Transcript whole foods/wild oats merger

WHOLE FOODS/WILD OATS
MERGER:
sowing the seeds for market growth
company history
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Founded by CEO John Mackey
Opened doors in September 1980
“The world’s leading organic and natural foods retailer”
- produce
- grocery
- beer
- body care
- floral
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- meat and poultry
- bakery
- wine
- pet products
- household products
- seafood
- prepared foods
- cheese
- nutritional supplements
- alternative pharmacy
2007: #5 in Fortune’s “100 Best Companies to Work For”
Today: 270 stores throughout the United States, Canada
and the U.K.
growth strategy
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To expand through a combination of new-store openings
and acquisitions of existing stores:
Year
Acquisition
Specialties
Regional Markets
1991
Wellspring Grocery
home-grown; vegetarian; fish; meat; poultry
North Carolina
1992
Bread & Circus
natural foods; wooden toys
Massachusetts, Rhode Island
1993
Mrs. Gooch’s
lack of preservatives, harmful chemicals, refined sugar, artificial
coloring/flavorings white flour, alcohol, caffeine
California: Los Angeles, Hermosa Beach,
Northridge, Sherman Oaks, Glendale,
Beverly Hills, Thousand Oaks
1996
Fresh Fields
natural food supermarket
Washington, Baltimore; Philadelphia; New York,
New Jersey, Connecticut; Chicago
1997
Bread of Life
juice bar; full-service restaurant
Northern California; Florida
1997
Amrion
vitamins; pharmaceuticals
Colorado
1997
Merchant of Vino
wine; gourmet; produce; meat; seafood; nutrition; body care
Greater Detroit
1997
Allegro Coffee
organic coffees and teas
Colorado
1999
WholePeople.com/Gaiam.com
online food store
Nationwide
2000
Nature’s Heartland
natural food supermarket
Boston
2000
Food for Thought
community-sponsored markets
Northern California
2001
Harry’s Farmers Market
produce; gourmet; bakehouse
Atlanta
2004
Fresh & Wild
healthy and natural food retail
London, United Kingdom
2005
Tiny Trapeze Confections
all-natural organic candy
Boston
a company with a mission
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Core Values
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Selling the highest quality natural and organic products available
Satisfying and delighting our customers
Supporting team member happiness and excellence
Creating wealth through profits and growth
Caring about our communities and our environment
Creating ongoing win-win partnerships with our suppliers
“Declaration of Interdependence”
Philanthropy
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The Whole Planet Foundation
Community giving
Eco-consciousness
competition & consumers
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Competitive businesses
 Natural foods supermarkets (Trader Joe’s)
 Conventional and specialty supermarkets
(Safeway, Kroger, SuperValu, Stop & Shop)
 Super center grocery stores (Wal-Mart, Target)
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General consumer demographic:
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Eco-friendly
Wealthy
Educated
merger & acquisition law
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The Sherman Antitrust Act (1890)
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“every contract, combination or conspiracy in restraint of trade”
The Clayton Antitrust Act (1914)
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Protection against price discrimination, tying contracts, interlocking
directorates and allowing board members to acquire stock in
competing firms
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The Federal Trade Commission Act (1914)
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The Hart-Scott-Rodino Antitrust Improvements Act (1976)
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Premerger Notification Program: gave federal government
authority to dissolve mergers prior to an agreement
the merger & the FTC
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Reasons for merging
The FTC steps in
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Why? In an email to the Board of Directors, Mackey wrote:
“OATS remains a relevant competitor. By buying them we will
greatly enhance our comps over the next few years and will avoid
nasty price wars in Portland (both Oregon and Maine), Boulder,
Nashville, and several other cities which will harm our gross
margins and profitability. OATS may not be able to defeat us but
they can still hurt us. Furthermore we eliminate forever the
possibility of Kroger, SuperValu, or Safeway using their
brand equity to launch a competing national natural/organic
food chain to rival us.”
the FTC’s case against whole foods
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Violation of Section 7 of the Clayton Act
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Violation of Section 5 of the FTC Act
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Prohibits the acquisition of another company
“...where the effect of such acquisition may be to substantially lessen
competition between the corporation whose stock is so acquired and
the corporation making the acquisition…or tend to create a monopoly
of any line of commerce”
Protects against “unfair methods of competition”
Filed temporary restraining order against Whole Foods
blocking the merger with Wild Oats
whole foods’ response
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Legal filing
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Admitted to the language quoted by the FTC but denied all
other allegations
Weblog
Posted updated information on the CEO’s Blog
 Intended to maintain transparency
 Allowed readers to post comments and questions
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News releases
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Provided continuous developments in the case
the plot thickens: forum scandal
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Mackey’s alter-ego
Posted on Yahoo! Finance message boards for eight years
under the alias ‘rahodeb’
 Known as ‘the Whole Foods cheerleader’
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Sock-puppeting
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the act of creating a fake online identity to praise, defend
or create the illusion of support for one’s self, allies or
company
SEC launches investigation to ensure Mackey didn’t
reveal private company information
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Mackey suspends his own blog
public & media response
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Discussion of ethics in the news
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Controversy in the blogosphere
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Apparent lack of criticism in mainstream media
coverage
 Media declared it “forgivable”
one year later: “back to blogging”
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May 2008: SEC investigation concluded and
Mackey was cleared of any allegations
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The CEO’s Blog resumed with a post explaining the
reasons for his actions. Topics included:
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Why post online?
Why a screen name?
Clearing up the confusion
Key lessons
Moving on
aftermath
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August 16, 2007: U.S. District Court overturned
the FTC’s movement to block the merger
Whole Foods Market acquired Wild Oats for
$565 million
Gained immediate entry into new markets
Increase in sales
July 2008: initiated the “Whole Deal” program
December 2008: latest developments
relevant theories
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Grunig’s Four Models of Public Relations
 Publicity
 Public information
 One-way asymmetrical
 Two-way symmetrical
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Dominant Coalition
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Transparency & the Ethical DecisionMaking Process
food for thought
1.
With your own knowledge of ethical standards in public relations and
your own principles, decide whether or not Mackey’s behavior was
unethical. Why or why not?
2.
How could Whole Foods have better utilized the Page Principles to solve
either of its business problems?
3.
Would the ethical issue behind Mackey’s sock-puppeting affect your
decision to work for this company?
4.
Why do you think Whole Foods' board of directors kept Mackey in his
current position?
5.
Do you feel that the general public (via blogs, word of mouth, etc.) helped
or hindered the acquisition?
6.
Why do you think there was little outrage over Mackey’s sock-puppeting –
either in the media or from customers and investors?
7.
Discuss the role of reputation when organizations face
challenges or crises.
thank you
Comments? Questions?