Investor Ron Burkle Cashes Out For A 200% Return On $98 Million Investment in Whole Foods Market

Seven degrees of Ron Burkle: Grocer, investor, philanthropist and man about town. [Photo Credit: Cityfile.com]

On February 16 we wrote in this piece [Ron Burkle's Rather Excellent One Year Investment Adventure With Whole Foods Market] about investor and supermarket industry veteran Ron Burkle's beyond excellent return (on paper) of his $98 million investment in Whole Foods Market, Inc. in just a hair over one year. (Also see the links to past stories about Ron Burkle at the link above.)

This week we learned that Burkle and his Yucaipa Companies investment firm's return on his January 2009 $98 million investment in Whole Foods, through his Yucaipa Companies is no longer - at least the majority of it - just on paper.

According to Yacaipa, Burkle has sold the majority of his shares in Whole Foods, which represented an about 7% ownership stake in the natural grocery chain, for a return of about 200% Not bad for a year's worth of investment.

In our February 16 story we suggested Burkle might sell most or all of his Whole Foods stake soon because he's currently extremely busy tending to his about 19% ownership stake in book retailer Barnes & Noble, not to mention the myriad of other investments Yucaipa has.

Burkle has been selling off the Whole Foods shares for about the last month or so as the natural grocer's share price has continued to soar.

Among Burkle's activities vis-a-vis Barnes & Noble has been a campaign he's launched to be allowed to buy additional shares in the bookseller, something its board and CEO have been blocking.

Apparently they fear an activist shareholder who puts his money behind his ideas and strategies for making what has become a laggardprimarioy bricks-and-mortar book retailer, under fire from Amazon.com and other online book retailers, a potentially better performing one. Barnes and Noble sells books online but hasn't been able to compete in any significant way with Amazon.

Burkle has told Barns & Noble's board he wants to buy up to about 38% of the company. They have put in a provision which prohibits any outside investor from acquiring more than a 20% ownership stake.

Burkle is also interested in taking a substantial stake in the storied New York City retailer Barneys. He's bought some of the struggling apparel retailer's debt and has told its foreign owners, Dubai's Istithmar World investment firm, that he is interested in lending the firm, which has been hit hard by Dubai's financial meltdown, $50 million in return for taking control of Barney's, which Burkle thinks he can return to its glory days.

The Dubai investment firm bought Barney's in 2007 for about $900 million.

Based on his track record in the supermarket retailing industry, we think if he acquired Barney's, Burkle would first invest in it, like he did when he acquired the various chains to comprise Ralphs/Food 4 Less, which he eventually sold to Kroger Co. in the 1998's for $13.5 billion.

He likely then would cut costs, in part by wringing as much cost as he could out of Barney's supply chain, something he knows a thing or two about doing in the retailing business.

We think Burkle would also extend the Barney's brand, both into opening new stores in key U.S. markets and perhaps even selectively overseas, as well as into other forms of business. The Barney's brand still has considerable equity.

After doing these and other measures, operating Barney's for a few years, it's likely Burkle would then take the company public, which could result in substantial profits if all went well in the process we describe above.

But meanwhile Burkle has exited, at least for the most part, Whole Foods Market - and done so with a nice 200% return on his $98 million investment.

He's not out of the supermarket industry investment game completely though: Burkle owns 30% of the A&P supermarket chain and is playing a major role in the east coast grocery chain's strategy, along with how it's being managed. Remember, he's an activist shareholder, and with a 30% stake he should get involved in a hands on manner.

Burkle's Yucaipa has about $9 billion worth of investment funds, according to the firm. Among its investors are two of California's biggest pension funds.

Burkle lives in Southern California and New York City. His personal worth is estimated at $3.2 billion, according to Forbes magazine, which lists him in its storied richest people in the world ranking.

Look for Burkle - who grew up in the grocery business, starting as a bag boy at Southern California's Stater Bros. grocery chain then eventually moving into a vice president position there before leaving to start Yucaipa - to make new investments in the supermarket industry. It's not only the business where he made his first and major fortune - it's also in his blood.

Ron Burkle's Rather Excellent One Year Investment Adventure With Whole Foods Market

It's been just over a year since legendary supermarket industry magnate, investor, philanthropist and friend of Bill Clinton, Ron Burkle (pictured at left), acquired a 7% stake (9.8 million shares) in natural-organic foods grocery chain Whole Foods Market, Inc. Burkle reported his stake in a SEC regulatory filing on January 8, 2009.

During the about two month period from late November 2008 -to- early January 2009 in which Burkle made his investments in Whole Foods' common stock through his Yucaipa Companies' investment firm, the natural-organic foods grocer was aisle-deep in two key struggles: it's battle with the U.S. Federal Trade Commission (FTC) over the acquisition of Wild Oats Markets Inc.; and a loss in sales due to the economic recession.

As a result of these two key factors, Whole Foods' stock share price ranged from $9.97 per share (November 24, 2008) to $10.01 per share (January 7, 2009) during the period when Burkle made his $98 million worth of stock purchases, resulting in the 7% total ownership stake in the company. We will call it an average of about $10 per share.

Today, a mere year later, Whole Foods Market. Inc. reported a whopping 79% increase in earnings for its first quarter fiscal year 2010 over the same period in 2009.

Additionally, first quarter 2010 sales increased 7% to $2.6 billion, compared to the same quarter last year. Further, same store sales, which are a key measure of a retailer's health, increased by 2.5%. Complete details are here.

Whole Foods' first quarter sales and profits report announcement today sent the natural-organic grocery chain's stock share price soaring. At the end of business today Whole Foods Market, Inc. stock was trading at $32.95 per share.

The stock has been growing like naturally-fertilized clover over the past 12 months. The 52- week low is $9.06. The 52-week average high is $34.40 per share.

Ron Burkle's excellent one year Whole Foods Market adventure

Speaking of naturally-fertilized clover, Ron Burkle is certainly waist deep in it in terms of his about 13 month profit in Whole Foods Market, Inc. stock.

Based on the average price of $10 per share he made from late November 2008 -to- early January 2009, the supermarket magnate and investor has more than tripled the value of his $98 million stake in Whole Foods in just slightly over a year.

Based on the $10 per share average purchase price, at today's $32.95 per share close, Burkle has seen a whopping per share increase of $22.95. Not bad for a one-year investment adventure.

Trust in Whole Foods board, senior management

In this story [Retail Memo - Exclusive: Supermarket Industry Investor Ron Burkle Looking For A Seat On Whole Foods Market's Board of Directors] on January 16, 2009, we reported that Ron Burkle was interested in seeking a seat on Whole Foods Market Inc.'s board, based on his 7% stake in the company.

However, to date Burkle has been satisfied to be a passive investor in the natural-organic grocery chain - a position that has obviously paid off for the supermarket industry investor.

We stick by the January 2009 report that Burkle did have an interest, however strong or weak, in possibly joining the board. But it obviously wasn't something he has pushed, since if he did we doubt Whole Foods would deny him a spot. And if the grocer did, we would have heard about it. We haven't.

Historically, Burkle has been what's referred to as an activist shareholder, an investor who buys a substantial stake in a company and then participates in some way in its operations, generally as a member of its board and often times operationally. This has been especially the case for Burkle regarding his numerous investments and acquisitions in the food and grocery retailing industry.

But it appears to date that Ron Burkle has trust in Whole Foods' current board and senior management - a trust well-founded based on the growth of the investor's just over one year investment - and as such sees no need to join the board.

Burkle hasn't been a traditional passive investor when it comes to Whole Foods Market though. In fact, we are aware that over the last year Burkle has offered numerous ideas and suggestions, including involving Whole Foods value strategy, to the grocer's board members and senior management.

But of course Burkle isn't merely a investor in supermarkets - he has extensive operations experience as an food and grocry retailing executive.

He started out in the grocery retailing business as a bag boy for the Los Angeles-based Stater Bros. supermarket chain, where he eventually became a vice president.

In addition, Burkle was the board chair of Wild Oats Markets Inc., and was instrumental in the natural grocer's merger with Whole Foods.

Ron Burkle also put together one of the biggest supermarket chain's in the U.S. - Ralphs/Food 4 Less - which he eventually sold to Kroger Co. This was what earned him the 'supermarket magnate" nickname.

Burkle focusing on books not groceries right now

Interestingly, today Yahoo, of which Burkle is an investor and has been a member of the board of directors since 2001, announced that the investor is stepping down from its board because he wants to "devote more time to his other business interests."

