« Home | How to Fix FireFox - FireFox 2.0 Doesn't Start Aft... » | Create a Yahoo! SNOW Holiday Greeting Card » | We Called It - eBay and Tom Online Rumor Turns Out... » | Samsung Optical Joystick Phone » | Google Finance Still Full of Bugs - Reports Focus ... » | GoDaddy Starts .COM Domain Name Price War with $5.... » | Orange to Build Google Phone » | Entrepreneur Shifted Business from Crisco to Compu... » | Fired by a Capitalist - McScrooge Cans Judith Rega... » | China's Ultra Rich Splurge on Rollys-Royce and May... »

December 20, 2006

Whole Foods: Bringing Venture Capital to Your Local Organic Family Owned Farms

posted by MR WAVETHEORY at 12/20/2006 10:15:00 PM
I've been a long time fan of Whole Foods Market, Inc. (Nasdaq WFMI), the largest distributor of organic food products in America. What I like best about the company is that it provides organic products that are certified organic, meaning the fruits and vegetables they sell are grown under stricter guidelines than your average farmer's market. Of course, it comes at a price and Whole Foods is facing an identity crisis.

Many of the entrepreneurial farmers who initially worked with Whole Foods were small family owned farms, plowed by your local farmer. They were startups - sans venture capital. The original organic farmers were hippies from Santa Cruz and dropouts from Berkeley who wanted to go back to the land, kind of like your average disillioned tech geek today who dreams of launching a multibillion social networking company. Many of them moved to the Salinas Valley to drop acid while others moved to plow the land. However, over the last 30 years, organic has gone from hippie to yuppie to mainstream. I've always liked organics, but companies like Whole Foods now face a big challenge: How to convince its customers that its not selling out of its original roots as a single store in AustinNew Orleans (thanks for flaglerwrangler's reader comment) featuring wholesome food that works with entrepreneurial growers to bring great unique foods to your kitchen table.

Whole Foods faces several crises in its brand identity:

  • As the company has grown, Whole Foods has made 15 acquisitions and has had to tap into larger "industrial farms." It's grown at an extraordinary pace and faces a huge hurdle because Wall Street analysts value it at a huge premium to the average supermarket. I won't go into details, because you can look the details up, but the valuation of Whole Foods builds in some huge grow assumptions. Whole Foods has a target of 300 stores and $12 billion in sales by 2010, up from $4.5 billion last year. It's no longer a startup.
  • Another issue facing Whole Foods is how it will convince consumers that it's not just another Safeway - I recently strolled through Costco (Nasdaq COST) and I could find about 50% of the items I buy at Whole Foods for 33-50% less, things like dried dates, Silk Organic Soy Milk, Organic Honey Farm Yogurt, and Tangerines. The produce and vegetables are sourced from large organic farms like Grimmway Farms and Cal-Organic. That is killing the smaller farmers who can't compete on price. It's becoming mainstream.

I took a look at Whole Foods site to better understand its business it looks like they are aware of this identity crisis and are doing several things to differentiate itself. What struck me was how much of that strategy draws upon the venture capital model. CEO John Mackey wrote about this crisis in his blog where he talks about "Conscious Capitalism: Creating a New Paradigm for Business" John wants to make Whole Foods more conscious of its responsibilities and he plans to do what a VC would do:

-- Give $10 million a year in low-interest loans to help small, local farmers and producers of grass-fed and humanely raised meat, poultry and dairy animals.

-- Raise its standards of humane care for the animals who supply meat, eggs and dairy to the stores. Whole Foods has hired an "animal compassionate field buyer" to work with producers to ensure that they meet the standards.

-- Set up Sunday farmers' markets in the parking lots of some Whole Foods stores, including about 10 in Northern California.

I hope Whole Foods is able to build a bigger business and continue to bring down prices - I love cheap food and I love the variety that Whole Foods brings to my table. I also hope they will continue to continue promoting entrepreneurial farming activity. We could use more innovation in the grocery industry.

Previous Posts


Blogger flaglerwrangler said...

Original store was in Austin. New Orleans was an acquisition

8:19 AM  
Blogger MR WAVETHEORY said...

Thanks for the tip. I learn something about Whole Foods every day! Love the concept!

4:40 PM  
Blogger Fangyaya said...

true religion
louboutin pas cher
cheap jordan shoes
michael kors canada outlet
michael kors
nike roshe flyknit
rolex submariner
adidas yeezy
nike air max 90
coach outlet
rolex watches
polo ralph shirts
nike outlet
coach factory outlet
coach factory outlet
ray ban outlet
christian louboutin sale
ray bans
nike blazers
jordan retro
rolex watches
polo ralph lauren
coach outlet store online
tory burch handbags
lebron james shoes
basketball shoes
michael kors outlet
oakley sunglasses
michael kors handbags
replica watches
louis vuitton outlet
hollister clothing store
louis vuitton outlet
louis vuitton outlet
michael kors handbags
louis vuitton outlet stores
fake watches
ed hardy clothing
michael kors handbags
ray ban sunglasses outlet

1:09 AM  
Blogger dada24 Xu said...

true religion outlet store
true religion jeans
james shoes
louboutin shoes
adidas yeezy boost 350
longchamp handbags
adidas superstar
coach outlet online
ugg boots
michael kors outlet clearance

5:11 PM  

Post a Comment

Links to this post:

Create a Link

<< Home