Born Green

Behind the Whole Foods empire is a Texan tale of gastronomic gumption.

By Sam Gwynne

Published on May 26, 2009

Anyone who met John Mackey, the CEO of the $8 billion retail empire called Whole Foods Market, in 1978 would probably not have considered him a dynamo. Like a lot of young people in the laid-back city of Austin, the 25-year-old Houston native was in search of himself, God, and some vague sense of what he was supposed to do with his life. He had dropped in and out of college six times. Together with his 21-year-old girlfriend, Renee Lawson, he ran a little natural foods store called Safer Way. It was the sort of quirky granola den you may remember from the era: 3,000 square feet of brown rice, beans, nuts, unbleached flour, raw milk, and organic produce, all of it crammed into the first floor of a bright red, three-story Victorian house. The couple operated a small restaurant on the second floor and lived upstairs from it; because there was no shower in the apartment they sometimes drove the company car—an old, powder blue mail truck with pictures of dancing vegetables painted on its sides—across the river so that they could bathe in the waters of the city's Barton Springs.

The first Whole Foods store was only two years away, but in 1978 Mackey and Lawson were just scraping by, which was remarkably easy to do in Austin at the time. The city was a haven for the young, the freethinking, and the oddball. Its vibe was set by University of Texas students and, in no small measure, ex-students, who stuck around in droves, attracted by a liberal political culture, a low cost of living, and a dynamic music scene, which in the early 1970s witnessed the birth of "outlaw country", with musicians like Willie Nelson and Jerry Jeff Walker playing to combined crowds of rednecks and longhairs. "It was incredibly easy to live here," says Andy Cotton, an Austinite and cofounder of the Thundercloud Subs chain, now an institution in the city, in 1975. "Housing was cheap, pot was cheap, gas was cheap; there was lots of music and lots of good-looking girls." It's hardly surprising that, among Texans generally, Austin earned the epithet "ninety square miles surrounded by reality".

The city was also home to a robust natural foods subculture; people were joining small food co-ops, making unpasteurized yogurt in their bathtubs, and eschewing all processed, industrial food. That was the scene that intrigued Mackey, a part-time religion and philosophy student, when he moved to Austin in 1973. "I ended up living in this vegetarian housing co-op called Prana House," he recalled when I sat down with him recently in his office at the Whole Foods global headquarters, in downtown Austin. He was sporting a polo shirt, shorts, and running shoes and had long since shorn the shaggy hair he wore during the 1970s. "It wasn't because I was particularly interested in co-ops," he says. "I just thought it would be interesting. I thought I would meet some interesting women. I did, but I also got exposed to a bunch of vegetarians who had food consciousness." At Prana House—where he met Lawson, also a resident—Mackey learned to cook, familiarized himself with the works of writers influential within the natural foods movement like Rudolf Steiner, Adelle Davis, and Orville Schell, and eventually became the co-op's food buyer.

Mackey's next step on the road to "conscious capitalism" (as he would later describe his business model) was to get a job at a natural foods store, one of several that had recently popped up in Austin. By the time he and Lawson started Safer Way, in 1978, the city had 15 similar stores, most of them scrappy, shoestring operations. One of them, Clarksville Natural Grocery, belonged to Mackey's friends Craig Weller and Mark Skiles. "Back in those days a natural foods store was expected to be a tiny little place run by counterculture fringe-type people," says Skiles. "We all went about it ass-backwards, including John, but that's just the way it was. Anything that looked too organized smacked of, well, being organized."

But Safer Way needed some organization. The store was slowly bleeding to death. After barely a year they had already burned through half of its $45,000 of start-up capital; then a hepatitis scare related to a juice the store carried (made by a supplier) led to a 20 percent drop in sales. If the end wasn't yet in sight, well, it probably would not be long in coming.

Mackey had a hunch that Safer Way and all the other fledgling health food stores in town were going about things the wrong way. In 1979, he made pilgrimages to a number of big-city natural foods supermarkets. He visited Bread & Circus in Boston, Mrs. Gooch's in Los Angeles, and Frazier Farms in San Diego, among others. He returned to Austin with a new vision. "I'm a competitive guy, and I realized that with Safer Way I was not in a good competitive situation," Mackey says. "After I visited those stores, I was on fire. I realized, We've got to do a big store." He persuaded Weller and Skiles to join him—in effect merging Clarksville Natural Grocery and Safer Way—and scraped together start-up funds from friends and family. In September 1980, Mackey and his partners launched Whole Foods in a former nightclub just a few blocks from their old stores.

The venture represented an enormous risk. By the standards of most health food stores, the first Whole Foods was gargantuan: 10,500 square feet. Weller and Skiles had been paying $600 a month in rent at Clarksville; they were now looking at a figure five times that. The Whole Foods inventory was similarly massive, of a size unheard of for a natural foods market. Perhaps the riskiest bet—at least in the eyes of health food purists—was the merchandise itself: the new store sold coffee and soon added beer, wine, and meat to its offerings.

"We made the decision to do a real grocery store," Mackey says. "We didn't want to be 'Holy Foods'." Instead of the shopworn, ideologically rigid ambience of a mom-and-pop natural foods store, Whole Foods had well-lighted aisles and modern checkout stations. Mackey and the others had no idea whether this new model would fly. "We were scared shitless, basically," says Skiles. "The extent of our market research was 'Gosh, I think it will work'." Mackey, for his part, had figured that the break-even was about $3,000 a day.

The store hit that break-even mark by three in the afternoon on the day it opened. Within months, the business was grossing $200,000 a week; virtually overnight, it became the highest-volume natural foods market in the country. And by the end of the first year, the store, which had started with a mere 16 employees and not enough inventory to stock its shelves (the owners cheated by filling empty spaces with five-gallon water jugs and extra-large bags of chips), had a staff of more than a hundred.