In the statement, Yahoo Chairman Roy Bostock said: "Yahoo and its stockholders have benefited greatly from the counsel, insights and objectivity Ron has brought to the company during his nine years on the board."

The key business interest we think Burkle wants to devote more time to is his current investment focus on the Barnes & Noble book store chain.

Burkle recently disclosed in an SEC regulatory filing that his Yucaipa Companies investment firm has acquired a 19% ownership stake in the bricks-and-mortar and online book retailer. Additionally, in that filing Burkle said he would like to own as much as 37% of Barnes & Noble.

Barnes & Noble has an anti-takeover provision which makes it difficult for investors like Burkle to acquire majority ownership in the company, something that's been suggested he would like to do. However, if he can acquire as much as 37% (and even a bit less) of the bookstore chain, Burkle will have significant influence, including a seat (and maybe even chair) on the retailer's board.

It sounds to us like we will see the "activist shareholder" Burkle rather than the more passive investor Burkle when it comes to his run on Barnes & Noble.

In fact, his profits so far in Whole Foods Market, Inc. could provide a nice cash cushion should he decide to sell some shares for his investment in Barnes & Noble.

We have no information however that Burkle plans on cashing-in any part of or all of his investment stake in Whole Foods.

Either way, it's been a rather excellent 'One Year Whole Foods Market Investment Adventure' for the supermarket magnate.

We even suppose it's been an excellent enough one year adventure to make the legendary investor willing to take a crack at one of the most difficult retailing segments in U.S. - book selling.

Retail Memo: Whole Foods Market's April Fools Day Web Page Offers Mirth, Pokes Fun At Itself, But Also Good PR Move For Natural Grocer's Image

The April Fools Day spirit has struck the Whole Foods Market Web site today.

The natural grocery chain, which gets its share of ribbing with nick names like "Whole Paycheck," has turned the front page of its Web Site into a humorous self-look at itself in the spirit of April Foods Day, which is today, April 1, 2009.

The Web site home page is full of mirth. You can view the site here.

For example, the mock advertisement pictured at the top of this story leads off the Whole Foods Market April Fools Day Web site home page. As you can see, the natural grocer is offering four varieties of Organic Air under its "365 Everyday Value" store brand. It's not just air packaged in an attractive clear bottle with a spritzer top mind you -- but organic air at that. We don't see the USDA Organic certified seal on the product though, which bothers us a bit.

Good humor is that which comes closest to reality in many cases. That's why we wouldn't be surprised if Whole Foods Market were to put up a display of its "new" organic air item in its stores that sales would probably be fairly decent -- at least for a while.

And since "air" is a 365 day a year essential, offering the organic air under the "365 Everyday" store brand is pure brand marketing genius, of course.

Below its "365 Everyday" store brand organic air advertisement, Whole Foods then gets into the news of the day -- April Fools Day news at Whole Foods.

First up is a brief item about "today's featured local grower at Whole Foods. Here it is: "Featured Local Grower Peter Parker of Tulsa, OK raises Huntsman spiders, often mistaken for deadly Brazilian Wandering Spiders. Whole Foods Market is proud to offer one free spider with every 50-lb. purchase of organic bananas."

A rare spider was recently found in bananas at a Whole Foods Market store. This is a great way to "hang a lantern" on a problem. Poke fun at yourself, using April Fools Day to do so. PR grade=A+

In the spirit of its green retailing philosophy, Whole Foods Market then announces its latest strategic move in the paper v. plastic and reusable carrier bag controversy. That breaking April Fools Day news is this: "An Even Better Bag: Continuing our quest to keep plastic bags out of landfills, we introduce our reusable pet waste bags. Pick up after your pooch with our eco-chic Better Doggie Bag, designed by Cookie Fleck and Whole Foods Market."

Whole Foods pokes fun at its own image in the above "news" item. The grocer eliminated single-use plastic carrier bags from all its stores in April, 2008, on Earth Day. It's also been teased for selling numerous varieties of designer chic reusable carrier tote bags. The item shows Whole Foods can make fun of and laugh at itself. Consumers love this. PR grade=A+.

Whole Foods Market also tosses in some new store breaking news on its April Fools Day homepage. You have to click here to read this breaking news. But we will give you a hint: The store is "green" because it doesn't need refrigerated or frozen food cases to keep perishable products fresh.

The natural grocery chain also incorporates the April Fools Day theme into some of its regular Web site features.

For example, below are today's featured items in Whole Foods' regular "What's Cooking" at the stores feature:

~Deep-Fried Pork Eclairs
~Chianti-Gorgonzola Popsicles
~Indian Amazonian Guatemalan Honduran Balinese Rice
~Toast

The natural grocer's "Whole Story" Blog also gets the April Fools Day treatment.

Below are the five April Fools Day posts in today's "Whole Story" Blog:

Whole Story Blog

~When milk goes bad: 12 daring recipes
~No such thing as too much salt
~Experts find: eating food curbs hunger
~"Whole Deal" splits into 500 tiny deals
~Money-saving tip: bathtub wine

We actually think Whole Foods' could be on to something with the money-saving tip: bathtub wine post. After all, it taps into a number of hot-button consumer issues.

First, consumers are attempting to save money with every purchase in this severe recession, including wine. That hits the frugal hot button.

Another popular trend right now is "do it yourself" (DIY). Stomping grapes in the bathtub fits the DIY bill extremely well. Ties in with frugality in the recession as well.

Making bathtub wine at home is extremely sustainable production. You can't get much more natural-sustainable than bare feet, after all.

Combine all these factors with making sure the grapes used are organic and locally-produced, and Whole Foods just might want to make this do it yourself wine production idea a regular feature in its stores. We suspect it also might tap into the small but significant foot fetish consumer segment out there among America's natural products consumer base.

Whole Foods concludes its April Fools Day 2009 special feature page with... what else, a featured video. The title of the featured video: Change a flat tire the organic way with our step-by-step tutorial.

Some thoughts - and breaking news

Kudos to Whole Foods Market for stepping outside the box and offering up a bit of merchandising mirth for April Fools Day. Double kudos for poking fun at itself and some of its practices in the feature as well.

Consumers certainly need as much humor as we can get at present. And showing it has a sense of humor, including of the self-deprecating variety, is a good image booster for Whole Foods Market, which often comes across as...well, stuffy and a bit elitist.

Cheers to the creative minds who came up with the items featured in today's April Fools Day Whole Foods Market Web site extravaganza.

But all kidding aside...we have a funny feeling that the organic air item would probably be a pretty solid seller if it were to be marketed in the Whole Foods stores.

In fact, we were going to hold this back for a separate, breaking news story in the Blog, but we'll reported it here and now because of the ironic tie-in.

So here it is: According to our sources, Safeway Stores, Inc. is preparing to introduce what CEO Steve Burd is calling another revolutionary new product line under its popular, $500 million a year grossing "O' Organics" organic food and grocery product line.

Safeway has kept the new line, which Burd says will show Safeway to be the leading retail private label organics brand marketer in the U.S., under wraps in a secret campaign borrowed from the CIA.

However, Natural~Specialty Foods Memo has learned about the new "O' Organics" brand line from the Safeway Stores, Inc. buyer who came up with the new product line, and was so excited about it he said he just had to tell somebody.

The Safeway Stores' buyer, who spoke to us on the condition we not mention his name, said Safeway's research shows that consumers will perceive the new "O' Organics" product as "a breath of fresh air" in new product development. That new product line: Safeway "O' Organics" organic fresh air, packaged in clear bottles with a spritzer top. April Fools!!!

[You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at www.twitter.com/nsfoodsmemo. And that's no April Fools.]

Retail Memo - Breaking: FTC Delays Whole Foods Merger Opposition Case Another 30-Days For Settlement Talks; Progress Towards A Deal Remains Positive

FTC. v. Whole Foods Market, Inc. - Settlement Negotiations

In this Tuesday, February 2 story [Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?], in which we reported that a source close to the settlement discussions between Whole Foods Market, Inc. and the U.S. Federal Trade Commission (FTC) told Natural~Specialty Foods Memo (NSFM) progress was being made towards reaching a potential agreement over the FTC's legal challenge of the 2007 Whole Foods-Wild Oats merger, we said the FTC would likely extend its current five business day halt order in its antitrust challenge of the deal if it felt negotiations were promising.

The FTC did just that late yesterday afternoon.

