Will Whole Foods re­main ‘Austin’s thing’?

Austin American-Statesman Sunday - - FRONT PAGE - By Se­bas­tian Her­rera

Lisa Lindqvist has shopped at Whole Foods Mar­ket for much of her adult life. In that time, the gro­cer has re­mained pretty much the same: Or­ganic food. High-end stores. Lo­cal feel. Foodie cul­ture.

But much has changed lately, and after Ama­zon’s $13.7 bil­lion pur­chase of Whole Foods closed in Au­gust, Lindqvist now says she wonders if the Austin-born gro­cery store she’s grown to love will even­tu­ally be­come un­rec­og­niz­able.

“It’s nice to have a lo­cal home­town player that’s so in­te­grated and en­trenched in the com­mu­nity,” Lindqvist, 48, said re­cently out­side of the com­pany’s head­quar­ters store at Sixth and La­mar. “From that stand­point, I hope that lo­cal feel doesn’t change. I hope that it doesn’t be­come generic over the years. This is the flag­ship of this city, and a lot of peo­ple are re­ally proud of that.”

In the more than 35 years that Whole Foods has ex­isted, the gro­cer has forged a place in the na­tion’s con­scious­ness as it be­came the leader in the or­ganic food in­dus­try. Lo­cally, it has been one of the area’s best-known busi­ness suc­cess sto­ries.

With its sale to Ama­zon, how­ever, Whole Foods has lost its lo­cal con­trol, and the re­sult has left con­sumers here and else­where, as well as mar­ket an­a­lysts and even de­sign firms, de­bat­ing what’s next.

Will the gro­cer’s iden­tity change? Will its prod­ucts be al­tered? What does the sale mean for Austin as a whole?

From its be­gin­nings as a sin­gle store on North La­mar Boule­vard in 1980, Whole Foods be­came a source of civic pride for many in Austin.

As the com­pany grew, its pi­o­neer­ing stances brought the or­ganic food mar­ket into the main­stream and turned Whole Foods into a For­tune 500 com­pany.

Four years after open­ing its first store, Whole Foods be­gan ex­pand­ing into other Texas cities and places out­side of the state. Its large of­fer­ings of clean, or­ganic food, com­bined with its rev­o­lu­tion­ary store de­signs, at­tracted cus­tomers.

As it grew, Whole Foods’ co-founder and CEO John Mackey ac­quired a slew of com­pa­nies through­out the years.

It be­gan with the buy­out of Whole Foods Co. in 1988, a New Or­leans-based whole­some food store, ac­cord­ing to the com­pany’s web­site.

Whole Foods then ac­quired North Carolina-based Well­spring Gro­cery in 1991, and a year later, bought Bos­ton-based Bread and Cir­cus, then the big­gest nat­u­ral food gro­cery busi­ness in the North­east.

From 1993 to 2007, Whole Foods ac­quired 12 more nat­u­ral food or gro­cery busi­nesses, in­clud­ing Colorado-based Al­le­gro Cof­fee and United King­dom-based Fresh and Wild. Its fi­nal merger be­fore Ama­zon came in 2007, with its pur­chase of Colorado-based Wild

Oats Mar­ket.

“Be­fore Whole Foods, when peo­ple wanted to eat healthy, we had th­ese tiny health food stores run by peo­ple who looked like they were go­ing to keel over and die,” said Phil Lem­pert, a food in­dus­try an­a­lyst with Cal­i­for­nia-based Su­per­mar­ket Guru. “They took that con­cept and made it big­ger and brighter and cleaner and staffed it with peo­ple who were passionate for clean eat­ing.”

Other than the South by South­west brand, Lem­pert said, Whole Foods be­came “the most rec­og­nized com­pany of Austin.”

As Whole Foods ac­quired com­pa­nies, its brand surged, with the gro­cer go­ing pub­lic in 1992, launch­ing its in-house 365 Ev­ery­day Value line in 1997 and mak­ing its first ap­pear­ance on the For­tune 500 list by 2005. Its stock peaked in 2013 at a trade price of $65.24.

Then the prob­lems be­gan. Whole Foods started see­ing slug­gish prof­its at its more than 460 stores while same­store sales, a key in­di­ca­tor of the com­pany’s health, be­gan to dip. As its stock plunged and com­peti­tors such as Kroger be­gan catch­ing up to Whole Foods when it came to or­ganic foods, Mackey — who de­clined to com­ment for this story — be­gan pub­licly clash­ing with stock­hold­ers and the fu­ture of Whole Foods be­came un­clear.

“Whole Foods grew too much for what John Mackey could run,” Lem­pert said. “He had his ideas, and they didn’t sync up with what Whole Foods could and should be. Mackey saw a dif­fer­ent Whole Foods than what it evolved to.”

The gro­cer’s path dras­ti­cally changed with its sale to Ama­zon, which up­ended the gro­cery in­dus­try and has since seen com­peti­tors such as Wal­mart form part­ner­ships with Google to help with the sale of on­line prod­ucts. At the same time, some believe the sale is a hit to Austin’s busi­ness im­age.

But Jon Hock­enyos, pres­i­dent of Austin-based eco­nomic con­sult­ing firm TXP, said the im­pact has been min­i­mal.

“Austin is not thought of as a town that is driven by large cor­po­rate head­quar­ters,” Hock­enyos said. “We are not Seat­tle or Dal­las, in terms of ma­jor ar­eas that have mul­ti­ple For­tune 500 com­pa­nies. What we are is, we have a ter­rific startup cul­ture with a bur­geon­ing tourism econ­omy that has been able to at­tract ma­jor cor­po­ra­tions to expand their foot­print here.

“In a year or two, we’ll have a bet­ter han­dle on if and how Whole Foods changed in Austin.”

