John Mackey

Denease Pelly Green. On this weekend edition of Bloomberg Best. I had my food awakening where I really understood for the first time that what you a affected how you felt. John McKee, CEO of All Foods, asked my girlfriend living in the cow off whe her we ought to start up our own little store, and she said she thought that would be a lot of fun cool the birth of the nation's biggest natural foods change turned out there it wasn't just selling food to hippies, and how it

turned out to be so much bigger. All this and more coming up in the next hour of Bloomberg Best. All right, I want to get right to it, because what a story let's go back now to Austin, Texas. Yeah, and David Rubinstein asked John Mackie what propelled him to start Safer Way and then Whole Foods after dabbling at being a college student. And here's what Mackie said on the David Rubinstein Show Peer to Peer Conversations. What propelled

you to start Safer Way and then Whole Foods. I mean, you were at the University of Texas, and did you drop out to do this? I dropped out of school like six times. I've got a hundred twenty hours of electives. I just study whatever I was interested in. But I

did not drop out to start this company. I was living in a vegetarian co op when I was twenty three years old, and that's when I had my food awakening, where I really understood for the first time that what you ate affected how you felt and your health and your longevity. And then I became the food buyer at that co op. And then I went to work for a small natural food store in Austin, and I had found the purpose of my life. I was on fire

for healthy eating, organic and natural foods. Came home one day and asked my girlfriend living in the co op whetherr we ought to start up our own little store, and she said she thought that would be a lot of fun. Cool and uh. Six months later, we'd raised forty dollars from friends and family and we found a location, a small store location in Austin, and we were in business.

So when you started the company, though, did you have the vision of building a global or national company or did you just say I'll do a couple of stores. What was your original vision? Original vision was to break even. We were losing the month when we started out. The first year, we raised forty dollars in capital. We managed to lose twenty three thousand of it, so we were lucky to survive. We did much better in the second year, relocated two Whole Foods. No, we had no grand vision.

The best way to understand it is we were just passion and about selling natural, organic foods. There was no we weren't. We weren't. We didn't take any business classes. We we didn't have we weren't NBA's. We just were passionate. We were on five. We were young. I was twenty four years old when we started the first store. Renee was twenty, so we were just having an adventure. We were we were playing and having a grocery store. It

was so much fun. And then and then we started learning business and we've got pretty good at it, and then we started to grow it. I will tell you a story, David. So when we did our I p O. You know, one of the things that the investors want to know. They're trying to build a model of your company, so they want to know what's the potential. How big

could it be. We had twelve stores when we I p O. And I thought, I think we could sunday have a hundred stores, and uh, you know, we might even someday, we might even be able to do maybe maybe a billion dollars in sales. Someday someday we could have that. And they weren't. They weren't that impressed with that. They didn't think that was gonna be that bigger company. And of course, you know, we're doing twenty billion in sales now, I would have five twenty stores or thereabouts.

So I was very wrong about the upward potential of the business at the time. Um, when you were doing this in seventy eight. In the early eighties was natural food and well known as what natural food was organic foods. What what we're what weren't the view of them. Then when we were trying to raise venture capital money, I mean only we had three venture capitalists and invested, and

we had a dozen or more turned this down. And I remember one of the guys turning me down saying, yeah, I don't think this business has much of a future. I don't know why he felt so motivated to tell me why he wasn't going to invest, because usually they just say we're not interested. But he said, I want to. I want to explain to you. And he said, you guys are just a bunch of hippies and you're selling food to other hippies. I ran into that guy like

eight years later. He told me that was the biggest mistake he'd ever made in his venture capital career. Turned out that it wasn't just selling food to hippies, that it caught on in the in the upper middle class US and then and then it spread from there and and uh and yeah, the rest is history. As I say, So, when you dropped out of college, did you say to your father, I'm gonna be like Mark Zuckerberg er Bill Gates, and I'm gonna build a big company, and did he

have a lot of confidence in here to do that? Well. Mark Zuckerberg wasn't alive when I started the company. Saw he wouldn't have referred to him. And Bill Gates was just started Microsoft two years before I started a safer way, so my dad had never heard about UM. My dad was very supportive. Uh. He he was just wanted his son to do something. He was passionate about that. I really he could see I was very excited about this. So he was actually very supportive. In the early years,

