From Whole Foods to holistic well being: A founder’s story

This interview is a part of the Inside the Mind of the CEO collection, which explores a variety of important selections confronted by chief executives around the globe.

“People requested me how lengthy it took the primary Whole Foods Market to be worthwhile, and I say, until about two within the afternoon [on its first day],” says John Mackey, the corporate’s cofounder and former CEO. The younger hippie–entrepreneur who opened his first retailer (then known as Safer Way) in 1978 in Austin, Texas, might hardly have predicted that the enterprise would develop to turn into a multinational, multibillion-dollar pure meals pioneer. Acquired by Amazon in 2017 for US$13.7 billion, Whole Foods at this time has greater than 500 shops within the US, Canada, and the UK.

Mackey stepped down as CEO in 2022. During his 44-year tenure, he made an artwork type of going together with his intestine and bucking conference, and created a tradition of teamwork and independence. Management was decentralized; authority devolved to native shops and group leaders, who, in line with the founder, knew their prospects finest. Whole Foods established animal welfare requirements for its associated merchandise, and arrange the Whole Planet Foundation to fund microloans to entrepreneurs in communities the place it sourced merchandise.

Of course, it wasn’t all easy crusing. Mackey’s time as CEO included management challenges from activist traders, the board, and even his personal father. Ultimately, the flip aspect of his success at taking natural and pure meals mainstream was that the enterprise ultimately confronted elevated competitors from some conventional supermarkets and even Walmart, which undercut Whole Foods’ costs.

Mackey, who just lately printed a enterprise memoir (The Whole Story: Adventures in Love, Life, and Capitalism), talked to technique+enterprise concerning the position of group in enterprise, the considering behind the Amazon acquisition, and the way his imaginative and prescient for the way forward for well being impressed him to steer a startup at age 70.

Edited textual content and video of the interview comply with.

S+B: Your first retailer in Austin practically went below, actually, because of an unprecedented flood, and the group rallied to help Whole Foods. How did this form your management?

MACKEY: We had constructed that retailer in what’s known as the 100-year flood zone. And after I was speaking to the owner, he stated, “Well, John, it implies that about as soon as each hundred years you’re going to be eight toes below water.” And I stated, “I’ll take these odds.” Problem is, we had the 100-year flood within the first yr. Everything was a whole loss: the gear, the stock.

But probably the most wonderful factor occurred the following day. Our group members got here to work, they usually have been serving to us clear up the shop and I’m wanting round and I see some acquainted faces, however they don’t work for us. It was our prospects. They’d heard about what had occurred, they usually got here in to assist us clear up the shop. A variety of them labored day after day. And our suppliers have been keen to entrance us extra stock on credit score. The traders put in a bit bit more cash, too. A banker personally assured our US$100,000 mortgage. Amazing. It took us 30 days to reopen.

Whole Foods ought to have died in our first yr, and I didn’t have the phrase for it again then, however the stakeholders saved us. Our prospects, our group members, our suppliers, our traders, the financial institution, the group that we have been a part of didn’t allow us to die.

I noticed that we have been an interdependent community of relationships. And they cared about us. They didn’t need us to die. It modified Whole Foods without end, as a result of from that time onward, we started to take severely every one among these completely different relationships and to attempt to do proper by them, to create worth consciously for all these completely different stakeholders.

S+B: Jumping ahead to 2008, the monetary disaster was one other perilous second for what, by then, was a really large firm. Looking again, is there something you’ll have carried out in another way throughout this era?

MACKEY: That was one of many actual inflection factors for Whole Foods. Our inventory worth dropped 90%. We have been so weak to a hostile takeover that we went out and obtained pleasant cash to place into the corporate to stop that. We nonetheless obtained shareholder activists that got here in. But the inventory rose a lot that they bought out fairly shortly and didn’t make issues for us. Our inventory started to climb out of its low level to go on to new heights and get well, not solely the complete 90% it had misplaced, however to go up three or 4 instances increased than that over the following few years.

