Whole Foods has made organic produce hip. And for the suppliers, it's definitely a seller's market
When Drew Goodman and his wife, Myra, started growing organic lettuce in their expansive backyard in 1984, they could jointly handle all the work their little two-and-a-half-acre plot could dish out. But they also wanted to grow the business. So, in 1986, they found themselves talking to Edmund Lamacchia, who worked for a small chain of natural-foods stores in the San Francisco area.
There they were, recalls Myra: the produce guy in his Birkenstocks and these two quasi-hippies peddling organic salad mixes. And Lamacchia's initial response was no bear hug. "I don't know if they'll sell," he flatly told the green entrepreneurs. But he decided to give it a try, and the Goodmans' first retail customer ended up doing a steady four to eight cases a store. "They were our biggest retail customers," Myra remembers, with the kind of excitement reserved for that first big fish that tugs on your line.
Now, Lamacchia has moved on to become national vice president of procurement, perishables, at the Austin, Texas-based Whole Foods chain. And he no longer harbors any doubts about how much consumers enjoy organic salads. The Goodmans have done well, too. They preside over an empire of organic fruits and vegetables - 25,000-plus acres of pesticide-free salad fixings, all sprouting under the Earthbound Farm banner. Earthbound funnels more than a million cases a year into Whole Foods' crisply laid out produce aisles, where legions of the organiscenti will roll by and assay the offerings before tossing something delicious into a shopping cart. Earthbound is just a giant-size example of the multitude of organic suppliers around the country that have benefited from Whole Foods' emergence as one of the hippest trendsetters in the grocery business.
Hatched 25 years ago after the four owners of two natural-foods groceries in Austin - a group that includes current CEO John Mackey - decided to join forces in one small store, Whole Foods has erupted into one of the largest purveyors of natural and organic products in the country, with its 37,000 employees selling three-quarters of a billion pounds of produce a year. Along the way, the VW Beetle crowd that made Whole Foods a cult fave in central Texas has been joined in the parking lot by the BMW and SUV set. There are now 180 stores scattered from Beverly Hills to Manhattan and across the Atlantic to London. By 2010, the chain plans to swell to 300 stores with $12 billion in annual sales - up from $3.9 billion in 2004.
While each store's green section operates individually, anywhere from 40 percent to 70 percent of the offerings are certified organic. And as each new store has opened up for the steadily growing chain, it has helped widen the demand for succulent organics.
After all, says Bob Scowcroft, executive director of the nonprofit Organic Farming Research Foundation, it was Whole Foods that created a fresh image for organic produce. Its corporate roots may be tie-dyed in back-to-the-land idealism, but the brand's urban success is an outgrowth of an affluent demand for gourmet health food and the pocketbooks to meet the price. That approach, adds Scowcroft, has "taken organic from an individual taste and sensual pleasure to a successful Wall Street strategy." And in business, success is always defined by how closely imitated you are by the competition.
"So many of the retail chains have added organics in response to Whole Foods' success," says Myra Goodman. "They're saying, 'Wow, upscale shoppers are going five miles to Whole Foods. We better start offering organic.'?"
"I call it the ripple effect," adds Scowcroft. "Every time a Whole Foods store opens, every individual store - from the mom-and-pop to the large chain - has got to address its own organic shelf."
That ripple looks more like a wave to the once small organic-food industry. And organic farmers have been quick to catch it as they push the transition of organic farming, from a small stake on the fringe of the major farming operations in the country 20 years ago to a mainstream player in its own right.