he helped you somewhat as an accounting professor. He gave you some advice. My dad was my mentor. Uh, since I didn't have that business background. I always say that from the year of nineteen seventy eight to nineteen ninety four, I never made a move at Whole Foods without checking

with my dad. In nineteen four, I turned forty years old, and uh, we'd gone public two years before, and my dad was now wealthy, you know, on pay per pose with the wholefing stock that he had bought, and he wanted to hold onto what he had, and I wanted to grow the business. I just saw, we can really grow this thing. And so we had to. We used to fighting our board meetings. We were screaming each other at public board meetings. And finally I said, Dad, here,

here's what I want you to do. I want you to sell half of your stock tomorrow. I'm firing. I don't want you on the board anymore. I want you to sell half your stock tomorrow and take the other half and leave it in the company because we're gonna grow Whole Foods. It's gonna be a big enterprise someday. So he did that, very took my advice, sould half the stock the next day. He was very hurt. His feelings were hurt. I remember him telling me. I said,

I'm forty years old. I'm ready to run the company by myself without you, And he said, forty years old. You don't know anything. You're only forty, you know. It turned out he was right. I didn't know very much when I was forty. I know a lot more today and I knew then. But he was wrong about the potential growth of Whole Foods because the company took up after that, and he made a lot more money on that half that he kept in. So when you're growing the company and making it a national company in a

well known brand. Was the biggest problem that people still weren't convinced that natural foods and organic foods were good for you. Was it that the price you had to charge was somewhat more expensive than that's a safe way, or was it the safe ways of the world that we're gonna compete with you and they were gonna have organic foods, or it was just getting cash from investors to help you grow. What were the biggest problems. The

biggest problem was the limitation of the marketplace. Initially because it's a consciousness thing. So if when we opened up in a hip area where he had a lot of uh, younger sort of counterculture people the store or bohemian people, the stores would take off from the very beginning. But we when we went into suburb, like when we opened a store in in Greenville Avenue in Dallas, it took off. But when we went up to Richardson, a suburb North Dallas.

Back this, it was really slow. The stores started really slow. The suburban stores just didn't have enough what we'd call natural food consciousness to really be successful. It took us years to grow those those businesses. Now, when whole Foods came along and it was very popular in many areas. It became known in some circles as whole paychecked. I'm sure you've heard that before, and so that the implication was that your prices were expensive. But um, I assume

that your responses. But you're selling higher quality or more complicated things, and your prices are not a big drag on your overall ability to get people to come into the store. Is that right. It's a it's a very good question, of course, I do hear that all the time, and it's it's it's a little bit of a complex answer. So for most of our history, in the forty year history, we probably only got serious competition in the last fifteen years.

So the first twenty five years we existed, very few people sold the same products that we sold, so um, there was no big deal. But then as we got more successful, we got more competition. And one of the ways they competed with us was to undercut us in price. And of course, one of the things Whole Foods knows it needs to do is it needs to meet the competitive marketplace in terms of price, and that is one of the reasons we wanted to merge or sell the

Amazon is. Jeff and his team think long term. So it was gonna be very difficult for us to lower our prices and hold on to our company because it was when you lower prices initially, it actually hurts your sales and hurt your profitability. Something you were selling for a dollar now you're selling for ninety cents, So it looks like your business is declining. Now you'll get it back over time as people realize that they get better prices.

