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.
"Whole Foods demonstrated that there was a real market for organic
produce," says
James Parker, retail coordinator for Whole Foods'
national purchasing office in Watsonville,
California. "A lot of
farmers were reluctant to make the plunge, afraid they didn't have
a market for it, that they couldn't produce enough at a high-enough
quality standard to sell in the marketplace. We helped convince
them they could."
"It's been huge," agrees Jeff Huckaby, general manager of Grimmway
Farms' organic division. With Whole Foods' help, Grimmway has
mushroomed from a roadside stand in the late 1960s to a massive
farming operation that now includes the high-profile organic brands
Bunny-Luv and Cal-Organic, which started selling organic produce to
Whole Foods when both operations were fledgling, struggling
wannabes.
Once Whole Foods made it past the start-up phase, its deep pockets
and almost insatiable year-round appetite for organics helped
stabilize a turbulent market. And when expanding producers are
looking at an unexpected bumper crop of table-ready produce, they
can ask for help.
"It's a give-and-take relationship," says Stephen Poklemba of
Marfa, Texas-based Village Farms, which grows tomatoes in vast
hydroponic greenhouses in Texas,
Pennsylvania, and
Mexico. "If
crops are overproducing and we need to move product, I can talk to
Whole Foods and they can do a push or get an ad put out to move
more of that product."
What's left over when Whole Foods is done picking over the food is
being funneled into an expanding processed-foods market.
"Whole Foods is given the best and the freshest," says Scowcroft.
But producers always have a mountain of leftovers that don't make
the cut. "So now you start developing secondary markets for mixed
fruit juices, or perhaps start feeding your leftovers into a new
market for organic processed foods."
But not everyone is happy to see the sector's success turn organic
farmers into mainstream agribusinessmen.
Suppliers are quick to note the simmering tension that has long
brewed between the small farms and the major agribusiness suppliers
like Grimmway and Earthbound. As Whole Foods has swelled and lured
other supermarkets into the business, buyers demand megasupplies
of organic produce that can be delivered to stores as needed,
year-round.
"There's tension with those 50-acre farmers who were making it but
then lost their lettuce market," says Scowcroft. "Some are very
unhappy about it, but others say that this is just the way it is.
If you get a bigger market, somebody will do it bigger and
better."
"Whole Foods used to have a lot of little suppliers," agrees
Huckaby. "As they've grown and gotten bigger, they've had to have
people who could provide produce for them year-round."
For its part, Whole Foods says it's up to each farmer as to how big
they want to get.
"Oftentimes, a new source relationship will remain at the local or
regional level," says Parker. "Sometimes, they don't want to grow
beyond where they're at, and we're fine with that."
And plenty of those 50-acre farms that don't want to cater to big
buyers like Whole Foods have been developing new, premium niches of
their own, says Scowcroft. Some are catering to local communities
only. Others have found ready buyers for fresh, high-priced
organics among trendy restaurants.
And it’s very fresh. Some organic operations sprout twice-a-day harvests, at 10 a.m. and two p.m. “Think about it,” says Scowcroft. “Sweet corn an hour old.”
But the farms are pushing an envelope that’s been radically redesigned by Whole Foods.
“We feel that the image of organics has completely changed from being kind of a sacrifice to being a real indulgence,” says Myra Goodman, “meaning the best food, really upscale. And I think Whole Foods has played a big part in that.”
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