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.

Green Retailing Memo: One Year Since Eliminating Plastic Bags Whole Foods Market Says Reusable Use Has Tripled; 150 Million Less Bags in Landfills

Whole Foods Market teamed up with singer Sheryl Crow (pictured above, right) to design its value-priced "A Better Bag" reusable canvas shopping bag (pictured above, left). The reusable bags, which feature a tree drawn by Crow, come in two sizes and sell for 79-cents and 99-cents (large bag) respectively.

Nearly one year ago, on Earth Day, April 22, 2008, Whole Foods Market, Inc. eliminated offering free single-use plastic carrier bags as an option in all of its stores in the U.S., Canada and the United Kingdom. Instead, Whole Foods' decided to offer shoppers only free 100% recyclable paper grocery bags (made from at least 50% post-consumer recycled paper), along with making a major push to encourage customers to bring there own reusable shopping bags with them to the stores, as well as offering a variety of reusable bag varieties for sale at a variety of price points in its natural and organic foods markets.

[Read our April 21, 2008 story about Whole Foods Market's banning the plastic bags in its stores here: Green Retailing Memo: Whole Foods Market, Inc. Self-Bans the (Plastic) Bag Tomorrow; Has Related Regional Earth Day Promotions Planned For All Stores.]

A.C. Gallo, Whole Foods Market, Inc.'s co-president and chief operating officer says the Austin, Texas-based natural grocery chain decided to eliminate the single-use plastic carrier bags on Earth Day last year "in an effort to help protect the environment and conserve resources, a move that aimed to protect nature and wildlife and reduce litter by encouraging customers to bring reusable bags when they shop for groceries."

Last year hundreds of Whole Foods Market's store-level team members joined the non-profit Ocean Conservancy group's annual coastal cleanup day in which thousands of volunteers pick up litter and catalog what they found along beaches and coastal waterways throughout the world.

"During Ocean Conservancy's 2008 International Coastal Cleanup, 1.4 million plastic bags were found littering our oceans, lakes and rivers," says Dianne Sherman, Director of the International Coastal Cleanup. "Trash travels. Even if we live thousands of miles inland, our actions have a profound effect on the ocean. A bag can blow from a picnic table, wash down a storm drain into a river and wind up harming or killing a sea turtles, birds or other marine life. Trash is one of the most pervasive - but solvable -- pollution problems facing our oceans and waterways. Whole Foods Market and their customers are demonstrating how simple lifestyle changes can make a sea change."

When it eliminated the plastic grocery bags last year from the checkouts in all its stores Whole Foods Market became the first major U.S. grocery chain to do so.

Gallo says that in the one year since Whole Foods' eliminated the single-use plastic carrier bags from all of its natural foods supermarkets the chain has seen the amount of reusable bag use among its customers triple. Additionally, Gallo says that the natural and organic grocer has kept an estimated 150 million plastic bags out of landfills since last Earth Day.

That's a considerable amount of plastic bags for one food retailing chain with just under 300 stores to keep from going into municipal landfills, which is where most of the single-use bags go because there isn't a comprehensive recycling system for the plastic bags in the U.S. like there is for paper grocery bags.

"At first we wondered if shoppers would just switch to paper but to our great surprise, people have been truly excited about using reusable bags," Gallo says. "I think Whole Foods Market has also helped that along by offering various versions of stylish, affordable 99 cent bags that have become quite popular - our shoppers have been inspired to make a positive environmental change and have really incorporated the reusable bag mindset into their daily lives. Eliminating plastic bags was definitely the right move at the right time."

Whole Foods' sells a variety of reusable bags in its 279 stores in the U.S., Canada (six stores) and the United Kingdom (five stores). Its value-oriented "A Better Bag," which sell for 79 and 99-cents respectively, depending on size, is constructed primarily (80% of its content) from recycled plastic bottles. The bags currently feature a charcoal sketch of a tree drawn and signed by singer Sheryl Crow.

The natural grocery chain also sells a variety of lower -to- mid-ranged priced reusable tote bags on up to its premium $29.99 cotton and burlap FEED 100 bag. Each FEED bag purchased by shoppers helps provide 100 nutritious lunches to hungry Rwandan school children through the United Nations World Food Program's School Feeding Program, as part of charitable program Whole Foods Market contributes to.

Whole Foods Market also offers customers a refund of either five or 10 cents per-reusable bag used at the stores' checkouts. The amount varies depending on the store and where it is located.

Paper bag use has increased at Whole Foods' stores since the retailer self-banned the plastic bags nearly a year ago. We know this because we've talked to store-level employees in at least 40 Whole Foods Market stores over the last year who have told us this is the case. However, that's to be expected, and we have no problem with it for a couple reasons.

First, the paper grocery bags are 100% recyclable. Nearly every city and town in the U.S has convenient, curbside recycling programs. And many of the smaller town that don't have the curbside programs allow resident to toss their paper waste into their green waste garbage cans. Since paper, including paper grocery sacks, is compostable, the disposal companies turn it and the green waste into compost which the towns use in parks and also sell to companies and often give away for free to town residents to use in their gardens

Additionally, the paper bags used at Whole Foods Market stores are at made from at least 50% post-consumer recycled materials, and the grocer is working on 100%. This means the bags a shopper gets today came from at least half of a bag that was recycled and turned into the new bag.