David P. Wales, the acting director of the FTC's Bureau of Competition, issued a one paragraph statement late yesterday afternoon in which he announced the regulatory agency was extending by an additional 30-days it's order to halt the antitrust proceedings so that Whole Foods and the FTC could continue the ongoing settlement negotiations. The FTC's challenge is now on hold until March 6, 2009. The five business day halt order was set to expire this morning.

This is all the FTC's Wales said in his statement extending the halt order until March 6: "We look forward to continuing our discussions with Whole Foods to determine whether we can reach a mutually agreeable settlement that would be in the best interest of consumers." [Link to the full FTC statement.]

The 30-day extension allows both parties more time to negotiate, and possibly come to a settlement deal over the $565 million friendly acquisition by Whole Foods of Wild Oats Market, Inc., before the scheduled FTC administrative trial designed to decide the fate of the combined Whole Foods-Wild Oats starts on April 6, just 30-days after the FTC's 30-day extension of proceedings ends.

Based on what our sources have been telling us, as well as yesterdays decision by the FTC to extend the order to halt proceedings, its our analysis that both parties are hoping to reach a settlement agreement before that April 6 FTC trial start date.

In fact, in this January 29, 2009 piece [ Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement] NSFM called for the FTC and Whole Foods Market, Inc. to reach a settlement, suggesting the time has come for a meeting of the minds. We also set forth a simple blueprint both parties could use to aid them in negotiations.

In our Tuesday piece [Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?] we said this:

"Here is what we've learned thus far: Our source tells us the FTC has reviewed Whole Foods' initial settlement offer but wasn't completely satisfied by what it contained. We are told one element of the offer involves a willingness on Whole Foods' part to sell a number of the former Wild Oats stores, now rebranded under the Whole Foods Market banner, in some of the 29 U.S. markets where the FTC says a combined Whole Foods-Wild Oats is a monopoly in what the regulator calls the "premium natural and organic retailing segment (PNOS).

After reviewing the Whole Foods' settlement offer, we're told the FTC sent the natural grocery chain's outside legal counsel back to company CEO John Mackey and his top executives, suggesting the grocer needs to sharpen its pencil a bit more regarding its settlement offer. We were unable thus far to find out if the FTC has made any specific suggestions to Whole Foods' lawyers regarding in what specific ways Whole Foods Market, Inc. needs to sharpen the settlement offer."

Based on our source information we believe it was this turn of events, elaborated on more fully in the Tuesday story, which led to the FTC's decision late yesterday to extend its order to halt for an additional 30-days.

At the core of the FTC's legal challenge of the 2007 merger is that it argues a combined Whole Foods-Wild Oats is a monopoly in what the regulatory agency calls the "premium natural and organic retailing segment (PNOS)." This segment as defined by the FTC includes "premium natural and organic foods retailers" like Whole Foods Market, Inc., Portland, Oregon-based New Seasons Market (9 stores) and Ashville, South Carolina-based 15-store Earth Fare, Inc.

The fact Whole Foods Market and New Seasons Market have qualitatively different retail formats and focuses -- something that shouldn't be lost on those of you reading this who have experience in or with natural foods retailing and know about both retailers' formats and positioning -- apparently hasn't stopped the FTC from lumping the two natural grocers together in its PNOS category, which is a category we've argued in stories like this one [ Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly] is irrelevant because it doesn't describe the way natural and organic foods and related consumer packaged goods products are retailed in the U.S. in 2009.

This central argument, despite the fact it fails to describe the reality of the market, forms the core of the FTC's antitrust action against Whole Foods Market, Inc. post merger with Wild Oats. It's the fulcrum, so to speak.

And despite the folly of the argument -- the FTC is sticking to it. Therefore, as we suggested in our January 29 piece, the best course of action for Whole Foods Market, Inc. (and for the FTC) is to attempt to obtain a settlement deal, thereby saving it from further legal proceedings, which it has done.

We also believe it's in the best interest of the FTC to work out a settlement deal with Whole Foods Market, Inc. Fighting the merger has become much to much of a priority, perhaps even an obsession, for the FTC in the larger scheme of its mission as one of the U.S. Federal Government's antitrust watchdog agencies, even if it believes a combined Whole Foods-Wild Oats is a monopoly in what we argue is an artificial category -- PNOS -- which in our analysis is irrelevant to how natural and organic food and grocery products are retailed in the U.S. today. [We describe the multi-format retailing of natural and organic products in this piece, as well as in numerous others linked at the "recent bibliography at the end of this story.]

Therefore, we believe the 30-day extension by the FTC is a positive and wise move for both parties, as well as consumers. In 11 days, February 16, Whole Foods Market, Inc. will report its financials for the company's first fiscal quarter of the year. Those numbers aren't going to be very good. And they won't reflect the sort of income one would expect a monopolist retailer to turn in. As a result, the Q-1 numbers will add an additional and current argument to the "Whole Foods isn't a category monopolist" argument, in our analysis and viewpoint.

Meanwhile, our sources tell us the settlement negotiations between Whole Foods and the FTC are thus far progressing in a positive way. Stay tuned.

Natural~Specialty Foods Memo (NSFM) Linkage

FTC. v. Whole Foods Market: Recent Bibliography From NSFM

February, 2009

February 3, 2009: Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?... February 1, 2009: Promotional Merchandising Memo: Whole Foods Market's Super Bowl In-Store Promotional Merchandising Message: 'Value'....

January, 2009

January 31, 2009: Store Brands - Private Label Memo: Smart & Final-Owned Henry's Farmers Market Preparing to Debut New Natural & Organic 'Sun Harvest' Store Brand....January 29, 2009: Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement....January 25, 2009: Retail Memo: Judge Sets February Hearing Dates On FTC Motion That Could Result in Whole Foods Market Having to Rebrand 100 Former Wild Oats Units....

January 24, 2009: Retail Memo: Despite its Battle With the FTC and Other Struggles, Whole Foods Market Still Ranked 22nd 'Best Place' to Work in America By Fortune....January 24, 2009: Retail Memo - News & Analysis: Gelson's Chain Challenges Whole Foods' Subpoena For Trade Secrets; FTC Says No Like it said to New Seasons Market....

January 23, 2008: Retail Memo: Three Judge Federal Appeals Court Panel Rules Against Whole Foods' FTC Lawsuit Today; What's Next?.... January 21, 2008: Retail Memo: An Argument in Favor of the FTC in FTC v. Whole Foods Market, Inc. -- Or At Least Against Whole Foods' Legal Tactics....

January 19, 2009: Retail Memo: Concerned With Fast-Looming FTC Hearing Date Whole Foods Re-Files Lawsuit Taking it Directly to Washington, D.C. Federal Appeals Court....January 19, 2009: Retail Memo - Breaking News: Portland's New Seasons Market and Whole Foods Market, Inc. Reach Agreement; New Seasons Will Provide Trade Secrets....

January 16, 2009: Read Memo: Colorado Newspaper Columnist Joins NSFM's 'Whole Foods Market Isn't A Monopoly' Bandwagon....Friday, January 16, 2009: Retail Memo - Exclusive: Supermarket Industry Investor Ron Burkle Looking For A Seat On Whole Foods Market's Board of Directors....Thursday, January 15, 2009: Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly....

January 15, 2009: Retail Memo: Fresh & Wholesome Market Fears Not A Whole Foods Market Monopoly; In Fact Part of its Competitive Strategy is to Be the Anti-Whole FoodsRetail Memo: Whole Foods Offers Carrot and Stick to Retailers That Have Yet to Comply to Subpoena For Trade Secret Data and Information....

December, 2008

December 29, 2008: Retail Memo - Breaking News: New Seasons Market Doesn't Turn Over Trade Secrets to Whole Foods Market Despite Deadline to Do So Being Today....December 29, 2008: Independent Grocer Memo: Natural-Organic, Local, Fresh and Premium Keys to Pacific Northwest USA's Haggen Foods; Now Adding Value....December 28, 2008: Retail Memo: Web Site and Blog-Driven Viral Boycott of Whole Foods Market Stores in Portland, Oregon Region Going On; Could it Intensify?....December 28, 2008: Retail Memo: Tomorrow Deadline For Portland, Oregon's New Seasons Market to Turn Over Trade Secrets to Whole Foods Market's Legal Counsel....

