ChewsWise Blog

ChewsWise Blog

Whole Foods Isn't a Supermarket?

By Samuel Fromartz

A supermarket is a supermarket except when it's not, the Federal Trade Commission said this week.

The commission threw down the gauntlet and opposed the combination of Whole Foods and Wild Oats, because their merger would create a monopoly in that protected enclave, the natural foods business. This would lead to higher natural and organic food prices and store quality would go down. Whole Foods already gets slammed for its prices. Now they would move higher? And the stores are going to look like crap? This is a recipe for business success?

I find this view, at the very least, myopic and want to send the staff copies of my book. (Anybody willing to put up the chump change for this action?) Considering that every other supermarket chain has launched a surprising array of organic food products and that leading products, such as organic bagged lettuce, are sold in three out of every four grocery stores in the nation, the idea of a separate natural foods business is something of a fantasy. According to the Times:

Neil Currie, an analyst at UBS Investment Research, said in a note to investors that the F.T.C.’s actions were “somewhat at odds” with the recent blurring of lines between stores like Whole Foods and Trader Joe’s and more conventional chains like Publix and Wegmans. He said that 74 percent of natural and organic foods were now sold through mass-market channels like conventional supermarkets.

Yesterday, Natural Food Merchandiser came out with its survey which pegged the retail natural foods business at $46 billion. The share held by conventional grocery stores: 50 percent, or $23 billion. Whole Foods does not have the remaining 50 percent. In fact, its sales last year were $6 billion. Wild Oats annual sales were a little over $1 billion, which gives them a combined 15 percent of natural food sales.

Whole Foods also decided to pursue this merger with a very old nemesis once it became clear that  competition was arising from new entrants, such as traditional grocery stores. Even Wal-Mart, the biggest supermarket in the nation, whose sales are bigger than the next-six biggest chains, is selling organic food. In other words, this merger was a defensive strategy by Whole Foods to protect against new competitors, not to get a lock on the market. That's impossible, now that natural and organic foods have gone mainstream.

Maybe if Whole Foods sold Coca-Cola, or other products with a lot of high-fructose corn syrup and artificial flavors and colors, the merger would go through. After all, then it would be just be another supermarket. But it doesn't, so it's not.

Advice to Whole Foods CEO John Mackey: Call Bill Gates and get the number for his lawyer. Microsoft's a true monopoly and through many legal actions they are still doing just fine.