June 7, 2007
Whole Foods and Wild Oats Vow to Fight FTC in Court
The Federal Trade Commission on Tuesday announced that it was filing a lawsuit in federal district court to prevent Whole Foods from buying Wild Oats.
Jeffrey Schmidt, Director of the FTC’s Bureau of Competition, said in a press release put out by the agency, “Whole Foods and Wild Oats are each other’s closest competitors in premium natural and organic supermarkets, and are engaged in intense head-to-head competition in markets across the country. If Whole Foods is allowed to devour Wild Oats, it will mean higher prices, reduced quality, and fewer choices for consumers.”
In making its decision, the FTC rejected the basic notion that other grocers were in the same business as Whole Foods and Wild Oats. The result is that the two natural food chains have a much larger share of “channel” sales than they would if all stores selling natural and organic foods were included.
The FTC argued: “Whole Foods and Wild Oats are differentiated from conventional retail supermarkets in several critical respects. These include the breadth and quality of their perishables – produce, meats, fish, bakery items, and prepared foods – and the wide array of natural and organic products and services and amenities they offer. In addition, premium natural and organic supermarkets seek a different customer than do traditional grocery stores. Whole Foods’ and Wild Oats’ customers are buying something more than just the food product – they are seeking a shopping ‘experience,’ where environment can matter as much as price.”
John Mackey, chairman and CEO of Whole Foods Market, said in a press release, “We intend to vigorously challenge the FTC in court. The FTC has failed to recognize the robust competition in the supermarket industry, which has grown more intense as competitors increase their offerings of natural, organic and fresh products, renovate their stores and open stores with new banners and formats resembling Whole Foods Market. Evidently the FTC does not appreciate the many benefits for consumers of the proposed merger, including our plan to invest capital in and improve many of the stores currently owned by Wild Oats.”
Greg Mays, chairman and CEO of Wild Oats Markets, said in a release from that company, “While we disagree with the FTC’s position and believe it is without legal and factual merit, we are confident that, once presented with the facts, the Court will agree that this merger is pro-competitive and the FTC’s application for an injunction will be denied, thus allowing us to proceed forward with the merger. We intend to cooperate with Whole Foods in all respects and to vigorously challenge the FTC in Court.”
Discussion Questions: What is your reaction to the Federal Trade Commission’s decision to seek to block the Whole Foods/Wild Oats deal? Do you think a combined company would improve or diminish competition in the supermarket channel? What do you expect to happen after the parties have their day in court?
- FTC Seeks to Block Whole Foods Market’s Acquisition of Wild Oats Markets – Federal Trade Commission
- Whole Foods Market to Challenge FTC’s Opposition to Wild Oats Merger – Whole Foods Market, Inc.
- Wild Oats Markets Announces It Will Fully Cooperate with Whole Foods Market to Challenge the FTC’s Opposition to Merger – Wild Oats Markets, Inc./Business Wire
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Ron Burkle, who controls Wild Oats, is a very close business associate of Bill Clinton. Is it a coincidence that the FTC is trying to block the Whole Foods/Wild Oats merger?
Would I be the first to comment that Whole Foods is having difficulty sowing up (not sewing up) the Wild Oats deal? Oh, to be Whole and sowing Wild Oats again! Can I get an “Amen?”
Ron Burkle (a major stake-holder in Wild Oats) is now competing with Rupert Murdoch to buy Dow Jones (NYTimes, etc.). Which of these deals do you think is getting most of his attention?
The standard line argument of the deal reducing quality and raising prices doesn’t float.
FTC seems completely misguided here. This deal will allow Wild Oats stores to improve its merchandising and lower its prices, while providing better scale and improved efficiencies overall for Whole Foods (i.e. lower prices for shoppers).
I think Cheney’s behind this…he doesn’t want to see a “green” company succeed.
I am now convinced that the FTC does not understand the retail grocery business at all. I can’t believe that the FTC has allowed all of the supermarket mergers over the last 15 years or so–Safeway, American Stores, Albertsons then Supervalu–there are so few choices to shop now it’s a complete monopoly. There has been NO “economy of scale” which is what all of these HUGE GROCERY STORE CORPORATIONS promised consumers and all we have gotten is rising food prices and less choices.
