahoo Finance' message board posting issue.

He elaborated though: "When you meet a really formidable competitor, you become afraid. This fear "can be harnessed to make your heart open wider," he said, adding that formidable retail competitors also serve to make Whole Foods Market better and stronger.

Another audience member asked Mackey how the integration of Wild Oats was going. "It has surprisingly been not that difficult," Mackey answered, going on to add that one problem has been making "that kind of culture switch" without a store team leader in place that comes from Whole Foods.

The Whole Foods' CEO then made a bit of news when he said Whole Foods is in the process of putting experienced Whole Foods Market store team leaders in each of the former Wild Oats stores, which means the existing Wild Oats, now Whole Foods, store managers will be losing their positions running those stores.

Towards the end of the question and answer session, Mackey also talked about a practice at Whole Foods which most non-insiders aren't aware of. That's the practice of encouraging Whole Foods' team members to give each other what Mackey calls "appreciations" at the end of every meeting. Team members will tell one another after a meeting why they appreciate another meeting attendee and so on. Some Whole Foods team members like to joke the "appreciations" come right out of Scientology.

Mackey said last night the "appreciations" help to dismantle preconceived notions and judgements team members might have about one another, along with dismantling any lingering hostility that might have been present at the meeting.

The Whole Foods chief also offered an interesting news tidbit about the company's board of directors and the giving of the "appreciations" practice, saying the board was the last holdout in the company in terms of giving the after meeting "appreciations" to one another. However, Mackey added the board members are now doing them after each meeting and all seems to be going well.

Winding up the question and answer session, Ms. Simon thanked the audience for its participation, turned to Mackey and said: "John, I appreciate you." Perhaps that giving of "appreciations" practice is contagious?

To paraphrase the line from that famous song 'Mack The Knife,' written by Bobby Darin, it appears (John) "Mackey's Back in Town." And, by all indications, he's back with a renewed vigor.

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