What's more remarkable, perhaps, is that Mackey and his partners accomplished all this without offering any of the expensive "gourmet" foods—goat cheeses, handmade pastas, balsamic vinegars, and so on—for which the chain is now famous. Mackey himself was "more of a guy who would go on a ten-day juice fast or an all-brown rice diet", he says. That move toward gourmet products did not start in earnest until Whole Foods acquired the more epicurean Wellspring Grocery (with two stores in Durham and Chapel Hill, North Carolina), in 1991; for its first decade, it remained fundamentally a health food store. "Coffee was a good example of that," Mackey adds. "We were just buying coffee that was cheap, bulk coffee, whatever was least expensive. Coffee was coffee. We didn't know anything about olive oil, either."

Austin loved them anyway. The best evidence of that came after the great flood of Memorial Day 1981, which deposited eight feet of water in the store. The company had no flood insurance. All seemed lost. Mackey was so sure of it that he spent the first night in front of the store with friends drinking beer and trying to figure out his next move. "Part of me was kind of relieved," he says. "I had worked so hard for three years. I thought that maybe I would go live in Europe for a while. I was still only 27 years old."

But when Mackey showed up to start cleaning the next day, he was greeted by a bunch of people he had never seen before. "It turned out that they were customers who had come in to shop that day and had pitched in," he recalls. Over the next few days, dozens more volunteered. The recovery was miraculous. Investors and banks kicked in more money, and the store reopened in 28 days.

The experiment had worked. Today the Whole Foods empire comprises 281 stores in three countries. And yet the same cultural divisions—hippie Austin versus Texas at large, counterculture versus consumer culture, advocacy versus profit—that played out in the original store are still at work within the vast, publicly traded entity that Whole Foods has become. The past two and a half decades have been a period of relentless expansion during which the company—now the largest natural and organic foods grocer in the world—has acquired one competitor after another: Massachusetts-based Bread & Circus in 1992, the seven locations of Los Angeles-based Mrs. Gooch's in 1993, and, in a controversial merger that led to a government antitrust suit (eventually settled in favor of Whole Foods), Wild Oats Markets, its main competitor in the natural foods niche, which consisted of more than 100 stores in 24 states and British Columbia.

All the while, Mackey, who remains CEO (Renee Lawson opted out in 1981, Skiles in 1985, Weller in 2000), has waged a high-profile campaign to ensure an equitable workplace and ethical business practices. Company policy caps executive salaries at 19 times what the average employee makes (Mackey has even chosen to reduce his annual salary to one dollar), and everyone who works 30 hours a week or more is offered health benefits. He has also imposed strict food-quality standards, which have dramatically expanded the market for organic produce, fish, and meat (albeit, some argue, at the expense of smaller, local producers).

Still, over the past decade or so, Whole Foods has developed a reputation among many consumers as a place you go more for gastronomic splurges than for organic, fair-trade, or locally produced food. Mackey himself admitted as much to me, saying that Whole Foods had become more of a "foodie-oriented store". But the visionary impulse that gave rise to a new, enlightened era of grocery shopping back in 1980 lives on; Mackey says that the company will be returning to its roots over the next decade as it devotes more resources to promoting healthful eating. "We have had a real emphasis on pleasurable eating," he told me, "and have relatively neglected the healthy aspect of things. That is going to change." If history is any indicator, as Whole Foods changes, the world will change right along with it.

**Natural Selection: The Evolution of Whole Foods Market

1980 The first Whole Foods Market opens in Austin, Texas, after the merger of two local stores, Safer Way Natural Foods and Clarksville Natural Grocery. The 10,500-square-foot store has an initial staff of 16 people.
1991 The company launches its own Whole Foods brand, becoming the first retailer to maintain a private-label line featuring organic food products; by 2009 the store's 365 Everyday Value line includes more than 2,000 items.
1991 With the acquisition of Wellspring Grocery, of North Carolina, Whole Foods starts to expand its inventory to include more specialty, high-end food items. Wellspring owner Lex Alexander stays on with Whole Foods as director of private-label products.
1996 Whole Foods begins importing a number of foods that are new to the American market, including marcona almonds, two-year-aged parmigiano-reggiano, and Dalmatian coast fig spread. It becomes the first U.S. chain retailer to carry fresh (as compared with canned) olives from France.
2000 Whole Foods works closely with Jan Bastiaansen of the Netherlands to help him become the first certified organic cheese producer in the European Union. Later that year, Whole Foods becomes the first retailer to ship an entire container (40,000 pounds) of organic cheese from the EU to the United States.
2003 Whole Foods is designated America's first National Certified Organic Grocer. Three years earlier, Whole Foods was the first national food retailer to join the USDA advisory board to help develop the U.S. Organic Standards.
2004 With the purchase of UK-based Fresh & Wild stores, Whole Foods begins its expansion into Europe. Three years after that, the first overseas branch bearing the name Whole Foods Market opens in the Kensington area of London; there are now five such stores in the UK.
2007 The Federal Trade Commission seeks to block Whole Foods's $670 million acquisition of Wild Oats Markets, its largest competitor. Whole Foods eventually wins the battle, but only after selling leases for 19 closed Wild Oats stores and divesting itself of 13 still-operating stores to restore competition.
2008 Whole Foods implements stricter guidelines for farmed seafood, reducing environmental impact and requiring vendors to pass a third-party audit. Existing standards prohibited antibiotics, hormones, sulfites, mammalian by-products in feed, and genetically modified or cloned seafood.
2009 Whole Foods employs 52,000 people in more than 280 stores in the U.S., Canada, and the UK. The tenth-largest food and drug store in the U.S., Whole Foods ranks 369th on the Fortune 500 list, with annual sales of approximately $8 billion.

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