And now the FTC is going to protect us? What a joke. Wild Oats has been a mess organizationally and lost money for years. I really think that Whole Foods would have finally turned the Wild Oats stores around and made money, improved the stores and given jobs to more people.
Has anyone been in a new Whole Foods? They are specialty food stores. I think the new formats make them high end grocery stores and this is why I think the FTC doesn’t understand the grocery business. They are only focusing on the word “natural” and the new Whole Foods in my area are a far cry from a nuts & berries type store.
The FTC should allow the merger so that customers have a choice between the CORPORTATE GROCERS (many of which are NOT run by people who understand groceries and food–but are into the business for the cash flow i.e. KK&R) and a food store run by team members and leaders who understand FOOD.
When I first started in the grocery business I worked for Vons (with about 75 stores) and the FTC wouldn’t allow Vons to buy the Shopping Bag chain (about 25 stores) because it would create a monopoly here in Southern California. Since that day back in the 60s I have been convinced that the FTC didn’t understand the grocery business and over these past 40 years they have never made a decision concerning the grocery business that made sense and with this ruling over Whole Foods and Wild Oats I don’t think the FTC will EVER understand the grocery business. It’s a shame or should I say, sham!
Meanwhile, the grocery industry at large can continue to improve their organic and natural food assortments; even the ones that have been able to secure Wild Oats products. Whilst the founders of the industry shall remain subject to playing catch up in the retail positioning war–pioneers with arrows in their backs–“if they don’t get you the first time around they are making sure they do the next time.”
As a consumer, I disagree with most of the panelists and support the FTC. Whole Foods is not a “grocery store.” It is a “wellness” store and aside from Wild Oats, the only competitor in Chicago I can think of is a small health and vitamin shop, Sherwyn’s. A few hundred SKUs of organic foods does not make a competitor to Whole Foods. What about the homeopathic remedies? The yoga and Pilates merchandise? The environmentally conscious this and that? People who shop regularly at Whole Foods would tear their hair out trying to shop at Dominick’s or Jewel or Target or Wal-Mart. Wild Oats, however, does give them an alternative, and it is good that the FTC’s decision gives them a choice.
The FTC challenge is based heavily on a very arguable definition of the competitive sphere in question. In other words, are we talking about competition just between large organic supermarket chains or all food retailing, or something in-between? Federal judges are likely to hear or dismiss the case depending on the answer to this question.
I’m no anti-trust lawyer, but it seems self-evident that WF and WO are not the only places where shoppers can obtain organic or locally-produced foods. In fact, in an ironic twist, it seems that organic product prices may tend to remain higher in part because of competition. That is, Wal-Mart, Kroger, Safeway and many others are competing to purchase relatively scarce ingredients for their growing organics programs. This sustains prices at the farm and pantry.
It appears to me that some unqualified low paid government workers at the FTC think they know more than us BrainTrust Panelists. Lots of good comments above. Is there really that much overlap? Maybe in a few markets. If there is monopoly, well, Whole Foods has earned it. Higher prices? Could they get much higher at Whole Paycheck anyway?
Basically, the big challenge that Whole Foods et al will have is that they are doing market research for the large retailers who are all studying and now attempting to copy their success in fresh, organic, and wellness. What happens when that becomes a retailing commodity?
Our beloved FTC obviously continues not to get it….
A monopoly? A MONOPOLY? Cripes, even Wal-Mart sells this stuff now! Also, just ask any supermarket operator if Whole Foods operates in a different market and isn’t really a competitor. Listen in on the investor conference calls of major supermarket chains and see how much Whole Foods is discussed. Oh, please. When I think of all the questionable mergers the FTC has allowed without batting its baby blues, and then consider its attempt to block this one, well, it just boggles the mind. I didn’t think the FTC could surprise me anymore, but it just did it again.
More and more ‘regular grocers’ have started increasing floorspace allocated to natural food brands (Stop & Shop, Shaws), which should lessen the market share of Whole Foods and Wild Oats. That said, as of now, of the roughly $15 Billion industry (‘Organic food goes mass market’ Steve Gray, WSJ May 2006), the combined share of the two is approximately 48%. That alone may not be reason enough to raise antitrust flags. There could of course be other factors not known yet that may be motivating the FTC action (see the Forbes article).
