Whole Foods Market co-founder and co-CEO John Mackey makes no bones about it: 2015 was one of the toughest years ever for the organic foods giant.
Now, Austin, Texas-based Whole Foods is rethinking its business and revamping its brand to do battle with a growing army of competitors. The retailer has created a nine-point turnaround plan aimed at making 2016 a better year.
Mackey sat down with the Austin American-Statesman to talk about the challenges the company is facing, and about what he expects the new year to bring.
Q: What was 2015 like for Whole Foods Market?
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A: It was a challenging year for us for sure. We saw our same-store sales continually slow down, quarter by quarter. I cannot remember any year we received this much negative media coverage. We felt like a lot of things were just blown way out of proportion.
The New York (City Department of Consumer Affairs) event (saying we overpriced items there), was making a mountain out of a molehill in the sense that every year in every city you are going to have weights and measures mistakes, and that’s true of every supermarket of America. Perfection is not quite possible there. And that one got national news coverage. And I mean – not to say we don’t take it seriously – but the fact that got national coverage was a surprise to us.
Then, you have the infamous ($5.99) asparagus water. Do you realize … we only sold one bottle of asparagus water in one store that was mis-priced? And the guy who did the pricing, it was his first day on the job. And it was national news. And I think trying to get that corrected, no one was interested. It was very frustrating for us.
Q: How do you think Whole Foods responded in these challenging moments?
A: It’s kind of like when you are accused of something, it’s very difficult to prove your innocence in the court of public opinion when people want to believe what they want to believe. So we made some changes going forward. … We created a crisis team who can respond quickly and be on point for this stuff.
Instead of waiting for the executive team to talk everything through and decide what our response is going to be, we essentially deputized a small group of people to be right on it, so we can respond more timely. Part of our problem was not responding quick enough. Media is so 24/7, if you are couple days behind, then you might as well be a couple years behind.
Q: So, what Whole Foods is doing — is it working?
A: Sure, it’s working. We’re over $15 billion in sales, we have EBITDA (earnings before interest, taxes, depreciation and amortization) of $1.3 billion (for fiscal year 2015). We have great returns on investment capital. We have 91,000 team members. Everybody is copying us.
So clearly, what we are doing is working. The stock market is quite obsessed with one metric, and that’s same-store sales growth. The fact that slowed down has caused the stock price to fall primarily. It’s sort of a short cut for lazy thinking because there are so many other factors that go into business success. … We used to beg people to write articles about us. We were just seen as a bunch of hippies selling food to other hippies. So I’m kind of very proud of the fact that Whole Foods has really changed the world, that the whole food industry has changed because of Whole Foods Market.
Q: What do you see happening in 2016 for Whole Foods?
A: I think the biggest thing that is going to happen for Whole Foods is the nine points. Some of the points that we emphasized there: We are cutting costs, we’ve cut a significant amounts of money out of our cost structure already and we’ve pledged that by the end of 2017 we’ll have a run rate of $300 million reduced from the end of fiscal 2015. That’s a significant amount of money. And … some of that money is going to be invested in lower prices all through the store.
We are going to increase our differentiation. We are going to innovate more. We are going to do a better job of marketing or explaining and communicating those differentiations of our quality standards. … The world of marketing is changing so rapidly to the digital revolution and social media. So we are going to double down in our investments in those particular areas.
We are starting a new format that we are really excited about (365 by Whole Foods). The stores are smaller and they are going to be a curated product mix.