Whole Foods has become a go-to grocery shopping place for many people, as they provide great quality products which are free from preservatives. When you walk into Whole Foods, there are high chances that you are going to see an Amazon sign up somewhere. This surely might pop the question, is Whole Foods owned by Amazon?
Well, if you didn’t already know Whole Foods has been acquired by Amazon since 2017. At a whopping cost of about $13.7 billion, Whole Foods is now under amazon and has since seen a few changes. The story of Whole Foods is an interesting one, as it did start from the bottom and made its way up to the top.
The ride wasn’t easy, and there were a lot of hurdles along the way. Whole Foods started from a small store in Austin, Texas, and is now under the commercial giants of Amazon. The journey is one of hard work and perseverance. Let us take a look at how a college dropout built an empire, later to be owned by Amazon, from scratch.
How Did Whole Foods Start?
Whole Foods started from a gap in the market, a market that lacked accessible, healthy food. It was easier to get mac and cheese and hamburgers regularly, while a lot of the vegetables and fruits had artificial colorings, preservatives, etc., which did more harm than good. Whole Foods began to fill this gap.
SaferWay: The Beginning
The very first Whole Foods Store, then called SaferWay, was started in a small house in Austin, Texas. The store was founded by John Mackey and his girlfriend Renee Lawson Hardy. Mackey had grown up eating boxed dinners and cereal breakfasts. He never even realized that his lifestyle was unhealthy or there was anything wrong with it. This was what every kid had.
It was not until he was 23 and started work in a vegetarian co-op, that he started to become interested in the idea of healthy eating and a vegetarian diet. Bored from college classes, he became more and more interested in real-life business ventures and ideas. He started to think of ways he could make something on his own.
As a result of his experience working at the vegetarian co-op, he noticed the gap in the market when it came to healthy, preservative-free, and accessible fresh produce. Fitness culture was not as prevalent as it is now, and in some ways, Whole Foods did contribute to the start of this “trend”.
Once Mackey dropped out of college, he was filled with ideas and was excited to start work with his experience in organic eating gained from the co-op. With just $45, 000 Mackey and his girlfriend started their first natural grocery store and named it SaferWay. SaferWay’s primary demographic was the Austin hippies and they didn’t sell meat or anything with sugar.
The Birth of Whole Foods Market
After running the store for about two years, Mackey and Hardy merged with two other grocery store owners, Craig Weller and Mark Skiles. And on the 20th of September, 1980 the first Whole Foods Market was opened. With the initial motive of selling fresh, healthy products they now expanded to sell meat, wine, and even beer.
Unlike many other new businesses, Whole Foods did very well from the start. Word got around, and people wanted healthy alternatives to their box dinners of mac and cheese every night. People got more and more health-conscious, and Whole Foods was an accessible way to meet their needs. This is probably why they did not even need much advertising back in the day.
The Flood of ‘81
While the starting may have been relatively smooth, the rest of the ride was not. When Mackey and Hardy first opened the store, they rented out a space that was a hundred-year flood zone. This meant that every hundred years or so, the area would flood. Being short on money, and desperate to start something new Mackey took the risk.
Unfortunately, Mackey did experience the hundredth-year in his lifetime. In 1981, during the Spring the floor flooded and drowned the store. Sewage was everywhere, and all the inventory was soaked and ruined. There were even looters who came to trash the store. Mackey tried to save what he could of the cash, but there was not much to do.
There was no insurance to back them up and they did not have enough money to save the business. They thought that would be the end of Whole Foods. But surprisingly enough, everyone in the community stepped up. Many customers helped to clean up, banks and investors helped with the financial issues and even employees worked for free for a while.
With a united effort, Whole Foods came back to life. That’s the amazing thing about business, when people like the service, they will go out of their ways to help. That is how the business survived the flood and stood back up to give the community what it needed.
How Did Amazon Acquire Whole Food?
The flood of 81 made Mackey rethink his approach. He was beginning to think of expanding his store, to avoid putting all his eggs in one basket. It was like a safety blanket. If one store were to fail for some reason (Like it almost did during the flood), there would be others to back them up.
He began to look for investors to expand his business. However, despite the success of the business in their local community, investors failed to see any potential in Whole Foods and refused to put in money into what seemed like a “hippie store”. They thought the general population would not be interested in healthy living alternatives to fast food.
Eventually, though, Mackey managed to raise enough money to expand. 34% of Whole Foods was sold for about $8.5 million valuations. This was almost 20% of the sales that they were making at the time, and Mackey did not want to sell over more of his hard-earned money.