I personally have trouble with the logic of the FTC’s objections in this case. (By the way, some “full disclosure” that my brother is an FTC staff member, although he does not work in the Bureau of Competition.) The market share controlled by the combination of Whole Foods and Wild Oats needs to be measured on a market-by-market basis. The decision does not seem to weigh the amount of market share in “organic” or “natural” foods being driven by traditional grocery retailers, who have wisely capitalized on this growing business. Even supercenter retailers such as Target and Wal-Mart have made a point in their merchandising and marketing that organics are a key strategy.
More to the point…if the FTC can approve the combination of Macy’s and May Company, on the premise that their combined share is part of a much broader competitive landscape ranging from Target to Kohl’s to JCPenney, why are they taking such a contrary point of view about the Whole Foods/Wild Oats merger?
One might be tempted to conclude that the FTC doesn’t understand the food business very well….
A Whole Foods/Wild Oats combination can be dangerous for the health minded consumer, both in the short and long runs.
First, WF is scheduled to close those WO which are located nearby WF markets. That will lead to higher prices in the remaining store.
Second, WF is not subject to any direct competition by traditional supermarket operators be they Safeway, Sunflower (Supervalu), Publix, Great A&P, Royal Ahold, or Food Lion.
Third, if they were really serious about open competition, they WF would have allowed WO to honor its agreement to have WO organic products sold in Pathmark stores.
Four, WF is attempting to conquer the world, one continent at a time.
Whole Foods wants to prevent the traditionals from gaining even the most minimal share of the organic/natural foods segment from them.
They act like a monopolist to me. If it smells, tastes, or looks like monopoly power, it should be denied.
In the past year, Whole Foods began running ads in the New York/New Jersey metro area to convince consumers its prices do not warrant its “Whole Paycheck” label. The chain has done this in a market without any Wild Oats stores. It’s clear Whole Foods recognizes that its competition is not just other natural food grocers. You would have thought the FTC would be able to see that, as well.
Speaking as consumers of organic products in northern New Jersey, we can tell you that local (a drive of 15 minutes or less) shopping choices for organic items include Trader Joe’s, Kings Super Markets, Pathmark, A&P, ShopRite, Target, Back to Nature (local health food store) and Whole Foods. We have made at least one purchase at each of the businesses named within the past three months. The FTC’s decision makes clear that it does not understand the reality on the ground.
Even if the FTC’s conclusion that the merger would corner the natural foods market is somewhat true at present, it certainly wouldn’t be the case for long. To peak into the future, one only need look at the present situation in the UK, where Whole Foods’ 80,000 sq. ft. London store has just opened. Although making waves, most in the know don’t expect the chain to have a huge competitive advantage there because (as per Reuters), “Britain is the world’s most mature and competitive market for organic food retailing with leader Tesco, number two grocer Asda Wal-Mart and Marks & Spencer already offering thousands of organic lines at increasingly lower prices.”
How long before the U.S. market offers Whole Foods/Wild Oats similar competition?
I have to agree that Whole Foods and Wild Oats are competing for the same shopper–or you could say–the same shopping occasion.
Other grocers, as much as I love them, have had to play a little catch-up in this area. Conventional grocers in some cases are taking back a few categories from Natural Food Markets, and in other cases, are converting sales from conventional products to organic products.
But in the main, I have to agree that the merger of these two chains would be diminishing competition in the space…at least in the short run. But this is like playing a game of slappy-jack: if you slap it down in one area it will only pop up in another. Green and Organic grocery is here to stay and we haven’t seen all its myriad forms yet.
This is difficult in that I can see both sides of this argument. By combining there would be the chance of a monopoly because of the way that these two companies approach this niche market. Therefore, the consumer would be denied having two companies competing in this specialty market segment. An analogy might be if Starbucks and Caribou Coffees were to merge, would that create a monopoly in the gourmet coffee segment? There is enormous competition in coffee sales outlets but not as much in the gourmet segment. Is that something that needs to be protected?
On the other hand, most of the organic products that they sell are sold in traditional supermarkets and grocery chains. Also by merging, they might have the additional resources to further expand the concept to more markets thus favorably impacting the consumer.