Unfortunately single-use plastic carrier bags are seldom recycled in the U.S., largely because there isn't a comprehensive recycling system established to do so . Few if any curbside recycling programs allow single-use plastic carrier bags, for example.

In states like California and New York, supermarkets are required by state laws to place bins in the stores so that shoppers can return the plastic bags. The retailers also are required to arrange to have the bags picked up by a company that will have them recycled.

But the simple fact is that American consumers generally will only recycle if its convenient to do so, which is why residential the curbside system works best. Before that cities used drop off centers. Recycling rates were minimal. Curbside increased the rates dramatically.

In addition, only about three or four states have such laws.

In 2007, Whole Foods Market introduced all-natural fiber packaging at its in-store salad and food bars that comes from plants that grow wild or are cultivated and harvested annually.

Whole Foods' is currently searching for alternatives to its use of plastic bags and plastic containers in its stores' produce, seafood, bakery and bulk foods departments, according to Gallo. Since customers generally use a single plastic bag for each individual item purchased in these departments, that adds up to using lots of these single-use small bags storewide for Whole Foods.

Any replacement bag for these uses though requires that the material used in the bag is food grade, since it will be coming into contact with fresh and ready-to-eat foods.

Before the invention of the plastic bag for use in produce and plastic bags and containers for in-store bakery, supermarkets used paper bags and paper boxes (remember those pretty pink bakery boxes?) in these departments.

Some supermarkets still use paper along with plastic in their in-store full service bakeries. However few do largely because the cost of plastic is cheaper.

Switching to paper is something we think Whole Foods should take a look at and consider for both bakery and bulk foods. It's a bit more difficult for produce, although their are supermarkets that still offer a choice of plastic and paper bags for shoppers in the produce departments. Paper can be used to wrap fresh fish but usually stores put it in a bag first in order to preserve its freshness. That could be more difficult to find a solution for.

One of the reasons retailers like using plastic in produce, bakery and bulk departments is because the store checkout clerks can see the item through the bag, which speeds up checkout. However, we think in the case of bakery and bulk, going to paper for Whole Foods wouldn't slowdown checkout all that much, particularly once the clerks got used to peeking inside the bag when the need to, mostly in the case of produce since the bulk bags are supposed to be identified by code numbers anyway.

It would be hard of course to go to paper completely in any in-store bakery we realize because in some cases clear packaging, prepacked cakes and the like, is needed to display the product in self-service. But items in the full-service cases could be packaged using paper bags without much difficulty. Safeway Stores, Inc. for example does this in its stores, using a mix of paper (for service bakery) and plastic.

Of course, a truly biodegradable-compostable plastic bag for seafood, fresh meat, produce, bakery and bulk that doesn't cost retailers an arm and a leg would be a great solution. But none are available at a decent cost yet on the market that we've been able to find.

There is a slow behavior change going on among consumers in terms of bringing their own bags to the grocery store. And since Whole Foods Market happens to cater to the "greenest" of "green" consumers it's likely the behavior change is and will always be more dramatic in its stores, compared to say conventional supermarkets.

But with steady education, along with economic incentives designed to decrease plastic and even paper bag use by shoppers, its our analysis that over the next few years we will see more and more shoppers, regardless of where they shop, bringing there own bags to the grocery store.

In fact, it is some of the no frills, deep-discount grocery chains like Germany-based Aldi (Europe and the U.S.) and Lidl (Europe), and Supervalu's Sav-A-Lot (U.S.) that are leading the way in encouraging shoppers to bring their own bags to the store because they charge customers a small fee (usually five to 15-cents per-bag) for each single-use plastic bag they request at checkout, providing a small but still real economic incentive to shoppers to bring their own bags to the store. Many shoppers bring single-use plastic bags or paper bags from previous trips or from other stores with them to these stores, not just specifically designed reusable tote bags. Doing this takes the "single-use" out of the paper and plastic bags.

And of course more and more cities, counties and even states and nations (Ireland, China) have and are passing plastic bag ban laws or laws requiring shoppers to pay for the single-use plastic bags in stores if they request them. As more of these laws are passed, which they will be, that obviously will decrease the amount of single-use plastic bags used overall, both in the U.S. and globally. [Related story: Green Memo: Ireland Has Reduced the Use of Single-Use Plastic Carrier Bags By 94 Percent With Bag-Fee Law; Has Exceeded EU Recycling Targets.]

For example, China banned the bags nationwide last year. That resulted in a huge global decrease in usage in one legislative fiat. Of course it would be better if consumers adopted the use of reusable bags without all the added new legislation.

What's needed are additional and new creative ways to change shopper behavior more towards the bring-your-own-bag concept, along with some solid economic incentives designed to move the behavior change along more rapidly. We see both coming.

Reader Notes

~Click here to read a selection of past posts in Natural~Specialty Foods Memo (NSFM) on the plastic and reusable bag topic and issue. You can also use the search box at the top of the Blog. Just type in the search terms "plastic bag issue," "reusable bags," "plastic grocery bags," or "single-use plastic carrier bags."

~You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at www.twitter.com/nsfoodsmemo.

Retail Memo: David Wales, Who Headed Up the FTC's Nearly Two Year Legal Challenge Against Whole Foods' Acquisition of Wild Oats is Leaving the Agency

FTC v. Whole Foods Market, Inc.: Settlement Agreement Post-Mortem

David P. Wales, the Acting Director of the U.S. Federal Trade Commission's (FTC) Bureau of Competition, and the man who in that role spearheaded the nearly two year antitrust legal challenge by the regulatory agency against Whole Foods Market, Inc.'s acquisition of Wild Oats Markets, Inc., is leaving the FTC to, as they say, pursue other interests.

