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Whole Foods playing dirty pool against local competitor

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In the continuing FTC battle with Whole Foods (NYSE: WFMI) over the company's merger with Wild Oats Markets (a merger, I might add, that's already complete; all of the stores in my region have been converted to Whole Foods markets for many months), there is a local casualty. This local casualty has not been forced out of business by the strength of the Whole Foods conglomerate, with, now, stores in every quadrant of the city -- no, it's thriving, popular with both customers and the quirky-and-excellent local purveyors of vegetables, cheeses, chickens. But New Seasons Market is facing unwelcome bullying from the organics food giant.

Yesterday in the New Seasons blog, popular CEO Brian Rohter points to the objectionable subpoena he's received from Whole Foods' attorneys, claiming that his company's secrets are party to the FTC/Whole Foods dispute. (A response from Whole Foods indicates that this request went out to 96 companies, stores and vendors, although those aren't detailed.) The subpoena demands a wide variety of documents, including all documents relating to competition with Whole Foods or Wild Oats; financial information, by store; market studies and strategic plans; and all plans for future stores, expansion and renovation. Rohter's attorneys have objected but tell him he could very well lose and be ordered to hand over the documents (at considerable cost to a small local grocery chain).

Rohter argues that, though Whole Foods insists only the attorneys and consultants will see the information "That's like trusting the fox to guard the henhouse – and we don't have any faith it's going to work like that. ... some of the people at Whole Foods have a history of less than stellar behavior when it comes to competing fairly." In a follow-up to a Whole Foods response at Portland Food and Drink, Rohter says, "And those "consultants"...? Once they've looked through our information they're not going to "unlearn" it. The very nature of their job means they carry things they've learned from one job to another. Will they ever work for Whole Foods again?"

Rohter and his many supporters point to past aggressive behavior by Whole Foods management as evidence that dirty pool is in full swing, including the infamous episode in which CEO John Mackey posted derogatory statements about Wild Oats using a phony screen name, and internal emails with phrases such as "Wild Oats needs to be removed from the playing field" and "I want to crush them and I want to spend a lot of money in the process" (yikes!). Many Portland consumers are jumping to call a boycott of Whole Foods; others are decrying the "ploy for sympathy" Rohter is making; others still wonder if it's not just a boilerplate wishful-thinking legal request (Rohter argues it's not and says he's asked many other small grocery chains in other markets if they've received similar demands; they haven't).

I'm not boycotting (largely because Whole Foods markets are inconvenient for me and don't offer enough local produce and meats, anyway) but I suspect that Rohter is right in his belief that Whole Foods management would end up using the information it gained for ill, if indeed New Seasons was forced to comply. The market has been rousingly successful despite prices that are just as high as those at Whole Foods, largely because of savvy location selection, the fantastic treatment of small local vendors and employees, and the personal and genuine culture the chain has developed. Management really gets what its consumers wants, and delivers (literally and allegorically); Whole Foods could use more of New Seasons' passion. Unfortunately, with the Leadership Team [Whole Foods' capitalization] as it is, I doubt the company could ever successfully clone the balance between embracing local, sustainable cuisine and offering a wide variety of conventional products, too. Nor could Whole Foods imitate (in all its markets) how to understand consumers and treat employees with respect.

This may not materially impact Whole Foods' local sales but it certainly has destroyed the company's credibility among the area food thought leaders. And it shines a light into the culture of bullying in Whole Foods management; a culture that doesn't lead to shareholder value, in my opinion.

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Last updated: July 03, 2009: 10:10 PM

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