September 27, 2013
AUSTIN, Texas — As it continues to grow into an internationally known brand, Austin-based Whole Foods Market Inc. is learning a lesson that has been taught to many up-and-coming corporations before it.
The bigger the company gets, the brighter the spotlight — both for good and bad — that shines on it.
That’s become a fact of life for the Austin-based natural foods grocer, which is flying higher than ever with more than 350 stores and posting record profits. Nearly everything the company does makes news these days.
“In some ways, it’s a compliment to how people see our company,” said Whole Foods co-CEO Walter Robb. “I do think we’re a leader in the food industry, and people look to us in that respect. And so when we take a step or a make decision, it gets reported on.”
Andrew Wolf, an analyst with BB&T Capital Markets, said the challenges Whole Foods is dealing with aren’t surprising. “The bigger you get, the bigger the target — whether it’s the unions or attorneys or civil rights groups or anybody,” he said.
A handful of incidents in the past year have challenged the company — both in protecting its reputation and in deciding whether its existing policies might have to evolve as it grows.
This summer, the company faced fallout over allegations that it punished two Hispanic employees in New Mexico for objecting to a policy restricting the use of Spanish at work.
While Robb and other company officials said the incident was a misunderstanding, the company did revise its language guidelines after an outcry from activists.
Robb said the New Mexico story was partly the product of a “gotcha culture” in the media, but he acknowledged that the company’s prominence also factored in.
“Do I think it would have been picked up 10 years ago, or 15 years ago?” he said. “Probably if we were smaller, no probably not. Do I think it would be picked up at other companies (similar) as us right now, just because of where things are in the media? Yes I do.”
Incidents like the language controversy in New Mexico can happen to any company because it’s impossible to control all the actions of thousands of employees, said Wolf, the analyst with BB&T Capital Markets.
“You can’t control them all,” he said. “The best you can do is hire them well and train them well, and even then some of them are going to say stuff that’s going to be embarrassing for the company.”
When Whole Foods opened a store in Detroit in June, it got more media coverage than any other store opening in the company’s history, Robb said. The company was hailed for opening a store in an area where people don’t have immediate access to fresh foods — but at the same time there was criticism that Whole Foods’ prices were too expensive for lower-income residents.
That perception that Whole Foods is too expensive and caters to a largely affluent demographic continues to be a challenge for the company, Wolf said.
“That’s been their biggest hurdle,” Wolf said. “And that remains. I mean, they’re not going to stop trying to create a better value image, because as they get bigger, they have to.”
The company has worked hard to improve its value and accessibility, Robb said.
“I welcome the question, because it gives us a chance to have a dialogue about this myth that if you eat healthy it has to be expensive, or that eating healthy is only for certain people,” he said. “That’s just bull.”
Whole Foods has also received pushback at times for the political views of some of its top leaders. In 2009, company co-founder and co-CEO John Mackey made national news — and sparked scattered boycotts — after he wrote an op-ed piece criticizing President Barack Obama’s health care plan.
Robb said the fallout over Mackey’s health care comments made them more careful as company leaders.
“I think we both recognized that — being a public company CEO — that times have changed and it isn’t so much about what you individually think as you’re representing the company and you have lots of shareholders and stakeholders and that has to be taken into account,” he said. “So I think both of us are a lot more careful about when we speak, that we’re speaking on behalf of the company, and if we are speaking individually, being very clear that that’s the case.”
As co-CEOs, he said, “we’re not just responsible for our own opinions but we’re responsible for the welfare of almost 80,000 (employees) and that we have a responsibility to them and our stakeholders.”
Despite the handful of incidents that have drawn criticism, the increased attention overall has not been a bad thing for Whole Foods, said Brian Yarbrough, an industry analyst for Edward Jones.
“When you’re producing record profits and you’re putting up same-store sales … that are two and three times (that of other conventional grocers), you’re going to get a lot of headlines,” he said. “I guess if there’s too much negative news, maybe it becomes a (public relations) problem, but I don’t think that’s the case. I think Whole Foods gets a better blend of good and bad (media coverage), at the end of the day.”
There’s also the reality that the reason Whole Foods’ profile has risen — and the reason it continues its swift growth as a company — is that it has a product that people want, Wolf said.
“People want a Whole Foods store most everywhere,” Wolf said. “So that’s really the bottom line — over the long haul, that’s the substance of the matter. If an employee makes a mistake and says something stupid here or whatever … that is going subside, because people want what the company really is — which is the product and the service from these excellent employees.”
The bottom line for the company’s leadership, Robb said, is that as Whole Foods navigates its higher profile, “we have to recognize that with that comes some responsibility and some accountability. And that’s not a bad thing.”
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