Whole Foods Fattens Up in Grocery Retail

Co-CEO John Mackey on making management by consensus work
Photograph by Aaron Dyer for Bloomberg Businessweek

38. Whole Foods
Market Cap: $17b
Revenue: $11.7b
EPS: $2.52
Whole Foods Market ascended to No. 38 on this year’s Bloomberg Businessweek 50 ranking of best-performing U.S. companies. The chain of natural food supermarkets was No. 75 last year. Bloomberg News reporter Leslie Patton discussed future expansion plans with co-CEO John Mackey. The company’s co-founder also explained why he once said he’d prefer to leave his creation in the hands of a millennial, rather than a Gen Xer.

Whole Foods has said it plans to expand to 1,000 stores. How much of that is going to be Whole Foods opening stores vs. acquisitions?
We made an announcement in October to acquire six Johnnie’s Foodmaster locations in Boston. There will be more like that, but I can’t tell you what that will be because they’re all opportunistic. We’re changing the name, but we kept a lot of their employees. When we acquired Wild Oats [in 2007], we changed the name and kept most of the employees.

What do you think of Trader Joe’s?
We consider them our main competitor. We match all Trader Joe’s prices so they’re not underselling us. [Whole Foods' private-label brand] 365 is geared to match Trader Joe’s prices.

What are your plans for international expansion?
We’re in Canada and the U.K. and we don’t have any other plans at this time. We have two stores in development in the U.K.—they’re both in the greater London area.

How are your U.K. stores doing compared with those in the U.S.?
Some are doing very well and some are not doing as well. Our brand isn’t as well known and we don’t have the same economies of scale as we do over here so it’s harder to be as price competitive. As we grow, our supply chain will get better, our prices will get better.

Whole Foods always takes the long-term view of things. We opened our first store in Canada back in 2002 and we really struggled. Now we’re hoping to do $1 billion in Canada in another decade or so. Canada is a great market for us. You’ve got to be patient because it takes a while to build. Whole Foods wins people over time—with good service, high quality. Gradually, their baskets start to fill up and they start to buy more stuff as they have more experiences with us.

How would you describe how you and fellow co-CEO Walter Robb divide duties at the company?
I’m a great believer in the team approach. Walter and I might be called co-CEOs, but in truth there are seven top executives at Whole Foods Market on our executive team. They all get paid the same money, the same bonuses, the same stock option grants, and we function as a team. In a sense, we have seven CEOs. We make decisions by consensus and it’s really the office of the CEO. Walter and I are more in the public eye because we have the title and we’re the best of the public speakers in that group, but that doesn’t necessarily mean that the other five aren’t equally valuable. It’s really hard for the outside world to understand what Whole Foods does because it just doesn’t fit into any of their categories. The way we manage our company at the top is very different.

You agreed to receive a $1 salary starting in 2007. Why?
I’ve just waived it all. Most of it is donated to our foundations. I’m a person whose philosophy is to follow your heart and that’s what my heart guided me to do. That was the right thing for me to do.

Have you done succession planning yet? Who will lead the company after you and Walter are gone?
If I get run over by a truck, Walter will probably be the only CEO for a while. We’ve got seven people who are all capable of being the CEO. I’m not planning on leaving anytime soon. It could be that Walter leaves before me, you never know. We’re the same age.

You said you want to be able to leave the company to someone of the millennial generation. What do you mean and why?
It partly is a joke. It just means that I’ve got more confidence in the millennial generation than I do in the X generation. Not that I don’t think that the Xers are incredibly competent; they just tend to be less idealistic and more cynical. So I really want that idealism of the millennials because Whole Foods is such an idealistic company. I don’t think it’s probably realistic that I’ll live long enough to pass the baton to a millennial. Or I’ll live long enough, but I doubt I’ll still be CEO long enough to pass it to a millennial. So I’m sure there’ll be some Xers that get to wear the crown.

    Before it's here, it's on the Bloomberg Terminal.