But we missed the perfect alternative we ever had within the historical past of the corporate to decrease our costs. We have been beginning to get extra competitors. What we might have carried out and may have carried out—and it’s my single greatest remorse because the CEO—was decrease costs into that [stock price] climb. Our inventory wouldn’t have gone as excessive. We wouldn’t have created as a lot short-term shareholder worth. We’d nonetheless be an unbiased firm at this time, I feel, if we’d carried out that.

S+B: Why, finally, did you resolve to promote, and why Amazon?

MACKEY: We wanted to fight the narrative about [the nickname] “Whole Paycheck,” which was actually hurting us. We wanted to drop our costs. But as a public firm, should you’re promoting one thing for a greenback and also you begin to promote it for 90 cents, within the quick run, your gross sales go down, your [comparable store sales] go down, your income go down, and your inventory worth goes down. And that’s very troublesome to deal with in a market that’s centered on quarter-to-quarter [results].

Amazon let Whole Foods drop its costs 4 instances within the first two years. That is long-term considering. And it was an excellent choice. I very seldom anymore hear the “Whole Paycheck” narrative; it’s possibly not fully disappeared, however it’s now not the lead when folks speak about Whole Foods, and Amazon made that doable.

S+B: In The Whole Story, you say you had some misgivings concerning the Amazon acquisition. Do you continue to really feel that method?

MACKEY: I remorse the circumstances that made promoting to Amazon the easiest possibility. If I had to return in the identical circumstances, although, we’d make the identical choice. Our shareholder activists advised us, “We’re going to take over your board, fireplace your administration group, and promote the corporate to the very best bidder.” I believed we might resist. That was one of many paths not taken. But we wanted time to show our enterprise round. We wanted to decrease our costs, and that was going to be painful. The different possibility we had was to go personal, however that might have taken us billions and billions of {dollars} in debt.

I awakened one morning and I believed, “I’m wondering if Amazon would have an interest?” And I obtained tremendous excited as a result of I admired Amazon. I admired Jeff Bezos. We had a tremendously good connection. So, we contacted Amazon to see in the event that they’d have an interest. They have been very enthusiastic about it. It occurred fairly shortly. Six weeks after our very first assembly, we signed an settlement to merge.

But I all the time marvel if we’d fought, might we’ve got stayed unbiased? At the time, my job was to search for the win–win–win resolution for the stakeholders, together with the traders. This [ended up being] a great factor for our prospects. We lowered costs 4 instances within the first two years. It was good for our group members. They all obtained a increase. It was good for our suppliers as a result of we continued to do enterprise with them. Amazon.com picked up a lot of our suppliers. It was good for our shareholders as a result of they obtained a couple of 40% worth enhance. So, it was actually a win–win–win.

S+B: Forty-four years is a protracted tenure as CEO by any requirements. How did that contribute to Whole Foods’ success?

MACKEY: There’s an funding philosophy that has confirmed to be very profitable, which is investing in founder-led firms, as a result of the founder loves his or her firm they usually’re considering long-term with it. It’s their child. They wish to assist it develop up and nurture it.

What occurs as companies grow old and the founders retire [is] you rent skilled managers or they’re working with the corporate they usually transfer up the hierarchy. And it’s an unlucky reality that almost all CEOs in most large public companies possibly will solely be the CEO for 5, six, seven years. That’s sort of the common tenure. So they don’t see the long-term horizon and ask what’s going to be actually good for the group ten, 15, 20 years from now.

You take an enormous threat once you deliver an outsider in. Sometimes it’s obligatory to do this as a result of the corporate must be shaken up. Culture must be modified and challenged. But long-term considering is without doubt one of the issues that is perhaps sacrificed once you do this.

One of the issues that almost all impressed me about Amazon—and one of many causes I wished Whole Foods to affix Amazon—is it was very apparent to me that Jeff Bezos thinks actually long run. He doesn’t suppose quarterly, yearly. He doesn’t even suppose 5 years forward. He’s considering ten, 15, 20 years down the highway.

S+B: PwC’s Voice of the Consumer Survey 2024 discovered that respondents have been keen to pay 9.7% above common worth for sustainably produced or sourced items. What do you are taking away out of your expertise of getting bought natural and specialty meals at a premium?