December 24, 2008: Christmas Eve Memo 2008: 'Twas the Night Before Christmas' - FTC v. Whole Foods Market, Inc. Version....December 24, 2008: Independent Grocer Memo: From Mrs. Gooch's to the Auto Body Business, Then Back to Retail, Chris Kysar is On A Healthy Organic Foods Retailing Roll....December 24, 2008: Retail Memo: It's 'Deja Vu All Over Again' - Judge Paul Friedman to Whole Foods Market, FTC: 'What's My Role Here?'....

December 23, 2008: Retail Memo: FTC Postpones Scheduled February 16 Administrative Hearing on Whole Foods-Wild Oats Deal Break-Up Until April 6, 2009....December 23, 2008: Independent Grocer Memo: National Grocers' Association Asks President-Elect Obama to Look Out For Independent Grocers When He takes Office in January....December 22, 2008: Retail Memo: Only Slightly More Than Half the 93 Natural Foods Retailers Issued Subpoenas By Whole Foods in its Case against the FTC Have Complied....

December 22, 2008: Retail Memo: Whole Foods Market Wants to Depose and Obtain Internal E-Mails From FTC Commissioner, Suggesting Possible Conflict of Interest Situation....December 22, 2008: Retail Memo: At Hearing Today Judge Tells FTC to Provide Road Map of How Whole Foods Could Take About Merged Companies Should Ruling Go In its Favor....December 19, 2008: Retail Memo: Whole Foods' Lobbying Effort Baring More Fruit - House Committee Leaders Send Letter to FTC Chair Similar to One Sent By Senate Leaders....

December 18, 2008: Retail Memo: 'This Isn't Over Yet' - New Seasons Market CEO On Judge's Decision the Natural Gorcer Must Turn Over Trade Secrets to Whole Foods Market.... December 18, 2008: Retail Memo: The 'Whole Primary Source Scoop' -- FTC and U.S. Federal Court Documents on the FTC v. Whole Foods Market, Inc. Case....December 17, 2008: Breaking News: Judge Orders New Seasons Market to Comply With Whole Foods' Subpoena and Submit Sales Data, Financial Records and Other Trade Secrets....

December 16, 2008: Retail Memo: Whole Foods, Wild Oats and Boulder, CO...And the Rocky Mountain News' Editorial Take On FTC v. Whole Foods Market, Inc....December, 15, 2008: Retail Memo: Eight Members of U.S. Senate Judiciary Committee Send Letter to FTC Chairman Regarding FTC's Legal Case Against Wild Oats' Acquisition....December, 13, 2008: Retail Memo - Analysis & Commentary: More On FTC v. Whole Foods Market, Inc. and Whole Foods Market, Inc. v. FTC....

December 9, 2008: Organics Category Memo: Wither Organics? Organic Food & Grocery Category Sales Down; But Double-Digit Growth Still Likley With Mass Market Lift....December 9, 2008: Retail Memo: Whole Foods Markets' 'Whole Legal Paycheck:' Three Top Washington, D.C. Law Firms Teaming Up On The Natural Grocery Chain's FTC Lawsuit....December 9, 2008: Retail Memo: Whole Foods Market CEO John Mackey and Team Launch First Aggressive Attack Against the FTC's Legal Case at Press Conference This Morning....

December 8, 2008: Retail Memo: Mr. Mackey (and the Whole Foods Market Troops) Goes to Washington....December 8, 2008: Retail Memo: Breaking News - Whole Foods Market, Inc. Files Lawsuit Against the FTC; Argues the Regulator Violated the Company's Due Process Rights....December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter and Whole Foods Market Co-President Walter Robb Discuss and Debate the Subpoena Issue Online....

December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter Speaks Out Again Today on the Whole Foods Market, Inc. Subpoena of His Company's Data....December 7, 2008: Retail Memo: Whole Foods Market Retains Top Washington D.C. lawyers and Politically-Connected Lobbyists to Plead its Case Against the FTC....December 6, 2008: Retail Memo: Fast-Growing and Scrappy Sunflower Farmers Market Ventures Deep in the Heart of (Whole Foods Country) Texas....

December 3, 2008: Retail Memo: More on the Whole Foods Market-New Seasons Market Subpoena Issue; FTC Holding Firm For February, 2009 Hearing....December 2, 2008: Retail Memo: Whole Foods Market, Inc. Closes $425 Sale of Stock to Private Equity Firm; Adds Members of the Firm to its Board of Directors....December 2, 2008: Retail Memo: Portland, Oregon-Based New Seasons Market CEO Brian Rohter Responds to Whole Foods Market's Paige Brady....

December 2, 2008: Retail Memo: Whole Foods' Paige Brady Responds to Yesterday's New Seasons Market Piece; Lots of E-Mails; Issue Heats Up On the New Seasons Market Blog....December 1, 2008: Retail Memo: Whole Foods Wants A Court-Mandated Financial Records Dump from Portland-based New Seasons Market; it Says For its Battle Against the FTC.

Natural~Specialty Foods Memo (NSFM) Archives

FTC v. Whole Foods - Linkage from the NSFM archives:

Click here, here and here for stories about the FTC-Whole Foods issue from our archives, including pieces about mass market and natural foods class of trade retail competitors.

Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement

News & Analysis: FTC. v. Whole Foods Market, Inc. - Time For A Settlement

In an interesting but not all together surprising move to Natural~Specialty Foods Memo (NSFM), the U. S. Federal Trade Commission (FTC) today temporarily halted for five days its challenge to Whole Foods Market, Inc.'s friendly 2007 acquisition of Wild Oats Market, Inc.

The FTC announced the temporary suspension of its challenge to the merger in a brief order filed today in which it stated it would "withdraw this matter from adjudication for five business days."

David Wales, the head of the FTC's Bureau of Competition, which is in charge of the agency's challenge to the merger, said in a statement today that Whole Foods Market, Inc. sent the FTC a settlement offer to end the case today. Therefore the FTC has halted any action on the case for the five business days in order to study the offer and negotiate with Whole Foods' legal counsel.

We see the move by the FTC as a goodwill gesture in response to Whole Foods' offer. Additionally the moves by both Whole Foods (the settlement offer) and the FTC (the halt) could portend a resolution of this long legal battle over the merger of Wild oats into Whole Foods Market, Inc.

"We're going to roll up our sleeves and take a look at what they're offering," Wales said today in a statement. "We're hopeful that a settlement can be reached."

Over at Whole Foods Market's Austin, Texas headquarters, company executive vice president Jim Sud, who's been the corporate voice on the issue of late rather then CEO John Mackey, said in a statement: "We welcome this opportunity to hold constructive discussions directly with the (FTC) commissioners as well as the FTC's attorneys."

Whole Foods desires settlement deal

A person very close to the FTC. v. Whole Foods case told Natural~Specialty Foods Memo (NSFM) today that the natural grocery chain is very engaged in wanting to work out a settlement with the FTC, both because of the ruling made against the company last week by the U.S. Federal Court of Appeals, which we reported on here, and because the natural foods retailer, which will report its 1rst quarter fiscal-year sales on February 16, is extremely concerned about how much the battle with the FTC is taking its focus away from what it does, the retailing of natural, organic and premium food groceries.

Last Friday the federal appeals court ruled against Whole Foods' lawsuit against the FTC in which the company sought to block the upcoming April 6 trial before an FTC Administrative Law Judge, as well as give it a ruling that would remove FTC jurisdiction over the case and have it settled in a U.S. Federal Court courtroom.

The decision against Whole Foods' lawsuit in favor of the FTC assured that the April 6 trial will be held.

If the outcome of that trial goes in the FTC's favor it could mean a complete unwinding of the 2007 Whole Foods-Wild Oats merger. The worse case scenario could be that Whole Foods Market, Inc. would have to completely rebrand all of the former Wild Oats stores its converted (about 100) to the Whole Foods banner, which are all but about 6-12, and set up a entirely separate corporate entity to operate Wild Oats, essentially resulting in taking the merger back to where it was on the day the companies announced the deal in the summer of 2007.

In fact, the FTC has a motion before U.S. Federal Judge Paul Friedman in which it's asking the judge to force Whole Foods to do just what we describe above -- rebrand about 100 converted Wild Oats stores from Whole Foods back to Wild Oats and set up a separate entity to operate them -- even before it holds the April 6 administrative trial on the merger. Judge Friedman will hold hearings next month, on February 15-16 (the 16th being the same day Whole Foods Market, Inc. announces its first quarter financials), on this motion by the FTC, and as we reported here on January 25, 2009, says he will make a ruling shortly (likely in days) after the hearings end.

