Whole Foods: A Company That Forgot Its Purpose

How can you be the biggest company in a rapidly growing market segment and still see your profits and stock price plunge? Its easy to do if you forget your organization’s purpose.

Whole Foods, a natural foods supermarket chain, has recently seen both its profits and its stock price plunge. Since their business segment is growing rapidly, many are at a loss to explain what exactly is going on.

I am a long-time Whole Foods shopper and I believe their decline is likely to continue. For many years my family spent around $200 a week at Whole Foods. We now shop at the store only occasionally.

Have we abandoned natural and organic foods? Hardly! Whole Foods has simply lost our business. We still buy as many natural and organic foods, but other retailers such as our local natural food store, Trader Joe’s and Wegman’s have now earned our business.

At the heart as any success of any business is their ability to serve the consumer. The great economist Ludwig Von Mises observed: “The profit system makes those men prosper who have succeeded in filling the wants of the people in the best possible and cheapest way. Wealth can be acquired only by serving the consumers.”

At the core of an organization’s ability to serve the consumer is their understanding of what their purpose is and their ability to adhere to their purpose. To the extent that an organization understands its purpose and adheres to it, the organization builds trust with the consumer. As trust grows profits grow, as trust declines profits must decline. Although many companies forget it, there is no secret to that relationship.

A good example of an organization that remembers its purpose and builds trust is Southwest Airlines. Southwest has a guiding purpose to provide travelers low fares and excellent service. All of their decisions are based around that purpose. Southwest has met their purpose very well and they have been rewarded by consumers.

Whole Foods claims as part of its mission that: “We sell the highest quality natural and organic products available, and that we satisfy and delight our customers”. This was indeed once true of Whole Foods, but in the experience of my family it is no longer.

One example will suffice. For years, we consumed Whole Foods premium Icelandic salmon. Years ago we were stunned to find out that Whole Foods, like any other supermarket chain, was feeding their farm-raised salmon artificial colors.

I contacted Whole Foods several times and asked them to consider labeling their fish as containing artificial colors. They initially refused. It was not until Safeway began to label their salmon that Whole Foods began to label correctly their product.

That was the first betrayal of trust that my family experienced from Whole Foods. Sadly, it was not the last. As the years went on, we caught Whole Foods in more and more questionable practices. These practices further eroded our trust.

Each time we brought these practices to their attention. Each time our concerns were dismissed.

Why is Whole Foods stock price being hammered? The answer is simple. They are no longer fulfilling their guiding purpose. They no longer sell the “highest quality” products, and they no longer “satisfy and delight” their customers.

I take no pleasure in writing these words. Whole Foods had served my family well for many years. I hope they can find their way again.

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4 Responses to Whole Foods: A Company That Forgot Its Purpose

  1. coleen thornton says:

    I’d be interested to know what other questionable practices occur, especially within their own “organic” or natural brands. I shop there often.

  2. Barry Brownstein says:

    Coleen,

    Here is one in particular: Horizon Dairy products are prominently featured at Whole Foods. Horizon is owned by Dean Foods. “On Feb. 17, 2005 the Cornucopia Institute (http://www.cornucopia.org) filed two complaints with the USDA alleging factory farm style conditions on Horizon’s organic operations.” See http://www.familyfarmdefenders.org/pmwiki.php/Main/KnowYourDairyGiants-DeanFoods When I contacted Whole Foods about the issue I was rebuffed.

  3. George Doctoroe says:

    Barry, I think you are way over reacting to Whole Foods recent shifts. The company is growing extremely rapidly. Of course they are going to have a few problems along the way. Our family still feels they are by far the best healthy food alternative and we shop there more than ever now, even with a new Trader Joes in the area.

  4. Barry Brownstein says:

    George,

    I wish Whole Foods the best. The more competition in this market segment, the better for consumers.

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