But it's a painful transition. Now with Amazon, we've already dropped our prices three times and we're gonna keep dropping them, so Amazon is, and that that's another great benefit of the merger for us. We are getting more and more price competitive, and Amazon is willing to be patient and

let that play out over time. So a couple of years ago, you had, as you wrote in your in your book on Conscious Leadership, I hedge fund, kind of an activist Hedge fund came along and they were agitating for a higher price, and ultimately you looked at some about alternatives and one of them that seemed the best was selling the Amazon. Is that right, that's correct. We had the activists Investor's Janna partners wanted to. I met with them and they basically said, we're gonna take over

your board and and we're gonna throw you out. We're gonna sell the company, So why don't you just save us all a lot of a lot of anguish and just let's just agree to do that. So, of course we we didn't want to sell the company uh to the highest bidder, and we had to think about our different alternatives. So one was going private potentially. Another one was to put the company in friendly hands like we contacted Warren Buffett for example. Another one was to maybe

fight Janna and fight to maintain control. And then as I was trying to think about what the best solution and was, one morning I woke up. I just woke up and it popped in my brain, what about Amazon? What about Amazon? I've met Jeff a year before, really admired him, still do. I thought these guys would be perfect. I've heard they want to get into grocery business. This would be a good opportunity for them to get into it. Their technology could help Aul foods. So we contacted Amazon.

A couple of days later, we flew up to Seattle and met with Jeff and his team. We had an amazing first conversation lasted about three hours. It was like we were finishing each other sentences, all the things we could do together. We got super excited. Just a few days after that, they sent a whole team to Austin to continue the conversations. Six weeks after that first meeting, we signed a merger agreement. We negotiated the price, signed the mergery agreement, and and we were we were on

our way. So every acquisition looks great at the time you do him. Now you've had a couple of years behind you. Is it working out? And are you happy with you know? The metaphor I like to use for a merger is it's uh, it's like a marriage, particularly between big companies. So we had to love at first sight in a whirlwind romance. It's a fair question to ask, how's that working out now? It's about three years later now,

as a matter of fact, and is it perfect? You know? No, It's like I I sometimes say when people ask me this question, I said, you know, do I love absolutely everything about my wife? I've been I've been married thirty years and the answer is no, I love about nine percent. But it's two percent that you know it really bothers me, And I'd say it's kind of similar with Amazon. Do we love everything about Ama? There's about two percent we know love, but we love almost everything. Is pretty good.

That's a pretty good marriage. And in Amazon, the merger is working out great for us. We're a much better company today than we were pre Amazon. So Amazon is about getting people to buy things and ship into their home. You've been about getting people to come into your stores and buy a lot of things that they might see while they're walking around. So is that a different kind of culture and how has it worked out in that respect?

There's overlapping the cultures. We're both very customer focused. There are difference in cultures. But one of the things that Amazon has done, which has been fantastic and one reason the mergers worked well, they respect our culture. They're not trying to change our culture. Now our culture is changing because we're taking on lots of attributes that Amazon has and that has a change in our culture. But they're not forcing us to coercing us. We're doing it voluntarily

to make our company better. So that's why we're evolving. But I think in a healthy constructive way. People ask me, hey, John, if you could do it all over again, would you make the same decision, And the answers, yes, we make the exact same decision. So I know, whenever I go to Whole Foods, which is about a mile from my house, and I go there very frequently, they always asked me, are you a Prime Member? So it's being Prime helped

a lot in your business. The Prime Membership club. High percentage of our custom as our Prime members, and so they like that. Now there is a minority of customers who are not and and of course every time they get asked with their prime member, of course they don't necessarily like that. They keep, you know, getting asked that question. Um. But on balance, remember the majority of our transactions are coming from Prime members, so that's been that's been a

good thing for them. They're getting better prices and better deals. The main way Amazon's health Toll Foods though, is technology. I mean, particularly now with Covid, the amount of deliveries that we're doing and pick up store pickups and deliveries, I mean it's triple in the last year. I mean, we're doing a large percentage of our business online now and we didn't really have a small percentage before Amazon acquired US. So let's talk about COVID for a moment um.