In our analysis, this upcoming court challenge to the integration of the about 100 Wild Oats stores also provides further motivation for Whole Foods to have offered its settlement offer to the FTC. The natural grocer is running out of legal options -- and time. And its legal costs continue to mount. Meanwhile, U.S. taxpayers gets to pick up all of the legal costs expended by the FTC and federal courts in the regulatory agencies legal challenge against the merger.

FTC statement, position encouraging

The statement today ("We're going to roll up our sleeves and take a look at what they're offering," Wales said. "We're hopeful that a settlement can be reached") by FTC Bureau of Competition chief competition enforcer (his official title) David Wales that the regulatory agency plans to consider Whole Foods' settlement offer in such a serious way is positive news from the standpoint of the two entities eventually being able to reach an agreement and avoid the upcoming April 6 administrative trial.

This is the first time in recent case history that Wales has indicated an interest in settling the case short of unwinding the entire merger.

Natural~Specialty Foods Memo (NSFM) has learned that Whole Foods' settlement offer to the FTC includes the selling of a number of stores in most of the 29 U.S. markets in which the FTC argues the combined Whole Foods-Wild Oats is a monopoly in, in what the regulator calls the "premium natural and organic retailing segment (PNOS)."

Post-merger -- to today

Shortly after the merger Whole Foods Market, Inc. sold off the about 36 Henry's and Sun Harvest banner natural foods markets in Southern California and Texas that were part of Wild Oats Market, Inc., and were acquire by Whole Foods in the merger. Those stores were bought by Southern California-based Smart & Final LLC., which operates over 200 hundred non-membership warehouse format food and grocery stores in the Western U.S. and in Mexico, as well as now operating the Henry's Farmers Market (southern California) and Sun Harvest (Texas) banner natural foods stores, along with a new format the retailer created last year called Smart & Final Extra, which are 30,000 -to- 35,000 square foot hybrid supermarket-warehouse-type stores.

Additionally, since late 2007 when a federal court decision in favor of the merger, a decision the FTC since got reversed on appeal, which is why it continues to oppose the deal, Whole Foods has closed a number of former Wild Oats' stores that were either underperforming or that natural grocery chain says were located to close to newer and larger Whole Foods banner stores to make the units viable.

Nearly all of the former Wild Oats stores kept after the 2007 merger have now been converted to the Whole Foods banner, accept for about 6 -to- 10 stores. Earlier this month Whole Foods Market, Inc. co-president Walter Robb said only about a half dozen former Wild Oats stores were left to rebrand to Whole Foods. Our research counts a couple more than that left to convert. Therefore we use the 6-10 store range figure.

A settlement blueprint or template

In other words, the universe of stores we are talking about regarding a post-merger, combined Whole Foods-Wild Oats isn't much more than 100 nationally throughout the U.S. in these 29 markets where the FTC deems Whole Foods Market, Inc. a PNOS segment monopoly.

Our argument since the summer of 2007 has been that a post-merger, combined Whole Foods-Wild Oats isn't a monopoly. [You can read a recent story in which we made our argument as to why that's the case at the link here: Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly.]

However, looking at FTC v. Whole Foods Market, Inc. today from a completely practical standpoint, we see no reason why the FTC and the natural grocer should not be able to achieve a settlement. After all, we are talking about a universe of just slightly more than 100 stores that the FTC is saying a "PNOS" category monopolist (Whole Foods) makes. We're also talking about just 29 specific U.S. markets. These two key facts need to be the starting point for negotiation, we suggest.

The FTC and Whole Foods need to look at each of these 29 markets and the number of stores the combined Whole Foods-Wild Oats has in each of the markets. Both parties then need to do an independent competitive analysis on each of these markets, including in the analysis not just natural foods class of trade retailers but also food retailers that are hybrid natural-organic-specialty supermarkets. These include retailers like Gelson's and Bristol Farms in Southern California, Raley's and Andronico's Markets in Northern California, The Fresh Market (chain), which has stores in the south, Midwest, Mid Atlantic and eastern regions, Wegmans in the east, Haggen Foods in the Pacific Northwest, and the numerous other natural-organic-specialty "hybrid" chains that fit this category in the 29 markets designated as monopolist by the FTC.

Once this real competitive analysis is done in the 29 U.S. markets, the FTC and Whole Foods then need to agree on Whole Foods' closing an agreed upon number of those 100-plus former Wild Oats stores in each of the respective markets. There still might remain 29 of those markets after the independent competitive analysis work is done, which is something that can be completed in a matter of a few days. But there also could be fewer than 29 remaining after the analysis.

The burden in the FTC's administrative process is on Whole Foods in reaching a settlement, that's why the natural foods grocery chain reached out to the FTC and submitted a settlement offer. In return the FTC suspended action on the case for five days. We think thus far that's a positive spirit of cooperation.

As all lawyers and negotiators know, first time settlement offers are seldom accepted. Instead they tend to be the opening entree to get settlement talks started. Whole Foods has served that opening entree with its offer. The FTC has responded in kind with the temporary halt of legal activity. Both moves are good negotiation openers. After all, another thing all good negotiators know is that the best negotiations come when both sides give a little something right at the start.

Natural~Specialty Foods Memo calls for a settlement

We strongly encourage the FTC and Whole Foods Market, Inc. to use a version of the simple but empirical framework we outlined above in their settlement negotiations on the 2007 merger. It's time to put this thing to bed.

If the two parties use what we suggest as a blueprint (assuming the FTC doesn't accept Whole Foods' first settlement offer, which we believe will be the case), then go from there, we think a settlement can be reached that doesn't render the deal a complete loss for Whole Foods Market, Inc., while at the same time satisfies the FTC's position that a post-merger, combined Whole Foods-Wild Oats is an anti-competitive retailer, providing the regulator with a negotiated settlement it can live with.

It's time for both the FTC and Whole Foods Market to follow new U.S. President Barack Obama's call for a less partisan Washington -- or in this case a less dogmatic regulatory agency (the FTC) and a more agreeable-to-compromise company, Whole Foods Market, Inc., along with helping to usher in the new U.S. President's inauguration day call for a "New Era of Responsibility" among the nation's governmental institutions and agencies, businesses and people.

The initial settlement offer by Whole Foods Market, Inc. started that ball rolling. And the FTC's temporary halt of legal activity on the merger has followed Whole Foods' offer in kind. Now its time to "roll-up those sleeves" and negotiate -- and work out a settlement.

Retail Memo: Judge Sets February Hearing Dates On FTC Motion That Could Result in Whole Foods Market Having to Rebrand 100 Former Wild Oats Units

News & Analysis:

FTC. v. Whole Foods Market, Inc. - A Major Motion

Judge Paul Friedman, who presides in the U.S. Federal District Court for the District of Columbia, has set a two-day hearing on his court's calendar -- February 17-18, 2009 -- in which he will listen to arguments from U.S. Federal Trade Commission (FTC) and Whole Foods Market, Inc. lawyers regarding the FTC's motion asking the court to rebrand all of the former Wild Oats stores Whole Foods has thus far integrated and changed to the Whole Foods Market name. Judge Friedman also plans to offer a ruling on the FTC motion shortly after the two day hearing next month.

We first reported in this January 12, 2008 piece [ Retail Memo: FTC Asks Judge to Force Whole Foods to Put Most of the Wild Oats' Genie Back in the Bottle Pending A Resolution of its Merger Challenge] on the FTC's motion to Judge Friedman's court when the regulatory agency filed it.

In its legal filing the FTC asks Judge Friedman to rule in its favor on three key points:

>Order Whole Foods to rebrand (change the signs, ect.) the about 100 Wild Oats stores it's converted to the Whole Foods banner back to the Wild Oats banner.

>Put the operation of those rebranded stores in the hands of a third party.

>Order Whole Foods to stop converting any additional former Wild Oats stores into Whole Foods stores. Note: there are just a few of such stores left to integrate and convert.

points one and two are the most ominous for Whole Foods Market, Inc. should Judge Friedman rule in favor of the FTC's motion. Rebranding the about 100 stores already converted, which is nearly all of them except 6-12 former Wild oats units, would not only cost Whole Foods a substantial of money (did they save the Old Wild Oats signs, for example) but would essentially mean putting back together a format -- Wild Oats -- that didn't work all that well in the first place. It also would be a marketing nightmare as it would take away any benefits the stores have gained from the Whole Foods name and style of merchandising.