Mr. Wales' departure comes just one month after the FTC and Whole Foods Market reached a settlement agreement over the Austin, Texas-based natural grocery chain's 2007 acquisition of Wild Oats Markets, its then main rival in the natural foods retailing class of trade segment.

New FTC Chairman Jon Leibowitz offered some strong praise about the departing Acting Director of the FTC's Bureau of Competition, which among other tasks is charged with enforcing antitrust regulations and bringing charges of antitrust violations involving mergers and acquisitions, saying about Mr. Wales: "Dave has done a terrific job in leading the Bureau of Competition during an active period of antitrust enforcement and a successful time for the agency in court. American consumers owe him a debt of gratitude, and all of us at the Commission are grateful that Dave agreed to stay on to help ensure a smooth transition."

Chairman Leibowitz's comment about Wales' staying on has to do with the fact that he was the Bureau of Competition's Acting Director.

Mr. Wales joined the FTC in April 2006 as Deputy Director of the Bureau of Competition.

As Acting Director of the competition bureau since August 2008, he has supervised nearly 300 lawyers and staff in the merger and non-merger enforcement divisions and led the bureau in bringing more than 20 enforcement actions, according to Chairman Leibowitz.

According to the FTC's public affairs office, David Wales directed several litigated enforcement efforts that blocked proposed corporate mergers in CCS/Newpark Environmental Services, Oldcastle/Pavestone, and CCC/Mitchell.

In CCC/Mitchell, the Bureau obtained the first preliminary injunction order from a district court in nearly seven years.

Wales also led the Bureau in challenging several consummated mergers in court, including Polypore/Microporous and Ovation Pharmaceuticals, both of which are still pending, and he oversaw the continuing litigation and subsequent March 6, 2009 settlement involving Whole Foods/Wild Oats.

He also helped lead the FTC in obtaining important relief for consumers in other merger matters, including Reed Elsevier/ChoicePoint, Fresenius/Daiichi Sanyo, Dow/Rohm & Haas, King Pharmaceuticals/Alpharma, Hexion/Huntsman, Teva/Barr Pharmaceuticals, Herff Jones/American Achievement, Getinge/Datascope, and Lubrizol/Lockhart, according to the FTC's public affiars office.

Additionally, according to the public affairs office, in the anticompetitive conduct area, Mr. Wales oversaw the Bureau’s two lawsuits against pharmaceutical firms that entered into exclusion payment agreements – Cephalon and Solvay Pharmaceuticals.

The departing head of the competition bureau also helped lead the FTC in obtaining critical relief for consumers in other conduct matters in the health care, retail, consumer product, and real estate industries, including Dick’s Sporting Goods, Boulder Valley Independent Practice Association, AllCare IPA, Inverness, ESL Partners/ZAM Holdings, West Penn MLS, National Association of Music Merchants, and Bristol-Myers Squibb, the FTC says.

Further, in the energy sector, Mr. Wales oversaw several regional gas price investigations, as well as the Commission’s rulemaking to prohibit market manipulation in the petroleum industry, according to the FTC Office of Public Affairs.

David Wales' departure in many ways helps turn the page on the FTC v. Whole Foods Market, Inc. legal case and overall issue. As the Assistant Director of the Bureau of Competition in 2007 Mr. Wales played a major role in the FTC's challenging Whole Foods' acquisition of Wild Oats Market's in 2007.

And as the bureau's Acting Director since August 2008, Mr. Wales was in-charge of the FTC's legal challenge against the deal until the settlement agreement was reached on March 6 of this year.

The first page-turner at the FTC was the naming in late February, 2009 by President Obama of then FTC Commissioner Jon Leibowitz as the regulatory agency's new Chairman. Just a couple weeks after Mr. Leibowitz took over as the FTC's new Chairman, the agency reached the March 6 settlement agreement with Whole Foods Market, Inc., as we reported and wrote about in this piece: Daily Memo: It's A Done Deal: Whole Foods Market and the FTC Reach A Settlement Agreement On Wild Oats' Acquisition Antitrust Challenge.

Take our word for it, that timing wasn't accidental. The fact a settlement agreement was reached so soon after Chaiman Leibowitz assumed his position involved more cause than effect in turns of the settlement deal getting done. Chairman Leibowitz is a registered Democrat but was appointed an FTC Commissioner by Republican President George W. Bush. [Suggested reading: Retail Memo - Breaking: FTC Commissioner Jon Leibowitz Odds On Favorite to Be Named Chairman; Positive Development For Whole Foods' Settlement Talks.]

FTC Chairman Leibowitz has yet to announce who will replace David Wales as the competition bureau's chief. However, we expect the Chairman's choice to be a person who is proactive and strong on antitrust actions, as well as consumer protection issues. Mr. Leibowitz has said he plans strong enforecemnet of both antitrust, competition and consumer protection during his tenure at the FTC.

Meanwhile, perhaps the FTC, as a gesture of good will, should have one of the Washington, D.C. Whole Foods Market stores provide the food and drink, paid for by taxpayers of course, for David Wales' retirement party from the regulatory agency.