It will be interesting to see how this plays out. I was beginning to think that the FTC had either gone to sleep or has been so muzzled that it was no longer trying to do its job. Maybe this move is just to make us think that it is still a viable organization and not realize how ineffective it has become.
I may be a day late on commenting, but I have to respond to those posters who think the FTC is right. Chicago, mentioned by one, is home to a dozen or so WFMs (with several more on the way). Yes, Sherwyn’s is a good source for supplements, but this merger doesn’t make Sherwyn’s go away. And Sherwyn’s isn’t the only indy store in Chicagoland (Southtown Health Foods and Hyde Park Co-op come to mind). The only submarket that might feel the lack of competition is Evanston, where Whole Foods and Wild Oats are about 4 blocks apart, and of course the Wild Oats would close there. Yoga and Pilates items are as close as the nearest Target (there’s a new one in South Loop, where WFM is opening soon)–they carry the same Gaiam line that WFM carries. This poster seems to think that people seeking “wellness items” at Whole Foods don’t shop elsewhere. This is absurd–everyone I know shops in multiple stores, and in a city like Chicago, wellness items are available in a lot of neighborhoods. It isn’t 1950, you know.
In Denver, where I live, not only would the merged company have 15 locations (minus two or three Oats stores that I predict WFM would close), but we have the 25-store Vitamin Cottage Natural Grocers chain (with about 15 in the metro area), where prices are already significantly lower than those of Wild Oats or Whole Foods on identical branded items. The FTC seems to have forgotten about the Vitamin Cottages, Sprouts, Sunflowers, Earth Fares, etc. of the world. A lot of the “natural grocery” competitor set is privately held (as is Trader Joe’s), and so flies under the radar. And they seem to have completely missed the boat on such developments as Kroger’s Fresh Fare, Bashas’ Ike’s concept, or Publix’s GreenWise–natural-ish formats created by conventional stores to take business away from Whole Foods specifically (as Publix has even said publically if I’m not mistaken).
I can’t think of a single major market where this merger will result in decreased competition. Perhaps in a few minor markets (Portland Maine, San Antonio, Princeton, Kansas City, Omaha, Henderson, NV) it might make sense for the combined company to divest a few locations to maintain competition in the supernaturals segment, but in most places the competition is quite robust between Whole Foods and the conventionals and will remain so. Also, on items I’ve spot checked, I’ve found several times that WFM’s prices are lower than some of the identical items at Wild Oats.
I’m completely in agreement with the argument that this is about the GOP-controlled FTC sticking it to Ron Burkle, major fund raiser for Hillary ’08 (Bill is not only a friend–he’s on the Board of Directors of Yucaipa). And John Mackey is no Republican either–he’s a confirmed and outspoken Libertarian.
I have just come across an interesting study by Cooperative Development Services of Madison WI dated April, 2006.
The study, in describing the Organic Food channel distribution system in 2003, has the natural food grocery chain representing 19 percent of total sales and the mass market grocery, 37 percent.
The study states that the natural food grocery chain consists of two players, Whole Foods and Wild Oats.
So, if they merge, Whole Foods would be selling at a minimum 19 percent of all organic food. They would be the largest player, period.
No other player in the 37 percent mass market grocery category has 19 percent of this market, nor would any of the natural food independent groceries nor the remaining big boxes or wholesale clubs.
So yes, Whole Foods, becoming the biggest player in this sector, could indeed dictate organic food prices.
Definitely food for thought!!!
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Ron Burkle, who controls Wild Oats, is a very close business associate of Bill Clinton. Is it a coincidence that the FTC is trying to block the Whole Foods/Wild Oats merger?
Would I be the first to comment that Whole Foods is having difficulty sowing up (not sewing up) the Wild Oats deal? Oh, to be Whole and sowing Wild Oats again! Can I get an “Amen?”
Ron Burkle (a major stake-holder in Wild Oats) is now competing with Rupert Murdoch to buy Dow Jones (NYTimes, etc.). Which of these deals do you think is getting most of his attention?
The standard line argument of the deal reducing quality and raising prices doesn’t float.