The FTC and some others may not be aware but when Whole Foods acquired Wild Oats in the summer of 2007 it was only after the Boulder, Colorado-based then minor rival to Whole Foods had shopped the company around all over to potential buyers, including the mega-supermarket chain Kroger, which took a pass on acquiring Wild Oats, as did all the others.

Point number two, which goes with rebranding the 100 or so already converted former Wild Oats stores, which is putting the operation of those stores in the hands of a third party, not only seems like a draconian request by the FTC -- one sure to cost Whole Foods lots of financial losses and loss of business at those stores -- but also one without any kind of clear road map.

What does Whole Foods do? Create a new corporate entity? After all, Wild Oats no longer exists as a corporate entity of any kind. Who would want to run it? Does doing so mean creating new finance, HR, marketing departments? A new President? (of this third-party entity). New buyers? Who would provide the employees at the 100 stores health insurance, something Whole Foods Market, Inc. pays 100% of for its employees? The third party?

And, would Whole Foods be forced to pay for all this? To fund the third party entity, including health insurance, ect.? We think so. It really might be better at that point for Whole Foods Market to just close those 100 stores and walk away. Take a write down. Sell the real estate when the economy improves. Or, ask the FTC to appoint a receiver to dispose of the "surplus" stores, arguing the costs of complying with the order are too massive to make keeping them profitable, which would be a real argument. Maybe even ask for a bailout? It's not unheard of these days.

Perhaps the FTC would be willing to run the 100-store former Wild Oats entity, taking a page from the U.S. Treasury Department which now owns huge chunks (and the best preferred stock in) of America's top banks like Citi and Bank America. Many economists think the next step for the Treasury Department is the nationalization of these banks because they now are asking for billions more. Perhaps the FTC should just nationalize the 100-store former Wild Oats entity. We bet Whole Foods would entertain a decent offer -- one as decent as Treasury gave the big banks -- for those 100 stores.

Regarding point three, Whole Foods' ceasing to further integrate any more of the former Wild Oats stores, that would be something Whole Foods Market, Inc. could live with without much grief. In fact, lawyers for Whole Foods told Judge Friedman last week that the natural grocery chain has voluntarily stopped integrating and rebranding any additional stores, along with agreeing to not close any more former Wild Oats stores until the case is settled.

We think that's a smart move in that it tosses a somewhat real and largely symbolic bone to the FTC in terms of the hearing in Judge Friedman's court on the three-part motion.

Plus, since lawyers for the FTC argue there are exceptions to the voluntary offering from Whole Foods, exceptions they say will allow the company to continue to integrate Wild Oats assets into the Whole Foods brand, ruling in favor of the FTC on just that one point would still be a "real" ruling by Judge Friedman for the FTC.

The judge's ruling?

Natural~Specialty Foods Memo (NSFM) is going to go out on a limb and offer what we think will be Judge Friedman's decision on the FTC motion.

We think he will grant the third point of the FTC's wish list, that Whole Foods' cease from rebranding and closing any additional former Wild Oats stores.

But we don't think the judge will grant the other two key points in the FTC's motion: That all of the former Wild Oats store so far rebranded be returned to the original Wild Oats' status, and that those about 100 stores be turned over to a third party entity to run them.

It's also possible that the judge could rule that the about 100 stores be rebranded, but still allow Whole Foods to operate them. If he does grant that aspect, we are rather certain he would do so in this way, based on close observation of how he has handled the case since the summer of 2007.

Of course we could be wrong on all counts.

If so, such a decision will be extremely costly for Whole Foods Market, Inc. at a time when the value of the company has decreased by a whopping 70% since its friendly acquisition of Wild Oats -- a deal Whole Foods' CEO John Mackey now says publicly he would never do over. Like Whole Foods Market's lead outside legal counsel Lanny Davis has sais, in a different context though, "You can't put the toothpaste back in the bottle."

In our analysis, rebranding the stores and turning the operations over to a third party does nothing to further the FTC's case.

What it does do though is give the FTC a de facto temporary victory in breaking up the merger. Why? Because were Whole Foods have to rebrand these 100 stores, then later if it wins the case, change them back again to Whole Foods stores, the cost of doing so, and the loss of customer goodwill would likely result in Whole Foods' ending up getting rid of or closing a number of these stores because of the extensive costs from all of the rebranding and the loss of business during the process.

This motion makes no sense other to to play hardball with Whole Foods. Judge Friedman, who originally issued the ruling in favor of Whole Foods that gave the natural grocer the green light to go forward with the integration process, has played it pretty fair throughout this long process, in our analysis. Therefore it would surprise us if he ruled in the FTC's favor on the two draconian aspects of the regulator's motion -- the rebranding of the about 100 former Wild Oats stores, now changed to Whole Foods, back to the Wild Oats name and their placement with a third party to operate them.

But it's merely our analysis and opinion. It won't be until after the February 15-16 hearings until we know what Judge Friedman's actual ruling will be. And for Whole Foods Market that ruling has profound consequences as it prepares for the April 6, 2009 trial on the merger to be held by an FTC Administrative Law Judge in Washington, D.C. It also has profound consequences for the natural grocer's everyday operations. Stay tuned.

Retail Memo: Despite its Battle With the FTC and Other Struggles, Whole Foods Market Still Ranked 22nd 'Best Place' to Work in America By Fortune

FTC. v. Whole Foods Market, Inc.

Despite its ongoing battle against the U.S. Federal Trade Commission's (FTC) attempt to overturn its 2007 friendly acquisition of rival Wild Oats Market, Inc., it's 70% loss in company value over the last year and 40-plus% drop in quarterly income, along with its corporate headquarters firings (about 100 employees) in late 2008 and numerous other challenges, Whole Foods Market, Inc. still has managed to place 22nd on Fortune magazine's "100 Best Places to Work in America" annual ranking of American companies.

As a side note, Orrick Herrington & Sutcliffe, which is Whole Foods' main outside legal firm (it's using three firms, all coordinated by lead council Lanny Davis of the Orrick firm) in its battle against the FTC's attempt to overturn the Wild Oats deal, was ranked as the 87th best place to work in America by Fortune this year. It's one of two law firm's in the ranking.

The issue of Fortune magazine that includes the "100 Best Places to Work" ranking doesn't hit retail until January 26. However it's now available online at the Fortune Web site here.

Whole Foods' dropped six places this year compared to last year, when it came in 16th in Fortune's top 100 "Best Places to Work" ranking. But it wasn't alone in doing so. For example, coffee and food retail cafe giant Starbucks came in 24th this year. Last year the Seattle, Washington-based company, which also is experiencing its share of struggles, came in near the top last year -- placing number seven.

Even the uber-popular Google, who's campus in Silicon Valley offers among other employee features an employee cafe that offers food grown no more than 150 miles from Google headquarters, and offers the mostly organic meals the cafe serves at low prices subsidized by the company, dropped slightly in the ranking this year. Last year Google was ranked number one by Fortune as the best company in America to work for and at. This year Google placed fourth.

Whole Foods Market has made the Fortune list for 12 years in a row and is one of only 13 companies to be named every year since the list’s inception.

Regarding Whole Foods ranking at number 22, the business publication noted that the slowing economy “has not curbed the enthusiasm of this young workforce (28 percent are under age 25).” Additionally, it listed Whole Foods Market as number one among the top 100 for job growth, for adding 8,570 new employees in the last year. Much of that job growth came from the acquisition of Wild Oats.

Fortune also noted that Whole Foods is just one out of a total of 15 companies on the "100 best list" that pay 100 percent of its employees health-care premiums.
In addition to Whole Foods Market, four other retail food and grocery companies were ranked in the top 100 by Fortune. Two, Wegmans and Nugget Market, placed in front of Whole Foods.

Wegmans Food Markets, the family-owned New York state-based supermarket chain, known for its across the board innovation and high-touch employee policies, placed fifth overall. The retailer has been on the Fortune list for 12 straight years in a row and ranked in the top ten for seven of those years.

Nugget Market, which is a smaller, family-owned supermarket chain based in Woodland, California (about 15 miles from Sacramento) was ranked as the 10th best company to work for in America this year by Fortune. The inclusion on the list in 2009 marks the fourth year Nugget has been ranked as one of the 100 best places to work in the U.S. by the business publication.

Both Wegmans and Nugget put a major focus on merchandising natural, organic and premium foods, as does Whole Foods Market.

Stew Leonard's, a family-owned, multi-store independent based on the east coast, was ranked as the 53rd best company to work for in Fortune's ranking this year, and Publix Super Markets, a major supermarket chain in the southern U.S. that's based in Florida, came in at number 88 this year.

