Retail: Outrage in Aisle 7

Whole Foods CEO John Mackey has stirred up a political hornet's nest ... again.

There’s never really a good time for the head of an international company to enrage its customer base. And if you are John Mackey, CEO of Whole Foods Market Inc. (Nasdaq: WFMI) — whose patrons justify paying double for organic dandelion-greens because of the company’s socially conscious liberal image — offending them in this precarious economy seems just plain dense.

But it appears that’s exactly what the boisterous Whole Foods founder has done with an op-ed piece in The Wall Street Journal, in which Mackey not only attacked the Democratic health-care reform plan but the very idea that basic medical care (or even food) is something everyone is entitled to. The piece, published on Aug. 11, presented a free-market alternative to President Obama’s proposed reforms and used Canada as an example of why less government involvement in the health-care system is ideal, since the Canadian government tells citizens “what healthcare treatments they are eligible to receive and when they can receive them.” Mackey then went on to state that obesity, cancer and diabetes were “self-inflicted” and mostly preventable through proper diet and exercise (there was no mention of genetic factors). But what truly irked thousands of Whole Foods devotees who apparently equate universal health care with human rights was the inclusion that “a careful reading of both the Declaration of Independence and the Constitution will not reveal any intrinsic right to health care, food or shelter.” Let them eat organic cake elsewhere, indeed.

Has Mackey lost his organic bananas? Before jumping to conclusions, it should be noted that the man is no stranger to controversy. He once compared unions to herpes, saying “once you have them, you can never get rid of them,” and it was only last month that he was quoted as saying his stores sold “junk.” Yet for all of these provocative comments, the company hasn’t suffered financially. Is it possible then, that by inserting himself into the health-care debate and pontificating views that would appeal to many right-wing Republicans, Mackey knows exactly what he’s doing?

If so, there are few signs of it so far. Instead, the organic supermarket chain (which has six stores in Canada and a total of 284 in North America and the U.K.) has become the target of a widening backlash. Lefty community organizations, and labour unions that feel health care is a human-rights issue, like the United Food and Commercial Workers Union and CtW Investment Group (an arm of several unions), are united in calling for a boycott in an effort to have Mackey ousted as CEO. The groups are also pressuring the Bravo cable network to drop Whole Foods as the sponsor of its popular Top Chef show, while former customers are protesting outside locations in New York, Washington, D.C., West Hollywood, Calif., Cambridge, Mass., and Austin, Texas. Perhaps the largest example of brand dissonance, however, is the Boycott Whole Foods group on Facebook, which had a still-swelling membership of almost 33,000 people when this article went to press (highlights include ex-customers posting copies of receipts online as proof they are spending money elsewhere).

The only real positive to date is Whole Foods’ share price. After the controversy over the article began to unfold in mid-August, WFMI’s stock rose as much as 6%. However, it has since settled back to pre op-ed levels, closing Sept. 2 at US$27.19. For the moment, investors appear to be saying that you simply can’t buy the media coverage the company is getting now. And when it comes to the boycott, well, it’s one thing to click a mouse and join a group online — it’s another to follow through in a meaningful enough way that will hurt the company’s bottom line in the long run.

One observer who isn’t worried is John Winter, president of Toronto-based retail consulting firm John Winter Associates Ltd. “This will have a very modest impact,” he says. “They have a distinctive niche, and although there are other natural food purveyors, they certainly have a large slice of that market.”

Winter then makes a critical point that’s so far been lost in the noise around the backlash: “People who don’t have [insurance] coverage are not his core customers.” This fact suggests that while Mackey might lose some of his die-hard liberal supporters by slamming universal health care, he may have written the op-ed as a carefully planned tactic to raise Whole Foods’ profile with a larger, bigger-spending group — the moneyed right-wing Sarah Palins and Bill O’Reillys of the world who would never previously set foot in one of Mackey’s stores. After hearing his comments, they might very well give it a try.

But even if this is the case, Mackey is not acting like a CEO eager to burn too many bridges. Three days after the Journal op-ed, he wrote on his blog on the Whole Foods website a response to the controversy that smacked of damage control. In it, he claimed the opinions expressed were his own, not the position of the company (even though at the end of the article he was identified as co-founder and CEO of Whole Foods Market Inc.). Mackey also stated that he was answering PresidentObama’s invitation for Americans to put forth constructive ideas on reforming the health-care system, and that he titled the piece “Health Care Reform,” but an editor at the paper changed the headline to call it “The Whole Foods Alternative to ObamaCare.” Libba Letton, a spokesperson for the company, also told Canadian Business Whole Foods hopes customers remember the grocer’s history of supporting sustainability, organic farming and the ethical treatment of animals. “We aren’t seeing any significant changes now, but certainly when our customers tell us they are upset enough to boycott, that concerns us,” says Letton, while declining to provide specifics on current sales.

As for the stores themselves? At the Whole Foods in Toronto’s trendy Yorkville district in late August, where a steady stream of shoppers left carrying the trademark brown paper bags after noshing on samples of Bleu de Chèvre cheese, there wasn’t a whiff of protest. Granted, the health-care debate is a U.S. issue, but it wouldn’t be a shock to see Canadian Whole Foods fans showing solidarity with fellow American shoppers. Yet many customers either didn’t know about the controversy to the south, or didn’t care.

“I’m one of those millions they keep talking about. I don’t have health insurance, and I’m American,” said René Broussard outside the Yorkville shop. Despite not having a personal medical plan that covers the medication he needs to control his blood pressure and Type 2 diabetes, the 45-year-old (who runs a non-profit media arts centre in New Orleans) was reluctant to commit to a boycott. “I usually don’t go because of the prices, but they do have a few specialty herbal products. I get my Himalayan herbal toothpaste there,” he says.

Others elsewhere are more adamant. Jake Williams, an organizer at Massachusetts Jobs with Justice (a coalition of labour, community and religious groups that organized small protests outside Whole Foods stores in Cambridge and Framingham, Mass.), is certain the CEO’s comments will prove devastating in the long term. “I kind of wonder what the motive is behind it,” says Williams. “He basically argues that your health is your responsibility. It’s the same line many Republicans use to attack social services.”

Meanwhile, Boycott the Whole Foods Boycott groups, and customers supporting Mackey’s opinions have sprung up in defence of the retail giant. With the company not due to announce its next quarterly financials until November, perhaps only then will we learn if the comments have had any effect. In the meantime, if Mackey is concerned about the backlash, he sure isn’t showing it. “I haven’t talked to him since this came out,” says Letton. “He’s currently on vacation.”