FTC seems completely misguided here. This deal will allow Wild Oats stores to improve its merchandising and lower its prices, while providing better scale and improved efficiencies overall for Whole Foods (i.e. lower prices for shoppers).
I think Cheney’s behind this…he doesn’t want to see a “green” company succeed.
I am now convinced that the FTC does not understand the retail grocery business at all. I can’t believe that the FTC has allowed all of the supermarket mergers over the last 15 years or so–Safeway, American Stores, Albertsons then Supervalu–there are so few choices to shop now it’s a complete monopoly. There has been NO “economy of scale” which is what all of these HUGE GROCERY STORE CORPORATIONS promised consumers and all we have gotten is rising food prices and less choices.
And now the FTC is going to protect us? What a joke. Wild Oats has been a mess organizationally and lost money for years. I really think that Whole Foods would have finally turned the Wild Oats stores around and made money, improved the stores and given jobs to more people.
Has anyone been in a new Whole Foods? They are specialty food stores. I think the new formats make them high end grocery stores and this is why I think the FTC doesn’t understand the grocery business. They are only focusing on the word “natural” and the new Whole Foods in my area are a far cry from a nuts & berries type store.
The FTC should allow the merger so that customers have a choice between the CORPORTATE GROCERS (many of which are NOT run by people who understand groceries and food–but are into the business for the cash flow i.e. KK&R) and a food store run by team members and leaders who understand FOOD.
When I first started in the grocery business I worked for Vons (with about 75 stores) and the FTC wouldn’t allow Vons to buy the Shopping Bag chain (about 25 stores) because it would create a monopoly here in Southern California. Since that day back in the 60s I have been convinced that the FTC didn’t understand the grocery business and over these past 40 years they have never made a decision concerning the grocery business that made sense and with this ruling over Whole Foods and Wild Oats I don’t think the FTC will EVER understand the grocery business. It’s a shame or should I say, sham!
Meanwhile, the grocery industry at large can continue to improve their organic and natural food assortments; even the ones that have been able to secure Wild Oats products. Whilst the founders of the industry shall remain subject to playing catch up in the retail positioning war–pioneers with arrows in their backs–“if they don’t get you the first time around they are making sure they do the next time.”
As a consumer, I disagree with most of the panelists and support the FTC. Whole Foods is not a “grocery store.” It is a “wellness” store and aside from Wild Oats, the only competitor in Chicago I can think of is a small health and vitamin shop, Sherwyn’s. A few hundred SKUs of organic foods does not make a competitor to Whole Foods. What about the homeopathic remedies? The yoga and Pilates merchandise? The environmentally conscious this and that? People who shop regularly at Whole Foods would tear their hair out trying to shop at Dominick’s or Jewel or Target or Wal-Mart. Wild Oats, however, does give them an alternative, and it is good that the FTC’s decision gives them a choice.
The FTC challenge is based heavily on a very arguable definition of the competitive sphere in question. In other words, are we talking about competition just between large organic supermarket chains or all food retailing, or something in-between? Federal judges are likely to hear or dismiss the case depending on the answer to this question.
I’m no anti-trust lawyer, but it seems self-evident that WF and WO are not the only places where shoppers can obtain organic or locally-produced foods. In fact, in an ironic twist, it seems that organic product prices may tend to remain higher in part because of competition. That is, Wal-Mart, Kroger, Safeway and many others are competing to purchase relatively scarce ingredients for their growing organics programs. This sustains prices at the farm and pantry.
It appears to me that some unqualified low paid government workers at the FTC think they know more than us BrainTrust Panelists. Lots of good comments above. Is there really that much overlap? Maybe in a few markets. If there is monopoly, well, Whole Foods has earned it. Higher prices? Could they get much higher at Whole Paycheck anyway?
Basically, the big challenge that Whole Foods et al will have is that they are doing market research for the large retailers who are all studying and now attempting to copy their success in fresh, organic, and wellness. What happens when that becomes a retailing commodity?
Our beloved FTC obviously continues not to get it….