Both Stew Leonards and Publix are major retailers of natural, organic and premium foods, as well as selling basic food and grocery items.

The Stew Leonard's stores are mega-sized supermarkets and feature lots of natural, organic and specialty foods alongside conventional items, including a huge assortment of organic fresh produce and fresh meats. Stew Leonards also is a pioneer in marketing and merchandising "locally-produced food products, including working directly with farmers and producers.

Publix, which is the largest and fastest-growing employee-owned supermarket chain in the U.S., is a pioneer among supermarket chains in the natural and organics segment. In fact last year it started opening a new format supermarket called "Greenwise," which looks in its physical design and merchandise selection more like a Whole Foods store than it does a conventional supermarket. Publix is the leading grocer in Florida in terms of market share.

Food/grocery/consumer packaged goods maker and marketer General Mills was the only non-retailing food industry company to make it into Fortune's 100 best ranking this year.

In addition to marketing many of the top selling conventional food and grocery brands like Gold Medal (flour), Bisquick, Pillsbury and Green Giant, General Mills also is a major player and marketer in the natural and organic foods sector. Two of its natural and organic category brands are Muir Glen (organic tomato products and others) and Cascadian Farm, for example. Both are major top selling brands in the natural-organic segment. General Mills also markets premium food brands like Yoplait yogurt and Haagen-Dazs ice cream. [Link to General Mills' brands list.]

Below are the top ten places to work in the U.S. as determined by this year's Fortune magazine ranking:

• NetApp
• Edward Jones
• Boston Consulting Group
• Google
• Wegmans Food Markets
• Cisco Systems
• Genentech
• Methodist Hospital System
• Goldman Sachs
• Nugget Markets

Click here to view the full "100 Best Places to Work in America" list from Fortune magazine. There's also additional data about the 100 companies at the link.

Retail Memo - News & Analysis: Gelson's Chain Challenges Whole Foods' Subpoena For Trade Secrets; FTC Says No Like it said to New Seasons Market

FTC vs. Whole Foods Market, Inc. - and the Subpoenas

A U.S. Federal Trade Commission (FTC) Administrative Law Judge has denied a legal motion "For a protective order to quash or limit subpoena from Whole Foods Market, Inc." from the only other retail chain, Southern California-based Gelson's Market, out of the 93 natural and premium food and grocery retailing companies subpoenaed for various sorts of sales, financial and other trade secret information by Whole Foods Market in its battle against the FTC's legal case to overturn the 2007 Whole Foods-Wild Oats merger.

Basically the Gelson's legal motion/petition, like the one filed by Portland, Oregon's New Seasons Market, which also was denied by the FTC, asked the FTC to either kill the demands for proprietary information contained in the Whole Foods' subpoena completely and if not to then limit the demands, issuing a protective order which would allow the company to not submit some of the information demanded which it believes could harm it from a competitive standpoint.

Of particular concern to Gelson's are demands in the subpoena in which Whole Foods wants information from the 93 food retailing companies about their strategic growth plans in each of their respective markets. The FTC Administrative Law Judge ruled that Gelson's didn't show cause in its petition that such information would harm the company. Therefore he ruled against the grocery chain, ordering it to comply with the original terms of the subpoena.

As we've reported on previously, Portland, Oregon-based New Seasons Market, a nine-store natural foods chain was, until we recently discovered the Gelson's petition, the only one of the 93 retailers to challenge Whole Foods' subpoena with the FTC. New Seasons ultimately lost its legal challenge and was ordered by the FTC to comply with the subpoena. The Portland natural grocery chain failed to do so by the required date. However it reached a negotiated agreement with Whole Foods Market, Inc. and has now submitted the mutually agreed upon trade secret information.

Gelson's, which was one of more than half of the 93 retailers who didn't comply with Whole Foods' subpoena by its November 4, 2008 deadline, has been ordered by the FTC Administrative Law Judge to now do so post haste.

[You can read the full ruling at this link: Administrative Law Judge's Order on Non-party Gelson's Market's Motion for Protective Order or to Quash or Limit Subpoena from Whole Foods Market, Inc.]

The arguments to quash or limit the subpoenas made in the legal motions by lawyers for Gelson's and New Seasons were very similar.

What isn't similar though is that Gelson's is part of a publicly-owned and traded corporation, Arden Group, and therefore is a public supermarket chain, unlike New Seasons Market, which is a privately-held company. This means much of the information demanded in the Whole Foods Market subpoena -- sales and related financial data for example -- is already of public record by law. However, it's that non-public information such as plans to open new stores and the like, that Whole Foods' legal council says it must have, along with all the other information, from the 93 retailers. Privately-held companies like New Seasons aren't required by U.S. law to report there sales and profit information publicly like public companies are.

In addition to operating supermarkets under the Gelson's banner in Southern California, Arden Group also operates a few stores under the Arden-Mayfair banner in the region. In addition to its supermarket operations, holding company Arden Group has real estate and other related business interests.

There are 18 Gelson's supermarkets in Southern California. The stores sell a full range of food and groceries just like a regular supermarket does but put a major emphasis on selling specialty, gourmet, premium, ethnic and natural foods in an upscale store setting. [Learn more here.]

The central part of Whole Foods' argument as to why it's not a monopoly in what the FTC calls the "premium natural and organic retailing segment" in the 29 U.S. markets the regulator says it is is because the natural foods grocery chain not only competes with other natural foods class of trade retailers (like Portland's New Seasons Market) but with upscale supermarket chains such as Gelson's and numerous others across the U.S. that focus on the very same types of products Whole Foods does in its stores and are thus direct competitors.

This is an argument we've made since last summer -- long before Whole Foods' legal counsel came up with the idea of proving this by issuing subpoenas to the 93 retailers, a number of which are similar in format to Gelsons -- arguing that the FTC, in opposing the merger so strongly, has failed to understand the true nature of natural and premium food retailing in the U.S. today. That reality is that it is a multi-format, highly competitive business in which an increasingly variety of retailers are competing against Whole Foods for a share of the natural, organic and premium food category pie. [We suggest reading our January 15, 2009 analysis piece [Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly] for an overview of our argument.]

As we've also previously said, we completely understand and respect why New Seasons Market, and now Gelson's, challenged the subpoenas. Were we in their respective positions we likely would have done the same if unable to work out an agreement with Whole Foods.

Whole Foods' plan and strategy is to compile all of the data from these 93 retailers into a competitive analysis vis-a-vis itself in these 29 markets where the FTC says it holds a monopoly post merger in what the FTC has defined as the "premium natural and organic retailing segment." The retailer then plans to use this analysis to demonstrate at the scheduled April 6, 2009 FTC Administrative trial, where the fate of the merger will likely be decided, that it has more than enough competition -- from natural foods class of trade retailers, upscale/specialty supermarket chains and others -- in each of these markets.

The danger to Whole Foods though is that the burden of proof in the FTC Administrative trial is completely on the company. It must demonstrate to the Administrative Law Judge that the natural foods grocery chain isn't a monopoly, under FTC definitions no less, in every single one of the 29 markets. The Administrative Law Judge technically can rule against the entire merger if he believes Whole Foods has failed to prove its case in just one or two markets. That's a very difficult standard to meet.

As a result, without the proprietary information from the 93 retailers, at least two dozen of which have yet to comply with the subpoena as of early last week, according to Whole Foods' legal council Lanny Davis, the natural foods grocery chain can build a case to defend itself against the FTC's 29 market monopolist argument.

Therefore, as we've been writing about, this is why Whole Foods Market, Inc. is putting so much effort, including expensive legal talent, into obtaining the information from these 93 subpoenaed retailers. And the clock is running fast. April 6 is coming up very soon. Whole Foods still must obtain the information from these two dozen or so retailers, and must still compile all of the information into a legal brief before April 6.

On January 14, Whole Foods Market, Inc. took a number of steps designed to encourage those retailers who've yet to comply with its subpoena to do so. [Read about those measures at this link: Retail Memo: Whole Foods Offers Carrot and Stick to Retailers That Have Yet to Comply to Subpoena For Trade Secret Data and Information.]

It's our analysis that those measures, combined with the FTC's Administrative Law Judge's ruling against New Seasons' and Gelson's -- the only two of the 93 retailers we're thus far aware have challenged the subpoena -- will likely result in most of those remaining retailers' submitting the information demanded in the subpoena to Whole Foods' lawyers.

