Whole (Foods) Lot of Problems

Whole Foods Market Inc. (WFMI) has had a spate of bad press recently, and the company’s stock price hovers around it’s 52 week low of $18.26, well off it’s high of $53.65. Many analysts don’t think it has hit bottom yet. The most recent bad news is unlike the ethics controversy that engulfed the company, and its founder/CEO, a year ago. I wrote about WFMI at the time and thought the company was headed into dark waters. I was wrong, but only for a while. Eventually, the company stumbled again.

I’m a customer of Whole Foods. It is one of the better places to get vegetarian, vegan, and organic food. However, I prefer the local privately owned stores, like Garden of Light, for their service, character, and mission. Historically, Whole Foods’ quality and service have been high, however; their rapid expansion, acquisition of rival Wild Oats, and their focus on wealthy markets has conspired to weaken their base. Just like Starbucks, they have reduced the value of their brand with over-growth. When quality slips, so does customer service. Whole Foods was different from their competition, until their competition caught up. Now, even the standard grocery store chains are competing with them and luring away their previously loyal customers with better prices.

Much has been written about the perception that Whole Foods is an expensive place to shop. With the run up in global food prices, all groceries are expensive, but particularly at Whole Foods. They sell premium products at premium prices to folks who previously didn’t blink when stuffing their sales receipt into their pocket. It isn’t a perception, but a reality. Now that folks are watching their expenses a lot closer, they have shifted much of their buying to discounters. Groceries have always been a low margin/high volume business, but Whole Foods seemed to break out of the category and define their own niche by making grocery shopping a luxury. This is exactly what Starbucks did with coffee. Harvard Business publishing has a good article about how Starbucks destroyed their brand value with their excessive growth.

So, back to Whole Foods and the most recent bad news. This time they company has been caught up in another major beef recall scandal. Their internal quality assurance processes failed and they procured tainted beef from a disreputable source. They weren’t the only chain caught up in this most recent FDA related mess, but they are supposed to be better than the rest. If you want to learn more, there is no better time to read Fast Food Nation. As Whole Foods takes it lumps, others have seized the opportunity to encroach on their turf and make the most of the whole “eat local” movement. Time will tell if they recover from their assorted problems.

Oh, and if you ask me, the best way to avoid buying tainted beef is to not eat beef and other meat products, at all. Of course, if you insist on indulging; caveat emptor.

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