After all, it at least would be a small gesture in terms of giving Whole Foods Market, Inc. and its shareholders a little cash back towards the about $30 million the natural grocery chain spent defending the company against the taxpayer-financed, wrong-headed, nearly two-year false premise-based antitrust challenge to Whole Foods' acquisition of Wild Oats, which tried as it might in 2006-2007 to find a buyer, but couldn't until Whole Foods Market, Inc. came along.

It's just a thought.

Reader Notes:

>Natural~Specialty Foods Memo (NSFM) predicted that the settlement agreement between WHole Foods Market, Inc. and the FTC would have as its central proposition or condition the divestment and sale of certain stores by Whole Foods. We were correct. You can read an overview piece about it here: Retail Memo: The FTC-Whole Foods Market Settlement Agreement Looks Much Like Our January 'Blueprint-Template For A Settlement Deal' Proposal
>Follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at www.twitter.com/nsfoodsmemo.

>Below is a linked bibliography to Natural~Specialty Foods Memo's (NSFM) coverage and analysis of FTC v. Whole Foods Market and related issues and topics.

FTC v. Whole Foods Market, Inc. Recent Bibliography

Post March 6, 2009 Settlement Agreement:

March 31, 2009: Retail Memo: The 'Legal Times' Offers A Legal Legacy of the FTC-Whole Foods' Settlement Agreement; We Offer an Antitrust Case Blast From the Past

March 19, 2009: Retail Memo: Whole Foods Market Opens New Store in Santa Cruz, California Today ... And There's Plenty of Competition

March 12, 2009: Retail Memo: Whole Foods Market is Selling Brand 'Wild Oats'- We Offer Three Retailers We Suggest Could Benefit From Buying the Brand

March 8, 2009: Retail Memo: The FTC-Whole Foods Market Settlement Agreement Looks Much Like Our January 'Blueprint-Template For A Settlement Deal' Proposal

March 6, 2009: Daily Memo: It's A Done Deal: Whole Foods Market and the FTC Reach A Settlement Agreement On Wild Oats' Acquisition Antitrust Challenge

Pre-Settlement Agreement

March, 2009:

Daily Memo: Countdown to March 6, 2009: >Read our Thursday, March 5, 2009 Daily Memo at the link: [Daily Memo: It's A Done Deal: Whole Foods Market and the FTC Reach A Settlement Agreement On Wild Oats' Acquisition Antitrust Challenge]>Read our Wednesday, March 4, 2009 Daily Memo at the link: [Daily Memo - Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6]>Read our Tuesday, March 3, 2009 Daily Memo at the link: [Daily Memo - Whole Foods Market - FTC - Settlement Deal Watch - Countdown to March 6]>Read our Monday, March 2, 2009 Daily Memo at the link: [Daily Memo - Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6]>Read our Friday, February 27 Daily Memo at the link: [Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6]

February, 2009:

February 24, 2009: Retail Memo - Breaking: FTC Commissioner Jon Leibowitz Odds On Favorite to Be Named Chairman; Positive Development For Whole Foods' Settlement Talks.... February 22, 2009: Retail Memo: The 'Whole Analysis' - Whole Foods Market Inc's First Quarter Financials, FTC v. Whole Foods...The Natural Grocer At Home and Abroad....February 11, 2009: Retail Memo: 'God And Man at Yale' - The FTC-Whole Foods Settlement Talks: Whole Foods CEO John Mackey Speaks Out at Yale University....February 5, 2009: Retail Memo - Breaking: FTC Delays Whole Foods Merger Opposition Case Another 30-Days For Settlement Talks; Progress Towards A Deal Remains Positive....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) Archive Bibliography

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. You can search the archives using the "search" function at the top of the Blog as well.

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: Whole Foods Market Opens New Store in Santa Cruz, California Today ... And There's Plenty of Competition

Pictured above is the famous "Giant Dipper" roller coaster at the Santa Cruz Beach Boardwalk in Santa Cruz, California. Built in 1924 it is one of the oldest roller coasters of its kind in America. With Whole Foods Market opening its first store in Santa Cruz today, we suggest there will be a natural foods retailing competitive roller coaster ride soon hitting the city.

Fresh from reaching its settlement agreement with the U.S. Federal Trade Commission (FTC) on March 6, Whole Foods Market, Inc. today opened a 31,500 square foot natural foods supermarket in the coastal Northern California city of Santa Cruz, home to the famous Santa Cruz Beach Boardwalk, and what's considered one of the most attractive campuses of the University of California, the University of California, Santa Cruz, the campus with the unique mascot -- Sammy the Banana Slug.

The new store is the first for Whole Foods Market in the city of Santa Cruz, which has a very high natural-organic foods shopper demographic. Northern California, which is one of the U.S. regions in which Whole Foods Market has the greatest number of stores, is one of the best market regions for the natural grocery chain in the country.

An interesting aspect of Whole Foods' opening its new natural foods supermarket in Santa Cruz so soon after its March 6 settlement agreement with the FTC regarding the regulatory agency's near 20-month legal battle to overturn the 2007 acquisition by Whole Foods Market, Inc. of Wild Oats Markets, Inc., is that Santa Cruz, a city of about 100,000 residents, is a very competitive natural foods retailing town.

For example, in the natural foods retailing class of trade, locally-based New Leaf Community Markets has long been the leader in Santa Cruz. In fact, New Leaf just opened on March 11 a brand new nearly 18,000 square foot natural foods market on the westside of the city. The New Leaf store is about three miles from the new Whole Foods store, which is located on the city's east side. The new store replaces an older New Leaf market on the westside. There's also a New Leaf store in downtown Santa Cruz. There are six New Leaf units in the region.