Al­ready, though, Ama­zon’s in­flu­ence on Whole Foods can be seen in its stores.

On Aug. 28, the first day Ama­zon took over as owner of the gro­cer, prices were slashed, Ama­zon de­liv­ery lock­ers ap­peared at stores and the e-com­merce gi­ant promised in a state­ment that it was “just the be­gin­ning.”

Out of 45 items that the American-States­man pricechecked the week be­fore the sale closed, 11 were re­duced Aug. 28, in­clud­ing coho salmon, which dropped by $3 per pound, and Hass av­o­ca­dos, which went down 70 cents.

Days later, Bloomberg re­ported that Whole Foods ini­tially saw a 25 per­cent in­crease in cus­tomer traf­fic at its stores after the deal closed.

“The big­gest dis­sat­is­fac­tion with on­line re­tail­ers is the time you have to wait to re­ceive a prod­uct you ordered,” said Ut­pal Dho­lakia, a con­sumer be­hav­ior and e-com­merce ex­pert at Rice Univer­sity. “Ama­zon is try­ing to cre­ate its own (physical pres­ence). Wal­mart has it. Sam’s Club has it. All of the big re­tail­ers had it be­sides Ama­zon. So, it made sense that they would, too, and that they would do what they did.”

More changes are sure to come, an­a­lysts say.

Some say Ama­zon, and its CEO, Jeff Be­zos, will quickly bring new talent into Whole Foods’ Austin head­quar­ters while even­tu­ally phas­ing out Mackey, who for now re­mains CEO.

The sale of Whole Foods also means that Dell Tech­nolo­gies is the only For­tune 500 com­pany to re­main based in Cen­tral Texas. The metro area has thrived on a healthy startup scene, but it’s also seen brand-name com­pa­nies like HomeAway be sold off to big­ger cor­po­ra­tions.

While Ama­zon has said Whole Foods’ head­quar­ters will re­main in Austin, some shop­pers see that move as largely sym­bolic and have doubts that Whole Foods will truly re­tain the lo­cal con­trol its em­ploy­ees are used to hav­ing. They’re afraid that Ama­zon, a more-than-$470 bil­lion com­pany, will dras­ti­cally al­ter the gro­cer’s char­ac­ter.

Some have al­ready cre­ated con­cepts for what po­ten­tial changes might look like.

Austin-based de­sign firm Ar­gode­sign drew up fu­tur­is­tic prod­ucts Whole Foods could of­fer us­ing Ama­zon’s tech­nol­ogy power.

The con­cepts, which were high­lighted in a re­cent report in Fast Com­pany mag­a­zine, in­clude a re­frig­er­a­tor with openings both on the in­te­rior and ex­te­rior of homes to give ac­cess to drones that would de­liver gro­ceries, an “Ama­zon Bin” that would re­ceive re­order in­struc­tions and could also serve as a waste ser­vice by Ama­zon, and com­mu­nity gar­dens that would be op­er­ated by Ama­zon.

Ama­zon has not con­tacted Ar­gode­sign on the con­cepts, but the firm’s CEO, Mark Rol­ston, said his com­pany used prac­ti­cal think­ing to cre­ate prod­ucts mil­lions of con­sumers could use.

“Dis­tri­bu­tion is one of the high­est costs th­ese com­pa­nies have,” Rol­ston said. “(Much) of the pro­duce that’s grown never gets eaten. If Ama­zon could solve that, that’s profit for them. If they can keep more of what they grow and reach cus­tomers quicker, that’s what they want.”

Whole Foods will suc­ceed, Rol­ston said, if it uses tech­nol­ogy to en­hance its mis­sion of healthy eat­ing and con­ve­nience.

“Whole Foods is not just get­ting food as you know it, but in­tro­duc­ing dif­fer­ent kinds of eat­ing,” Rol­ston said. “I hope they con­tinue down that path.”

At Whole Foods’ fi­nal stock­holder meet­ing in late Au­gust, Mackey joked that the sale of his com­pany was like see­ing a daugh­ter marry a nice, rich man.

Be­cause Mackey has no chil­dren, the state­ment was telling. In many ways, Whole Foods was Mackey’s child; his most sig­nif­i­cant cre­ation. How that cre­ation evolves re­mains to be seen.

“This opens up a lot of pos­si­bil­i­ties,” Kristin Gibbs, a 28-year-old Austin na­tive and Whole Foods shop­per said re­cently out­side a lo­cal store. “I trust that Ama­zon will make Whole Foods expand in ways it couldn’t be­fore.

“Whole Foods will al­ways be Austin’s thing, but now, it’s just thriv­ing in a new way.”


Back in Fe­bru­ary 2013, Lind­say Ri­ley shopped the pro­duce sec­tion at a Whole Foods Mar­ket in Austin. E-com­merce gi­ant Ama­zon bought the 37-year-old Austin or­ganic gro­cer for $13.7 bil­lion in Au­gust, and has be­gun in­sti­tut­ing changes.


Whole Foods Mar­ket’s flag­ship store sits on the cor­ner of Sixth Street and North La­mar Boule­vard. It was one of only two Cen­tral Texas-based com­pa­nies on the For­tune 500.

John Mackey co-founded Whole Foods Mar­ket in 1980 and for now re­mains CEO.


A year after it opened at 10th Street and North La­mar Boule­vard, Whole Foods Mar­ket en­dured the Memo­rial Day flood of 1981. By 1984, the or­ganic gro­cer be­gan to expand to other Texas cities.


Dasher Hal­lo­ran, 7, (left) and his sis­ter De­laney, 10, take a tum­ble in Jan­uary on the tem­po­rary ice skat­ing rink at the Whole Foods Mar­ket on La­mar Boule­vard. Civic pride has been cen­tral for the gro­cer.

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