However, many of the retailers who have already submitted information, have self-edited some of the demands, those they believed were most proprietary to their respective business activity. Whole Foods Market also is attempting to get those retailers to submit the omitted information. That could be more difficult to achieve.

What is clear though is that Whole Foods wants and needs this information so badly it's willing to compromise, in the case of New Seasons market and perhaps others thus far, as well as to play hard play if needed.

The stakes are high. The unwinding of the merger could cost an already struggling Whole Foods much -- financially, in market share, and even possibly in terms of who has control of the company in the future. Stay tuned.

Reader Resource - Linkage:

Below is a bibliography of recent stories and posts published in Natural~Specialty Foods Memo (NSFM) on the FTC. v. Whole Foods Market, Inc. legal case and merger issue:

January, 2009:

January 23, 2008: Retail Memo: Three Judge Federal Appeals Court Panel Rules Against Whole Foods' FTC Lawsuit Today; What's Next?.... January 21, 2008: Retail Memo: An Argument in Favor of the FTC in FTC v. Whole Foods Market, Inc. -- Or At Least Against Whole Foods' Legal Tactics....

January 19, 2009: Retail Memo: Concerned With Fast-Looming FTC Hearing Date Whole Foods Re-Files Lawsuit Taking it Directly to Washington, D.C. Federal Appeals Court....January 19, 2009: Retail Memo - Breaking News: Portland's New Seasons Market and Whole Foods Market, Inc. Reach Agreement; New Seasons Will Provide Trade Secrets....

January 16, 2009: Read Memo: Colorado Newspaper Columnist Joins NSFM's 'Whole Foods Market Isn't A Monopoly' Bandwagon....Friday, January 16, 2009: Retail Memo - Exclusive: Supermarket Industry Investor Ron Burkle Looking For A Seat On Whole Foods Market's Board of Directors....Thursday, January 15, 2009: Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly....

Thursday, January 15, 2009: Retail Memo: Fresh & Wholesome Market Fears Not A Whole Foods Market Monopoly; In Fact Part of its Competitive Strategy is to Be the Anti-Whole FoodsRetail Memo: Whole Foods Offers Carrot and Stick to Retailers That Have Yet to Comply to Subpoena For Trade Secret Data and Information....

Monday, January 12, 2009: Retail Memo - Breaking News: Whole Foods Press Conference Tomorrow; Objective: Get Retailers to Comply With Subpoena; Need: Urgent....Monday, January 12, 2009: Retail Memo: FTC Asks Judge to Force Whole Foods to Put Most of the Wild Oats' Genie Back in the Bottle Pending A Resolution of its Merger Challenge.

December, 2008:

December 29, 2008: Retail Memo - Breaking News: New Seasons Market Doesn't Turn Over Trade Secrets to Whole Foods Market Despite Deadline to Do So Being Today....December 29, 2008: Independent Grocer Memo: Natural-Organic, Local, Fresh and Premium Keys to Pacific Northwest USA's Haggen Foods; Now Adding Value....December 28, 2008: Retail Memo: Web Site and Blog-Driven Viral Boycott of Whole Foods Market Stores in Portland, Oregon Region Going On; Could it Intensify?....December 28, 2008: Retail Memo: Tomorrow Deadline For Portland, Oregon's New Seasons Market to Turn Over Trade Secrets to Whole Foods Market's Legal Counsel....

December 24, 2008: Christmas Eve Memo 2008: 'Twas the Night Before Christmas' - FTC v. Whole Foods Market, Inc. Version....December 24, 2008: Independent Grocer Memo: From Mrs. Gooch's to the Auto Body Business, Then Back to Retail, Chris Kysar is On A Healthy Organic Foods Retailing Roll....December 24, 2008: Retail Memo: It's 'Deja Vu All Over Again' - Judge Paul Friedman to Whole Foods Market, FTC: 'What's My Role Here?'....

December 23, 2008: Retail Memo: FTC Postpones Scheduled February 16 Administrative Hearing on Whole Foods-Wild Oats Deal Break-Up Until April 6, 2009....December 23, 2008: Independent Grocer Memo: National Grocers' Association Asks President-Elect Obama to Look Out For Independent Grocers When He takes Office in January....December 22, 2008: Retail Memo: Only Slightly More Than Half the 93 Natural Foods Retailers Issued Subpoenas By Whole Foods in its Case against the FTC Have Complied....

December 22, 2008: Retail Memo: Whole Foods Market Wants to Depose and Obtain Internal E-Mails From FTC Commissioner, Suggesting Possible Conflict of Interest Situation....December 22, 2008: Retail Memo: At Hearing Today Judge Tells FTC to Provide Road Map of How Whole Foods Could Take About Merged Companies Should Ruling Go In its Favor....December 19, 2008: Retail Memo: Whole Foods' Lobbying Effort Baring More Fruit - House Committee Leaders Send Letter to FTC Chair Similar to One Sent By Senate Leaders....

December 18, 2008: Retail Memo: 'This Isn't Over Yet' - New Seasons Market CEO On Judge's Decision the Natural Gorcer Must Turn Over Trade Secrets to Whole Foods Market.... December 18, 2008: Retail Memo: The 'Whole Primary Source Scoop' -- FTC and U.S. Federal Court Documents on the FTC v. Whole Foods Market, Inc. Case....December 17, 2008: Breaking News: Judge Orders New Seasons Market to Comply With Whole Foods' Subpoena and Submit Sales Data, Financial Records and Other Trade Secrets....

December 16, 2008: Retail Memo: Whole Foods, Wild Oats and Boulder, CO...And the Rocky Mountain News' Editorial Take On FTC v. Whole Foods Market, Inc....December, 15, 2008: Retail Memo: Eight Members of U.S. Senate Judiciary Committee Send Letter to FTC Chairman Regarding FTC's Legal Case Against Wild Oats' Acquisition....December, 13, 2008: Retail Memo - Analysis & Commentary: More On FTC v. Whole Foods Market, Inc. and Whole Foods Market, Inc. v. FTC....

December 9, 2008: Organics Category Memo: Wither Organics? Organic Food & Grocery Category Sales Down; But Double-Digit Growth Still Likley With Mass Market Lift....December 9, 2008: Retail Memo: Whole Foods Markets' 'Whole Legal Paycheck:' Three Top Washington, D.C. Law Firms Teaming Up On The Natural Grocery Chain's FTC Lawsuit....December 9, 2008: Retail Memo: Whole Foods Market CEO John Mackey and Team Launch First Aggressive Attack Against the FTC's Legal Case at Press Conference This Morning....

December 8, 2008: Retail Memo: Mr. Mackey (and the Whole Foods Market Troops) Goes to Washington....December 8, 2008: Retail Memo: Breaking News - Whole Foods Market, Inc. Files Lawsuit Against the FTC; Argues the Regulator Violated the Company's Due Process Rights....December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter and Whole Foods Market Co-President Walter Robb Discuss and Debate the Subpoena Issue Online....

December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter Speaks Out Again Today on the Whole Foods Market, Inc. Subpoena of His Company's Data....December 7, 2008: Retail Memo: Whole Foods Market Retains Top Washington D.C. lawyers and Politically-Connected Lobbyists to Plead its Case Against the FTC....December 6, 2008: Retail Memo: Fast-Growing and Scrappy Sunflower Farmers Market Ventures Deep in the Heart of (Whole Foods Country) Texas....

December 3, 2008: Retail Memo: More on the Whole Foods Market-New Seasons Market Subpoena Issue; FTC Holding Firm For February, 2009 Hearing....December 2, 2008: Retail Memo: Whole Foods Market, Inc. Closes $425 Sale of Stock to Private Equity Firm; Adds Members of the Firm to its Board of Directors....December 2, 2008: Retail Memo: Portland, Oregon-Based New Seasons Market CEO Brian Rohter Responds to Whole Foods Market's Paige Brady....

December 2, 2008: Retail Memo: Whole Foods' Paige Brady Responds to Yesterday's New Seasons Market Piece; Lots of E-Mails; Issue Heats Up On the New Seasons Market Blog....December 1, 2008: Retail Memo: Whole Foods Wants A Court-Mandated Financial Records Dump from Portland-based New Seasons Market; it Says For its Battle Against the FTC.

Natural~Specialty Foods Memo (NSFM) Archives

FTC v. Whole Foods - Linkage from the NSFM archives:

Click here, here and here for stories about the FTC-Whole Foods issue from our archives, including pieces about mass market and natural foods class of trade retail competitors.