Another popular independent natural foods market in Santa Cruz is Staff of Life Natural Foods Market, which has operated in the city for many years and has a loyal following.

There's also a Trader Joe's natural and specialty grocery store in Santa Cruz. With its extensive selection of natural, organic and specialty products, Trader Joe's draws many of the same customers that Whole Foods Market stores do.

Safeway Stores, Inc. has a supermarket in Santa Cruz. The grocery chain, which is based in Northern California's San Francisco Bay Area, is in the process of building one of its brand new "Lifestyle" format supermarkets in the coastal community.

In addition to being filled with conventional food and grocery products, the new Safeway in Santa Cruz will be stocked full with natural, organic and premium food and grocery items, including the chain's popular "O' Organics" organic products brand and its "Eating Right" healthy foods brand. The two Safeway brands combined did about $1 billion in gross sales in Safeway's 1,750 stores in the U.S. and Canada in 2008.

The new Santa Cruz "Lifestyle" format Safeway also will feature a fresh, prepared foods-deli department and in-store special features like a fresh nut bar, which Safeway includes in its new "Lifestyle" stores. The new wave "Lifestyle" format stores often look in many cases very similar in design to a larger, new Whole Foods store.

Sacramento, California-based Raley's (130 stores, $3.5 billion in annual sales) has one of its Nob Hill banner supermarkets in Santa Cruz. Raley's is a major player in natural and organic foods retailing and the Santa Cruz Nob Hill store offers a strong selection of natural and organic products, reflecting Raley's competitiveness in the categories.

Add to this competitive mix Shoppers Corner, a longtime Santa Cruz independent supermarket that offers both conventional groceries and natural, organic and specialty foods. The grocer "stacks product high" and "sells it cheap," often offering natural and organic items for less than all its competitors.

In other words, Santa Cruz is a perfect laboratory to test the FTC's (now historic) antitrust argument that a combined Whole Foods-Wild Oats is monopolistic. As we argued throughout the legal case, in today's natural-organic foods retailing world in the U.S., Whole Foods competes against not only natural foods stores, but also certain supermarket chains (like Safeway) and hybrid format retailers (like Trader Joe's).

Therefore, since Santa Cruz has three high volume and competitive natural foods markets -- the two New Leaf units and Staff of Life -- along with Safeway and Trader Joe's, plus Shoppers Corner, it's our analysis that Whole Foods will have its competition cut out for it in the coastal city. It won't be a cakewalk on the boardwalk for Whole Foods Market in Santa Cruz.

By the same token, Whole Foods will inject a massive dose of competition into the food and grocery retailing business in Santa Cruz. The natural foods supermarket chain is going after the city's consumers aggressively with discount pricing, hot promotional deals, special events and other merchandising and marketing schemes designed to fill the store's aisles.

But the local guys will fight back. That's why the market was right, and why the FTC ultimately gave Whole Foods a sweet settlement deal. The competition abounds and is always changing and growing.

[Suggested reading: Jondi Gumz, a staff writer for the Santa Cruz Sentinel newspaper, has a comprehensive and insightful piece published in the paper today about Whole Foods' opening of its new store in Santa Cruz, and the competitive aspects having the new big league player in town might have on the city's existing retailers. Read the story here. There's also a color slideshow of photogrpahs of the new store at the link.]

Retail Memo: Whole Foods Market is Selling Brand 'Wild Oats'- We Offer Three Retailers We Suggest Could Benefit From Buying the Brand

Whole Foods Market, Inc. - FTC Settlement Agreement: Post-Mortem Analysis

As we reported in this piece [Daily Memo: It's A Done Deal: Whole Foods Market and the FTC Reach A Settlement Agreement On Wild Oats' Acquisition Antitrust Challenge] on March 6, 2009, the settlement agreement reached between Whole Foods Market, Inc. and the U.S. Federal Trade Commission (FTC) over the FTC's antitrust legal challenge to Whole Foods' 2007 acquisition of Wild Oats Markets, Inc. included three elements or terms. Those terms are:

>The selling of 13 (12 former Wild Oats' units, one existing Whole Food's unit) stores currently being operated by Whole Foods Market, Inc.;

>The selling of 19 closed stores; 10 closed by Wild Oats before the acquisition and nine closed by Whole Foods Market, Inc. post-acquisition and;

>The selling by Whole Foods Market, Inc. of the "Wild Oats" brand and all related intellectual property.

As part of the settlement agreement, a third-party receiver is handling the sale of the 32 stores and the "Wild Oats" brand and intellectual property.

It is the third element of the settlement agreement -- the selling of the brand -- that we focus on in this piece today.

It's our analysis that having to sell the brand is something that hurts Whole Foods Market not at all.

In fact, since acquiring Wild Oats Markets, Inc. in 2007, Whole Foods' has done pretty much all buried the brand by design and strategy. Therefore, we see no downside -- nor do we believe Whole Foods Market, Inc. does -- in the natural grocery chain's selling of the "Wild Oats" brand.
If Whole Foods Market gets a decent price for the brand and related intellectual property, it's our analysis and opinion that the retailer probably will view that aspect of the settlement deal as pure blue sky. [We don't think the selling of the stores hurts Whole Foods in anyway either, as we mentioned in our March 6 story. It's all blue sky for Whole Foods.]