He decided therefore to go public with Whole Foods in 1992. He ended up raising $28 million, and the company was then valued at $100 million. With this approach, Mackey was able to open a lot of new locations all over the country.
As health and fitness became more and more trendy, Whole Foods also became more and more successful. Currently, there are about 503 stores in all of the US, and this has also been due to the acquisition by Amazon, which helped Whole Foods expand even faster than it was doing before.
So how did Amazon come into the picture? Whole Foods did grow more and more until 2013 when it reached a peak stock price of about $60. This is when competitors started coming in, and there were a lot of different options when it came to healthy food shopping. Retail giants such as Kroger and Walmart became Whole Foods’ toughest competition.
Even now, with many different local businesses and subscription services that provide fresh produce door to door, Whole Foods is not the only cool kid on the block. Mackey knew that when you are good, people will try to copy you. And that was inevitable. With all this new competition, Whole Foods began to suffer.
Investors began to pressure Mackey into selling Whole Foods, but this was Mackey’s child. He was the only founding member left, and he did not want to sell. But at the same time, Mackey is an amazing businessman and he understands the trade. He understands that to let a business grow, means you have to let it evolve and change with time and changing needs.
That is when Amazon came into the picture. Amazon wanted to dip its hands into groceries and expand its customer base. While Amazon has very different ideals from Whole Foods, Whole Foods still needed an edge to keep up with the growing number of competitors.
Whole Foods’ mission was to change how Americans eat, to guide them to a healthier lifestyle. They wanted to provide sustainable, fresh, healthy, and accessible food options to everyone. They promote fair harvesting and meat that is ethically sourced.
Acquisition by Amazon might change some of their initial ideals, because Amazon is an efficiency and convenience-driven company. But Mackey decided to save his child and let Whole Foods grow. He hopes his child will grow even without him, even if it comes at a price.
What Are the Changes that Amazon Bought to Whole Foods?
The acquisition by Amazon meant a few changes to the business model of Whole Foods. Amazon brought with it changes at all levels, some of which have been received well, while others are a little more questionable.
With online shopping becoming more and more prevalent, a huge portion of sales does come from home deliveries and e-commerce. Amazon being one of the biggest e-commerce websites out there, should prove to benefit Whole Foods when it comes to the online customer base.
However, Whole Foods was partnered with Instacart in 2014 for their home deliveries. And even a year before Amazon came in, the partnership was agreed to be extended to another 5 years. Even though Amazon agreed to keep Instacart in charge of deliveries, in the beginning, it was pretty evident that this relationship would soon die out.
In 2019, Instacart services were slowly faded out from the Whole Foods experience. Instead, customers can now use Amazon Prime Now to get their groceries delivered in as little as 2 hours, especially within the hours of 8 am to 10 pm. While Whole Foods is still pretty behind in the game, this can only mean good things and increased sales for them.
Whole Foods alone did not offer a lot of discounting using a membership system. But with Amazon Prime, came an increase in sales and in-store discounts. This means Amazon Prime members get to see a lot more of the signature blue and yellow sale stickers on a lot of the items and even free delivery.
As Whole Foods was more catered towards quality products and sustainable methods, this often meant a higher price for their products. But with Amazon, prices have been significantly lowered and this proved to be a very good move as it made Whole Foods even more accessible to people. Its revenue growth increased up to 4.4% from just 0.6% in 2017.
There have been changes in the corporate level as well, with the acquisition by Amazon. Operations have been centralized to the Austin, Texas headquarters.
This also includes marketing operations and means certain positions were cut off. Some of the regional marketing staff were eliminated. This impacted the locals and the stores too.
Changes in Inventory Management System
There have also been in-store management system changes, which has upset some customers in certain areas. Employees now often bring items from the delivery truck directly to the shelves, skipping the storeroom entirely. This, of course, means at certain times stocks run out and there are shortages in the store.
While these empty shelves have disappointed customers, and often caused arguments and bad behavior to break out, this positively impacted the stores in some ways too. Skipping store rooms means there is less spoilage, and of course, reduced costs. This also forces employees to become more customer-facing and increase interactions.
I hope now you’ve got a proper answer to your question, is Whole Foods owned by Amazon? Starting from that small store in Austin, to now multiple branches all over the US and even the UK, Whole Foods has had a long, successful journey. Through these many changes, there have been different hurdles to overcome.
With the acquisition by Amazon, there have been even more changes. While there are a lot of customers who are fond of this change, there have also been many complaints about it. Regardless, whether the event of Amazon acquiring Whole Foods will be beneficial to both parties in the long term, is left to be seen.