ChewsWise Blog

ChewsWise Blog

Naturally, Whole Foods Wins

I'm surfacing from my self-imposed Internet vow-of-silence to take note that a judge has ruled in Whole Foods favor (WSJ $) and allowed its acquisition of Wild Oats to proceed. On its face, this supports the position that I've articulated before -- that Whole Foods does indeed face competition from others besides Wild Oats and that the merger does little to alter that reality.

The organic, natural food, and grocery market is fast-changing and to think anyone has a hammer lock on consumer choice when it comes to this food is myopic. The competitive advantage presented by Whole Foods and Wild Oats stores does not mean shoppers have no other choices. Indeed, I wonder how others will now respond to this merger, if it goes ahead. I doubt they will sit still or give up on organics.

I would also note that the FTC, in an improperly redacted court filing, actually presented evidence of that broader competitive market. It argued that Whole Foods was muscling organic suppliers to keep them from selling directly to Wal-Mart -- instead forcing Wal-Mart to buy through distributors. That way, Wal-Mart would not be able to pursue its favored tactic of demanding lower prices from suppliers and passing on those savings to customers.

The FTC was arguing that Whole Foods was stamping out a competitor -- an especially ironic argument considering how Wal-Mart's entry into grocery sales has vastly reduced consumer choice by driving other supermarket companies out of business. Also, regardless of what you think of these strong-arm tactics (if one can actually strong-arm Wal-Mart), this suggests that Whole Foods was worried about competition from the retail giant. So then Wal-Mart is the competition?

Every company wants an edge, a distinctive way to stand out to consumers, but that alone does not make for a unique market or wipe out competition from other vastly different-looking companies selling the same  things. Whole Foods understands that, which is why it is consistently paranoid about losing customers to the competition, whatever their size or shape. Apparently, that point was lost on the FTC, which seemed to take John Mackey's chest-thumping at face value. It was not, however, lost on the judge.

Finally the ruling was sealed but if anyone wants to leak it, I'd be interested in reading it and commenting further...