Natural~Specialty Foods Memo (NSFM) does see some value in the "Wild Oats" brand -- not particularly to Whole Foods Market, especially at this point in time since the natural grocery chain already made a strategic decision not to use the brand long before the FTC settlement requirement to sell it -- but to a handful of other retailers.

In this vein, we offer an analysis below of three very different retail chains -- natural foods grocery chain Sunflower Farmers Market, mega-retailer Wal-Mart, and online retailer Amazon.com -- that could benefit from buying and using the Wild Oats brand.

Sunflower Farmers Market

The fast-growing Boulder, Colorado-based natural foods chain, which was founded by and is run by Mike Gilliland (CEO), who also founded Wild Oats in 1984 in Boulder, might want to take a look at buying the "Wild Oats" brand from Whole Foods Market, Inc.

This is not just because of the nostalgic fact that Gilliland founded and named the grocery chain Wild Oats, although that aspect has a heart warming aspect to it, but rather because the brand name could offer some merchandising and marketing advantages to Sunflower Farmers Market.

The Texas connection: First, probably because an existing health food store in Texas has the name "Sunflower," Sunflower Farmers Market has chosen to name its stores in the Longhorn state "Newflower." Might it not be interesting if Sunflower Farmers Market buys the "Wild Oats" brand from Whole Foods and then changes the name of those Texas stores to "Wild Oats," using the old Wild Oats logo (which is attractive) and related intellectual and brand properties?

We think doing so could offer benefits to Sunflower in its Texas stores. The "Wild Oats" brand name still has brand equity, in our analysis, particularly among primary natural foods shoppers, and particularly in the Western U.S.

It would also be an ironic development were this to happen since Whole Foods Market is based in Texas. Sunflower just opened its first "Netflower" store in Austin, where Whole Foods' corporate headquarters is located, a couple weeks ago.

Additionally, brand "Wild Oats" might also offer Sunflower Farmers Market some additional options and benefits.

For example, the natural grocer could use "Wild Oats" as a private label brand. Wild Oats Markets, Inc. had a full line of natural and organic products under the brand, even selling the brand and line at Kroger stores throughout the U.S. for a few years, in addition to in the Wild Oats Market stores.

Whole Foods Market, Inc. has now sold off most of the "Wild Oats" brand items, replacing them in the converted former Wild Oats Market banner stores with Whole Foods Market store brands. But the recipes, graphic design for the labels and all of the other intellectual and material property still exists for the brand's product line. All Sunflower, or any other grocer, need do if they acquire the brand is to decide what products they want to put under it and hire vendors to produce the products.

Perhaps brand "Wild Oats" would make a good premium natural products brand for Sunflower Farmers Market, featuring either just organic or both natural and organic items, for example.

Further, owning the brand would allow Sunflower Farmers Market and Gilliland to use it on any stores it desired at any time. For example, Perhaps as the chain grows it creates a second retail format, branding it "Wild Oats." We could see a higher-end format from Sunflower (after the recession), for example, that used the Wild Oats retail brand on it. This would fit with the positioning of the brand on products being of a more premium natural and/or organic nature, under that scenario.

Lastly, imagine the marketing-oriented public relations attention buying the "Wild Oats" brand would have for Sunflower Farmers Market and Mike Gilliland.

We can see the headlines now: (1) "Wild Oats' brand returns to founder." (2) Mike Gilliland sows his 'Wild Oats': plans Texas stores under the Wild Oats Market banner." (3) It's 'Back to the Future' for Sunflower Farmers Market founder and CEO Mike Gilliland, as he prepares to launch a new line of private label natural and organic products in the Sunflower stores under the 'Wild Oats' label."

This could be publicity no amount of money can buy, particularly timed with the launch of the rebranded "Newflower" stores under the Wild Oats' retail banner in Texas, or the launch of a new proprietary natural product line under the "Wild Oats" brand for Sunflower. Just some food for thought.

And, since the settlement with the FTC requires a third-party receiver to sell brand "Wild Oats," Whole Foods Market, Inc. can't veto a sale of the brand and its assets to Gilliland and Sunflower Farmers Market (or to any other competitor), should the natural grocer decide to acquire it.

Wal-Mart Stores, Inc.

We go from small but fast-sprouting Sunflower Farmers Market to global giant Wal-Mart in this journey.

We think buying the "Wild Oats" brand from Whole Foods has some merit for Wal-Mart. For example, Wal-Mart brands its fast-growing line of natural and organic products under the "Sam's Choice" brand. While it's nice that this brand honors Wal-Mart founder Sam Walton, it really has very little resonance in consumers' minds when it comes to natural or organic food. In fact, since Sam Walton was a very frugal man, we doubt he would have spent the extra money that natural and organic food and grocery items cost anyway.

Wal-Mart could use brand "Wild Oats" for private label brand natural-organic products in a few ways.

First, it could brand all of its natural and organic products under the brand, including changing existing "Sam's" items to brand "Wild Oats."

Second, it could create a two-tier brand system. "Sam's" would be used for lower price-point natural and organic items, "Wild Oats" for higher-end, premium natural-organic items.

Lastly, Wal-Mart could use the "Wild Oats" brand name strictly for organic food and grocery items, then use "Sam's" or something else for "natural" only.

