If you’re at all concerned about the price of organic lemons or FTC dealings, read on.
Amidst much controversy, Whole Foods has announced an agreement to buy Wild Oats for $565 million, or $18.50 per share. Well, Wild Oats and Whole Foods can kumbaya all they want, but the champagne will remain uncorked indefinitely. Even though the deal seems amicable, the FTC has put up a huge stop sign by filing suit on antitrust grounds.
Only someone living under a rock could deny how fast the natural foods/organic sector has been growing over the past few years.
I read somewhere that it went up approximately 22% last year. Living in California, I’m in the heart of the “go natural” phenomenon and have created an organic household for myself. And because I buy what I live, I’m a Wild Oats stockholder as well as a patron.
Back to the FTC. Government lawyers are accusing Whole Foods of not playing fairly and in essence trying to rule the playground by buying the sand. Whole Foods claims that Wild Oats is just one small fish in a large natural pond and that because major chains like Wal Mart are going semi-crunchy, they have plenty of healthy competition.
In my opinion, both sides have pretty lame arguments.
First, the FTC. Is buying your competition really a no no? The 1,400 Cingular- the new AT&T commercials I’ve seen today indicate otherwise. And what about Microsoft (okay, they’ve been in the naughty corner) and Oracle? It boggles my mind that the FTC would care about these two companies merging.
“If Whole Foods is allowed to devour Wild Oats, it will mean higher prices, reduced quality and fewer choices for consumers.� - Jeffrey Schmidt, director of the FTC’s bureau of competition.
Wow. Those are strong words. Whenever a public figure uses colorful words like “devour”, I feel like they’re trying too hard to sell me on something or sway me with emotional verbiage. It isn’t possible to know exactly what the outcome of the merger will be so I’m not sure why Schmidt is speaking in such definitive cause and effect terms. That’s so 1984.
I feel like I’ve heard that exact quote before, just with Whole Foods and Wild Oats replaced with the names of other companies with proposed mergers. Weird.
What is the FTC really worried about? A out of control Whole Foods monopoly wherein people are forced to smuggle organic apples in from Canada? Seriously? Yahoo! reported that a Whole Foods/ Wild Oats merger would make up 11% of the natural foods sector-11%! That’s less than I tip at The Coffee Bean!
Next up, Whole Foods. Their main argument is that they’re not “gobbling up their competition” because of how many other (much larger) grocery store chains they have to compete with.
“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,” says John Mackey, chairman and CEO of Whole Foods.
I giggled when I read “new banners”. A billion dollar corporation is afraid of some Kinkos generated 25′ by 25′ banner? Muahahahaha!
C’mon now. The people who walk up and down the textured marble at Whole Foods to buy $4 lettuce are not the same ones buying Earth’s Best Organic Baby Food at Walmart. Whole Foods is pretending not to understand that there is an entire culture and value system that goes along with the shopping experience. Every CEO worth his or her Rolex knows that people are never buying things, they’re buying feelings.
Yes, Albertsons has bought some earth-toned paint and stripped their linoleum flooring, but do you really think Whole Foods shoppers are banging down their doors? No. There are three main natural foods stores in my neighborhood, Trader Joes, Henry’s (owned by Wild Oats) and Whole Foods. I am a little nervous about about the implications of the merger. I think Mackey should acknowledge the power his company has and not hide behind “Oh, but we’re so tiny compared to the big box stores.”
I like Greg Mays’ quote much better.
“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,” said Wild Oats CEO Greg Mays in a statement.
This is what it comes down to: Where is Whole Foods’ home? Do they play in the larger food industry, or are they an exclusive citizen of “All Natural” town? Can the two ever be truly separate? Are they regulated by the same entities/watchdogs?
Perhaps the FTC should do a poll. They should set up a booth outside of every Whole Foods and ask people how often they go to mainstream chain grocery stores. After, they could do the same at Ralphs.
So who should win? I don’t know, but it’s fun to watch.
In all seriousness, I think the deal will go through with some penalty or price cap attached. The yard monitors don’t want people to stop playing, they just blow whistles to let you know they’re watching.
This entry was posted on Tuesday, June 19th, 2007 at 12:52 am and is filed under Business Decisions, Corporate America. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.One Response to “Mmmm! Freshly picked Antitrust!The Whole Foods Saga.”
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June 29th, 2007 at 4:01 am
“First, the FTC. Is buying your competition really a no no? The 1,400 Cingular- the new AT&T commercials I’ve seen today indicate otherwise. And what about Microsoft (okay, they’ve been in the naughty corner) and Oracle? It boggles my mind that the FTC would care about these two companies merging.”
Exactly. It sounds like political meddling to me, probably from supermarket lobbyists in the FTC. NO surprise from this administration.