MACKEY: When you set it in a hypothetical, folks are typically a bit bit extra caring. But after they’re confronted with selections within the retailer, they don’t all the time act as idealistically as a result of they’ve a shortage of cash they usually need to make a trade-off. You have to consider folks being on a continuum of not solely wealth, however idealism. Some folks can pay much more. Some received’t pay a penny extra. So, it simply relies on the individual.

Whole Foods spent plenty of money and time creating our five-step animal welfare program, which had completely different ranges of welfare. The higher the welfare, the extra we charged for the merchandise. The most idealistic folks have been vegans. They didn’t need us promoting any sort of animal meals in any respect. Then you had others who didn’t suppose twice about paying extra for the perfect, highest diploma of welfare. And they have been in all probability very rich individuals who simply didn’t take a look at costs. And you then had different individuals who wished to purchase increased, higher animal welfare, however they have been offended as a result of they thought it was too costly. And you then had others who didn’t care about that, however how does it style? You have this spectrum of range of revenue, idealism, commitments. So we had completely different options for various prospects, and it appeared to work fairly nicely. It nonetheless works fairly nicely for Whole Foods.

S+B: As you look to the way forward for meals and well being, what do you see because the position of know-how?

MACKEY: We have know-how now that may increase mobile meats. You can develop beef or rooster mainly in a manufacturing unit and it’s bioidentical. That’s an enormous enchancment, ethically talking—animal meals with out animal struggling.

I’m tremendous enthusiastic about plenty of the technological improvements which can be occurring in well being. We now have the technological capability to grasp how wholesome every particular person is. We can create a baseline and with Apple Watch and Oura Rings, various kinds of steady glucose displays, we’re capable of monitor folks’s well being nearly minute by minute. As that improves, we’re going to have increasingly information about every particular person. And for the primary time, we’re truly capable of assist folks turn into the healthiest model of themselves. Technology is making this doable, and AI will support that. It will assist enhance analysis for any sort of sickness and work alongside docs.

I’m very a lot an optimist that know-how, whereas it does trigger some issues general, lifts humanity up. I’ve each motive to imagine that humanity goes to be far more healthy and much better off 20 years from now than it’s at this time.

S+B: How are you making use of this imaginative and prescient to your new enterprise, Love.Life—the built-in well being and wellness startup you launched in 2023?

MACKEY: Love.Life in some methods is only a continuation of the upper function I had with Whole Foods—to assist folks be more healthy—however Whole Foods was nearly meals. We’re going to open these giant, one-stop holistic well being membership golf equipment. The first might be within the Los Angeles space. It’ll be situated in a middle the place Whole Foods has a really profitable retailer. We’ll have a wholesome restaurant, a state-of-the artwork health middle, and a very nice spa. [Editor’s note: It opened this month.] We’re going to have all these restoration modalities, different well being remedies. We’ll have three pickleball courts, and in addition a medical middle.

The complete imaginative and prescient of it’s that we’ll take a look at our members, discover out their baseline well being, after which [help them] turn into their healthiest doable selves—bodily, but in addition emotionally and spiritually—as a group of individuals devoted to private development, wellness, and well being.

I’m actually enthusiastic about it. It’s going to be lovely. It’s going to be a really particular place. It’s going to be enjoyable. I’m again on an journey once more. I’m again in startup mode. I’m an entrepreneur once more, not operating an enormous company. I’m creating one thing new with my associates, folks I really like, folks that helped create Whole Foods.

S+B: How is it completely different launching a startup at this time and at 70, as a extra seasoned CEO?

MACKEY: I do know much more now at age 70 than I did after I was 24. And I didn’t have any cash after I was 24. Now I can make investments on this enterprise myself. I’m much less beholden to outdoors funding. On the draw back, I’ve much less power. I’m not going to do the identical sort of 80-hour workweek.

But from an exterior standpoint, the largest distinction is that Whole Foods [initially] flew below the radar. Nobody paid consideration to us for about 20 years. I count on folks to be being attentive to Love.Life from the very first day we open. The web didn’t exist after we began Whole Foods. There was no social media. There have been no smartphones. Good concepts at this time are shortly found, shortly copied, and shortly iterated upon. That’s a great factor. Capitalism is much more dynamic than it was.