We think Wal-Mart needs a better brand for natural-organic using one of the above three product scenarios

Wild Oats' is a good brand name, still has equity, and is for sale. Therefore, although we know this is way down on the list of Wal-Mart Stores, Inc.'s priorities list, we think acquiring the brand from Whole Foods Market would offers a nice opportunity in the natural-organic products categories for Wal-Mart, which continues to move deeper into the categories, and will move much faster once again in the natural-organic private label and retailing spaces once the recession ends.

Wal-Mart also now operates four (soon to be five when it opens a new store in Peoria, Arizona later this year) of its small-format Marketside grocery and fresh foods stores. (Wal-Mart also has two Marketside stores under construction in San Diego County, California, with three more planned in California.) The 15,000 -to- 20,000 square foot markets feature a limited assortment of basic food and grocery items, including natural, organic and specialty items, fresh meats and produce, perishables and in-store prepared foods.

The Marketside stores are more upscale than any of Wal-Mart's other formats. A selection of natural and organic items in the stores under the "Wild Oats" brand could be a nice addition to the natural and organic item selection-segment in those stores for Wal-Mart.

Amazon.com

In 2007 the online retailer Amazon.com started selling shelf-stable food, grocery, household item, health and body care and related packaged goods. Today the online mega-store's inventory in these respective categories is vast and extensive, including offering lots of natural, organic and specialty food and grocery items for sale.

Shoppers order the food and groceries online just as they do everything else that Amazon merchandises. The orders are then delivered to shoppers' homes via Federal Express, UPS or other basic delivery service.

In a little over two years, Amazon has gone from merely experimenting with selling food and groceries to actually selling a considerable volume of product, including a decent amount of natural and organic food and grocery products.

We think Amazon should take the logical next step in its progression as an online grocer and start offering its own brand products. Since the web retailer doesn't have the volume needed to really yet have a store brand everyday or discount grocery brand, we suggest a good place to start would be with a natural and organic products store brand.

Therefore, why not brand "Wild Oats"? The brand still has consumer awareness and equity. Everything is there to rapidly start producing whatever products are desired; all that's needed are vendors. And, the brand is for sale.

Amazon could create its own natural and organic food and grocery proprietary brand under the "Wild Oats" brand. It could start small, say with about 45-75 items in a half dozen -to- a dozen categories to start. We would suggest all the products be consumables and health and body care to start. Then it could go from there with the brand.

Amazon also could extend the brand "Wild Oats" across the numerous categories it sells products from. For example, how about "Wild Oats'" proprietary brand organic cotton clothing? What about body care, vitamins, supplements? How about a line of "green" cleaning products under the brand."

In other words, brand "Wild Oats" could allow Amazon to have a proprietary brand that it could use to create it's own "brand" in the numerous categories -- from food and drink to clothing and health and body care -- that avail themselves of a natural-organic products focus.

Amazon is without a doubt big enough to do this. We think it would be a very positive development for the online mega-retailer. It also, in our analysis, would help build better product brand equity for the online retailer.

Amazon.com is a major player in natural products retailing across numerous categories. The Wild Oats brand could allow it to become a much bigger category player in many mainstream and niche natural and organic products segments, from consumables to clothing, and much more.

Conclusion: Brand 'Wild Oats' - will any retailers bite?

There are other retailers besides the three we offer that could benefit from acquiring the brand from Whole Foods Market, Inc. Most interesting to us will be if a competitor -- like Sunflower Farmers Market, Sprouts Farmers Market or Natural Grocers by Vitamin Cottage -- buys brand "Wild Oats" with the design of using it as the name for a chain of stores.

Or, if another format retailer, say Target or Wal-Mart, were to buy it with the idea of someday using "Wild Oats" for a chain of natural foods markets. We doubt this scenario -- but that doesn't make it any less interesting.

It's our analysis that the FTC hopes something like the first scenario above happens -- that some competitor of Whole Foods Market buys the brand and uses it to compete against Whole Foods.' That's the key reason the FTC required there be a third party receiver appointed to handle the sale of the brand and the store sales: It wanted to make sure that Whole Foods Market, Inc. couldn't veto the sale of brand "Wild Oats" or the sale of any of the stores on the block to a competitor.

It will be interesting to see if any retailers bite and make an offer to buy the brand. Readers: Which retailers do you think could benefit from buying brand "Wild Oats" from Whole Foods Market, Inc? Offer your idea(s) and opinion(s) by using the "comments" link below. Just click and type.

[Related posts: March 8, 2009: Retail Memo: The FTC-Whole Foods Market Settlement Agreement Looks Much Like Our January 'Blueprint-Template For A Settlement Deal' Proposal ... March 6, 2008: Retail Memo: The 'Whole Bibliography' - FTC v. Whole Foods Market Antitrust Case & Issue ... March 6, 2008: Daily Memo: It's A Done Deal: Whole Foods Market and the FTC Reach A Settlement Agreement On Wild Oats' Acquisition Antitrust Challenge ... March 5, 2008: Daily Memo: Whole Foods Market - FTC - Settlement Deal Watch - Countdown to March 6]

[You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at: www.twitter.com/nsfoodsmemo.]

Retail Memo: The FTC-Whole Foods Market Settlement Agreement Looks Much Like Our January 'Blueprint-Template For A Settlement Deal' Proposal

The FTC - Whole Foods Market, Inc. Settlement Agreement

The four members (their normally are five but the FTC is currently one short) of the U.S. Federal Trade Commission (FTC) voted unanimously on the settlement deal with Whole Foods Market, Inc., announced on Friday, March 6, ending the nearly 20-month legal battle waged by the FTC to overturn the 2007 friendly acquisition by Whole Foods Market of Wild Oats Markets, Inc. [Read the details of the settlement agreement in our March 6 piece here: Daily Memo: It's A Done Deal: Whole Foods Market and the FTC Reach A Settlement Agreement On Wild Oats' Acquisition Antitrust Challenge.]