A monopoly? A MONOPOLY? Cripes, even Wal-Mart sells this stuff now! Also, just ask any supermarket operator if Whole Foods operates in a different market and isn’t really a competitor. Listen in on the investor conference calls of major supermarket chains and see how much Whole Foods is discussed. Oh, please. When I think of all the questionable mergers the FTC has allowed without batting its baby blues, and then consider its attempt to block this one, well, it just boggles the mind. I didn’t think the FTC could surprise me anymore, but it just did it again.
More and more ‘regular grocers’ have started increasing floorspace allocated to natural food brands (Stop & Shop, Shaws), which should lessen the market share of Whole Foods and Wild Oats. That said, as of now, of the roughly $15 Billion industry (‘Organic food goes mass market’ Steve Gray, WSJ May 2006), the combined share of the two is approximately 48%. That alone may not be reason enough to raise antitrust flags. There could of course be other factors not known yet that may be motivating the FTC action (see the Forbes article).
I personally have trouble with the logic of the FTC’s objections in this case. (By the way, some “full disclosure” that my brother is an FTC staff member, although he does not work in the Bureau of Competition.) The market share controlled by the combination of Whole Foods and Wild Oats needs to be measured on a market-by-market basis. The decision does not seem to weigh the amount of market share in “organic” or “natural” foods being driven by traditional grocery retailers, who have wisely capitalized on this growing business. Even supercenter retailers such as Target and Wal-Mart have made a point in their merchandising and marketing that organics are a key strategy.
More to the point…if the FTC can approve the combination of Macy’s and May Company, on the premise that their combined share is part of a much broader competitive landscape ranging from Target to Kohl’s to JCPenney, why are they taking such a contrary point of view about the Whole Foods/Wild Oats merger?
One might be tempted to conclude that the FTC doesn’t understand the food business very well….
A Whole Foods/Wild Oats combination can be dangerous for the health minded consumer, both in the short and long runs.
First, WF is scheduled to close those WO which are located nearby WF markets. That will lead to higher prices in the remaining store.
Second, WF is not subject to any direct competition by traditional supermarket operators be they Safeway, Sunflower (Supervalu), Publix, Great A&P, Royal Ahold, or Food Lion.
Third, if they were really serious about open competition, they WF would have allowed WO to honor its agreement to have WO organic products sold in Pathmark stores.
Four, WF is attempting to conquer the world, one continent at a time.
Whole Foods wants to prevent the traditionals from gaining even the most minimal share of the organic/natural foods segment from them.
They act like a monopolist to me. If it smells, tastes, or looks like monopoly power, it should be denied.
In the past year, Whole Foods began running ads in the New York/New Jersey metro area to convince consumers its prices do not warrant its “Whole Paycheck” label. The chain has done this in a market without any Wild Oats stores. It’s clear Whole Foods recognizes that its competition is not just other natural food grocers. You would have thought the FTC would be able to see that, as well.
Speaking as consumers of organic products in northern New Jersey, we can tell you that local (a drive of 15 minutes or less) shopping choices for organic items include Trader Joe’s, Kings Super Markets, Pathmark, A&P, ShopRite, Target, Back to Nature (local health food store) and Whole Foods. We have made at least one purchase at each of the businesses named within the past three months. The FTC’s decision makes clear that it does not understand the reality on the ground.
Even if the FTC’s conclusion that the merger would corner the natural foods market is somewhat true at present, it certainly wouldn’t be the case for long. To peak into the future, one only need look at the present situation in the UK, where Whole Foods’ 80,000 sq. ft. London store has just opened. Although making waves, most in the know don’t expect the chain to have a huge competitive advantage there because (as per Reuters), “Britain is the world’s most mature and competitive market for organic food retailing with leader Tesco, number two grocer Asda Wal-Mart and Marks & Spencer already offering thousands of organic lines at increasingly lower prices.”
How long before the U.S. market offers Whole Foods/Wild Oats similar competition?
I have to agree that Whole Foods and Wild Oats are competing for the same shopper–or you could say–the same shopping occasion.
Other grocers, as much as I love them, have had to play a little catch-up in this area. Conventional grocers in some cases are taking back a few categories from Natural Food Markets, and in other cases, are converting sales from conventional products to organic products.
