Whole Foods Markets wants to rip you off.
Wed Aug 15, 2007 at 12:25:34 PM PDT
Spare me the jokes about how Whole Foods rips everybody off who shops there, OK? My guess is that a lot of Whole Foods customers read this site and will want to read this story. It's adapted from a post at our Wal-Mart blog, the Writing on the Wal.
As I've explained before, Whole Foods Markets wants to take over its competitor, Wild Oats. The Federal Trade Commission is trying to stop it. I happen to be a Whole Foods shopper, and while I don't like paying their almost-universally high prices, their argument for the merger made sense to me. Here's Whole Foods CEO John Mackey, before his lawyers demanded that he stop blogging:
The FTC is failing to recognize how quickly the competition in the supermarket industry is evolving. Whole Foods doesn't merely compete with other natural foods supermarket companies such as Wild Oats, but also with natural foods discount chain Trader Joe's, upscale perishable supermarkets such as Wegman's and Central Market, new supermarket created natural foods stores such as Green Wise by Publix and Sunflower by SuperValu, over 200 food co-ops around the United States, remodeled upscale supermarket stores such as Safeway's Lifestyle stores and HEB's Platinum stores, Sprouts, thousands of local farmers' markets, and thousands and thousands of supermarkets selling natural and organic foods, and most recently Wal-Mart. Soon Tesco, one of the largest retailers in the world will be opening hundreds of stores in western United States-stores which are rumored will compete with Trader Joe's and Whole Foods. Indeed, Whole Foods faces more competition today than ever before in our entire history! The FTC needs to get out of Washington D.C. once in a while and look around at what is happening out in the real marketplace. Actually if they'll just get out of their offices in D.C. and go look at Wegman's, Trader Joe's, and Safeway Lifestyle stores they'll see how dynamic and rapidly evolving the food retailing market is today.
It turns out that none of that is true. From Business Week:
Federal regulators filed court documents Tuesday outlining concerns that stores in competitive markets would close and consumers would face higher prices if Whole Foods Market Inc.'s $565 million purchase of Wild Oats Markets Inc. is completed.
The Federal Trade Commission documents revealed that Whole Foods plans to close 30 or more Wild Oats stores, a move that the company believes would nearly double revenue for some Whole Foods stores.
It's actually much worse when you get into the details. Here are two extremely damning insights from the Business Week report:
-- Company documents labeled "Project Goldmine" predicted that buying Wild Oats and shutting down certain stores would increase revenue 85 percent to 90 percent at nearby Whole Foods stores.
-- The takeover will send as many as 80 percent to 90 percent of Wild Oats shoppers to Whole Foods stores, according to Whole Foods documents cited by the government. "As a result, they will unambiguously be worse off," because of increased prices, the FTC argued.
In other words, that whole argument about changing food choices was a big fat lie. There are two markets for groceries in this country. People who are willing to pay more for decent food, and people who aren't (or, more likely, can't). Whole Foods' plan is to gouge those of us who care about what we eat and can afford it the best they can, knowing that once you've had the good stuff, you won't go back.
That's what makes this point from the FTC filing all the more strange [You just knew I'd get around to Wal-Mart before too long]:
Whole Foods set "ground rules" barring suppliers from selling directly to Wal-Mart. "It wants Wal-Mart to have to go through distributors because that raises Wal-Mart's costs," the document said.
That explains why Wal-Mart's organic food selection is so pathetic. The people who sell this stuff won't cross the chain that controls access to their best customers. The thing is, knowing that the 80-90 percent of Wild Oats shoppers would go to Whole Foods means that most wouldn't be going to Wal-Mart. Indeed, people who really care about food wouldn't be caught dead in a Wal-Mart because they can usually afford not be price sensitive and Wal-Mart offers them nothing else but. So why do this?
Not only should those "ground rules" end any chance of a Whole Foods Wild Oats merger, it really ought to send someone to jail. Can you say RICO? What right does Whole Foods have to tell anybody who they can sell to?
The funny thing is that appears that the FTC didn't even mean to release those merger documents yesterday. They were just going to sit on the proof and let these monopolistic ground rules stand. Even when the Bush Administration does the right thing they manage to screw it up. Unbelievable.
JR
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