Additionally, the 4 -to- 0 unanimous vote in favor of a settlement by the FTC's Commissioners came just eight days after President Obama named the only Democrat on the FTC, Jon Leibowitz, as its new Chairman, and just a few days after Chairman Leibowitz officially assumed the duties of FTC Commission Chairman.

[Read: Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6, And: Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 9 Days to March 6. And: Retail Memo - Breaking: FTC Commissioner Jon Leibowitz Odds On Favorite to Be Named Chairman; Positive Development For Whole Foods' Settlement Talks.]

Below is a link to the press release issued by the FTC on Friday, March 6, announcing the settlement deal ending its antitrust legal challenge to Whole Foods Market's 2007 acquisition of Wild Oats:

[Link: FTC Consent Order Settles Charges that Whole Foods’ Acquisition of Rival Wild Oats was Anticompetitive.]

Below is the key quote from FTC Commissioner Jon Leibowitz in the March 6 press release regarding why the federal regulatory agency responsible for antitrust enforcement and consumer protection decided to reach and agree to a settlement with Whole Foods Market, Inc., despite for 20 months saying it's goal was to overturn the acquisition in order to preserve competition in what it called the "premium natural and organic retailing segment (PNOS) in a number of U.S. markets:

"As a result of this settlement, American consumers will see more choices and lower prices for organic foods,” said FTC Chairman Jon Leibowitz. “It allows the FTC to shift resources to other important matters and Whole Foods to move on with its business."

Although we've previously suggested the two parties should reach a settlement agreement in numerous pieces beginning some time ago, Natural~Specialty Foods Memo (NSFM) formally called for the FTC and Whole Foods Market, Inc. to reach a settlement on the legal case in this January 29, 2009 piece, where we focused the argument on the need for a settlement to be reached: Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement.

In that call for a settlement, we said achieving a settlement is important in part so that the FTC can move on to more important matters, including finding real antitrust cases to challenge, and so that Whole Foods Market can get back to what it does: merchandising and selling natural and organic food and grocery products.

In other words, FTC Chairman Leibowitz basically says in the March 6 press release what we said in our January call for a settlement, as well as in a number of stories prior to that.

In our January 29 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], we also offered a settlement blueprint or template for the FTC and Whole Foods. The basis of the settlement blueprint comes from the reporting, writing about and analysis we've been offering on the deal and antitrust challenge since the summer of 2007.

Below is a part of what we offered in the January piece:

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." [Read the entire story here.]

What we suggested is essentially the framework the FTC used in arriving at the settlement deal.

The FTC required (and the natural grocer agreed) Whole Foods Market, Inc. to put up for sale 32 stores -- 13 stores (12 former Wild Oats units and one existing Whole Foods unit) currently in operation and 19 stores that already have been closed, some by Wild Oats before the Whole Foods Market acquisition, the others closed by Whole Foods post-acquisition. [Read the details, including a list of the stores to be sold, here.]

Additionally, the FTC required Whole Foods to put the Wild Oats brand and associated intellectual property up for sale. This is really nothing to Whole Foods since if it thought the Wild Oats brand had value to the company it would be using it in some way. Instead, Whole Foods has intentionally shelved the Wild Oats brand. Now perhaps it can even make a few bucks from selling it.

[Of course, in the dynamic and interesting world of food retailing anything can happen. Perhaps Mike Gilliland, the founder of Wild Oats and now founder and CEO of fast-growing Boulder, Colorado-based Sunflower Farmers Market, will buy the brand from Whole Foods and bring back the Wild Oats name in the form of a chain of natural foods stores bearing the banner. For example, Sunflower is opening stores in Whole Foods' hometown market of Texas. However, because of what likely is a trademark issue with a natural foods store in Texas that uses the "Sunflower" name, the natural grocer has renamed its thus far handful of Texas' stores "Newflower." Wouldn't it just be ironic if Gilliland bought the Wild Oats brand from Whole Foods Market, Inc. and instead changed the name of the Texas stores to "Wild Oats"? It's intellectual property and retail brand marketing food for thought. And you read it here first.]

So, in a nutshell, the FTC seems to have used a very similar process to the one offered in our blueprint-template to arrive at a settlement deal; the key element of such a settlement agreement being, as we suggested, having Whole Foods agree to sell some selected stores in return for the antitrust regulator dropping its legal action, so that both parties could move on to doing what they should respectively be doing, antitrust enforcement and consumer protection for the FTC, and selling natural-organic groceries for Whole Foods Market.

We think the settlement is a good one for Whole Foods.

Reader Resource: Below are links to all of the FTC-filed information on the settlement deal with Whole Foods Market, Inc.:

>Agreement Containing Consent Orders
>Decision and Order [Public Record Version]
>Order To Maintain Assets
>Analysis of Agreement Containing Consent Orders To Aid Public Comment
>Commission Letter Approving the Divestiture Trustee Agreement
>Divestiture Trustee Agreement [Public Record Version] [Appendices B, D, and E Redacted]
>Amended Part 3 Administrative Complaint [Issued on September 8, 2008]
>News Release
>Order Withdrawing Matter From Adjudication