But in the main, I have to agree that the merger of these two chains would be diminishing competition in the space…at least in the short run. But this is like playing a game of slappy-jack: if you slap it down in one area it will only pop up in another. Green and Organic grocery is here to stay and we haven’t seen all its myriad forms yet.
This is difficult in that I can see both sides of this argument. By combining there would be the chance of a monopoly because of the way that these two companies approach this niche market. Therefore, the consumer would be denied having two companies competing in this specialty market segment. An analogy might be if Starbucks and Caribou Coffees were to merge, would that create a monopoly in the gourmet coffee segment? There is enormous competition in coffee sales outlets but not as much in the gourmet segment. Is that something that needs to be protected?
On the other hand, most of the organic products that they sell are sold in traditional supermarkets and grocery chains. Also by merging, they might have the additional resources to further expand the concept to more markets thus favorably impacting the consumer.
It will be interesting to see how this plays out. I was beginning to think that the FTC had either gone to sleep or has been so muzzled that it was no longer trying to do its job. Maybe this move is just to make us think that it is still a viable organization and not realize how ineffective it has become.
I may be a day late on commenting, but I have to respond to those posters who think the FTC is right. Chicago, mentioned by one, is home to a dozen or so WFMs (with several more on the way). Yes, Sherwyn’s is a good source for supplements, but this merger doesn’t make Sherwyn’s go away. And Sherwyn’s isn’t the only indy store in Chicagoland (Southtown Health Foods and Hyde Park Co-op come to mind). The only submarket that might feel the lack of competition is Evanston, where Whole Foods and Wild Oats are about 4 blocks apart, and of course the Wild Oats would close there. Yoga and Pilates items are as close as the nearest Target (there’s a new one in South Loop, where WFM is opening soon)–they carry the same Gaiam line that WFM carries. This poster seems to think that people seeking “wellness items” at Whole Foods don’t shop elsewhere. This is absurd–everyone I know shops in multiple stores, and in a city like Chicago, wellness items are available in a lot of neighborhoods. It isn’t 1950, you know.
In Denver, where I live, not only would the merged company have 15 locations (minus two or three Oats stores that I predict WFM would close), but we have the 25-store Vitamin Cottage Natural Grocers chain (with about 15 in the metro area), where prices are already significantly lower than those of Wild Oats or Whole Foods on identical branded items. The FTC seems to have forgotten about the Vitamin Cottages, Sprouts, Sunflowers, Earth Fares, etc. of the world. A lot of the “natural grocery” competitor set is privately held (as is Trader Joe’s), and so flies under the radar. And they seem to have completely missed the boat on such developments as Kroger’s Fresh Fare, Bashas’ Ike’s concept, or Publix’s GreenWise–natural-ish formats created by conventional stores to take business away from Whole Foods specifically (as Publix has even said publically if I’m not mistaken).
I can’t think of a single major market where this merger will result in decreased competition. Perhaps in a few minor markets (Portland Maine, San Antonio, Princeton, Kansas City, Omaha, Henderson, NV) it might make sense for the combined company to divest a few locations to maintain competition in the supernaturals segment, but in most places the competition is quite robust between Whole Foods and the conventionals and will remain so. Also, on items I’ve spot checked, I’ve found several times that WFM’s prices are lower than some of the identical items at Wild Oats.
I’m completely in agreement with the argument that this is about the GOP-controlled FTC sticking it to Ron Burkle, major fund raiser for Hillary ’08 (Bill is not only a friend–he’s on the Board of Directors of Yucaipa). And John Mackey is no Republican either–he’s a confirmed and outspoken Libertarian.
I have just come across an interesting study by Cooperative Development Services of Madison WI dated April, 2006.
The study, in describing the Organic Food channel distribution system in 2003, has the natural food grocery chain representing 19 percent of total sales and the mass market grocery, 37 percent.
The study states that the natural food grocery chain consists of two players, Whole Foods and Wild Oats.
So, if they merge, Whole Foods would be selling at a minimum 19 percent of all organic food. They would be the largest player, period.
No other player in the 37 percent mass market grocery category has 19 percent of this market, nor would any of the natural food independent groceries nor the remaining big boxes or wholesale clubs.
So yes, Whole Foods, becoming the biggest player in this sector, could indeed dictate organic food prices.
Definitely food for thought!!!