And COVID came, many people are worried that retail stores would have to shut down, but actually food retail stores have benefit, and you could argue because people need to eat a lot more, I guess, or at least to going to the buy staples. What was it like to manage under COVID at the outset. So the main thing to understand is almost all food retailer sales are up,

primarily because restaurants sales are down so much. Right, people aren't eating out as much, so they're eating at home more and that's been good for pretty much all food retailers. That's been good for whole foods as well. Maybe a little bit less good for us because we do a lot of prepared foods in our stores, and so that's way down. People are not going to our salad bars, are hot food bars, they're they're not going in our offices are shut down around our stores, so we're not

getting that traffic that we used to get in. But on the other hand, overall sales are up substantially because everything else is up so much as it made the way you're going to manage in the future different. Again, it helps us tremendously for being online sales and so and that will continue. I don't well ever, when we won't go back to Once people get a taste of that, they like it in Amazon if you're Prime member, delivery is free. So I think that's gonna be a permanent

shift for many people. You know. The hardest thing about managing the business now it's it's there's an element of fear. Right people are scared of the virus. Everybody's masked up. We would require mask for all of our team members and all customers in those masks. If you're I'm in Austin. It's a hundred degrees outside right now and we're in a mask around is not not very fun or pleasant thing to do. Um and people have been shut down in their homes and that's you know, we see what's

happening is unrest around the country. So it's been a hard This is this is I don't know about you, but I'd have to say is the weirdest year of my entire life. When you go to a Whole Foods anywhere in the country, you have at five hundred stores or so in the country. Now, I assume you're instantly recognized to have a picture of you there when you walk in, so they know who you are. Now I go in, I'm wearing a mask, nobody knows who I am. I'm I'm gonna have a perfect disguise, but no, they've

recognized me, mostly because they know I'm coming. Generally, I do some surprises, it's occasionally, and it's just I get recognized very quickly. So when you go in and you if you say, well, this is not set up the right way, or you should charge something different, that they listen to you. You know what I've learned, David, I've learned painfully that, uh, whether I like it or not, I'm the father of Whole Foods, and the team members

really want Dad to love the story. So I've learned to to sort of moderate my criticisms because they really tried to make the store look good because he knew I was coming. So I just try to stay positive and connect with the people, and then maybe after I leave, I will tell the the leadership of the region, I didn't like this, this or this. You've built one of the most famous companies in the United States. But you don't.

You don't own a lot of it relative to what some of the other founders of large companies have done. It does that make you, uh, lose sleep at night or you're okay with that? You know something I learned pretty early in life. One of the most destructive emotions there is in the world is envy. Envy will poison your soul. I learned to deal with envy of people envying me, and I learned to deal with my own envy a long time ago. And it's far better to to just be grateful. I've had an amazing life. I

am a very wealthy man by any objective standard. So other people wealthier than me. There are other entrepreneurs have made more money. So what I mean? I have everything I need or could ever want. So agreed, and those things poison our souls, and so I have. There's no place for envy. I am happy for them. I'm happy that they've had successful lives, and uh, yeah, so have I.

Life is good. In your book, you talk about the importance of a certain type of leadership where you are trying to be what you call a conscious leader, which is to say, worry about long term purpose of a company, not just profit. Is that right? Yes, I mean in the book we talked about purpose first. Put purpose first. That that Whole Foods has always been purpose driven since the very beginning. We always um, you know, wanted to make the world a better place and natural organic foods.

You want to people lead healthy. And then what we learned over time is the importance of leading with love, to care about your people. And so we have a chapter about leading with love. And then we learned, of course the importance of integrity in business, in life in general. Integrity is so important. You have to be you have to do what you say. You have to be trustworthy, you have to be authentic, you have to be honorable,

you have to have honor. When you talk a lot about the importance of culture and having a certain culture, you developed the Whole Foods culture. Has it changed under Amazon or you've been able to keep your culture? And what is that culture? Well, cultures are like living there like they're like living entities, and they change over time. They evolve. So yes that at mergers three years ago,

our culture has evolved in the last three years. But culture comes from your values, it comes from your purpose. And it comes from the way you lead the company, what your leadership principles are. So Whole Foods cause of very healthy culture. We were named one of the Hunter Best Companies to work for for twenty consecutive years, and our culture is still very healthy. I will say Covid

is challenging the culture. For one thing. We can't get around and visit the store so easily right now, So more stores are kind of on their own than ever before. And and we're to mask every day is stressful for people, and and so there's a lot of fear. And we're in urban areas, and there have been a lot of protests this summer. It's a it's a restless world out there right now. You've been the CEO of this company

for forty two years. UM. Very few people are CEO so have publicly traded companies or companies as large as yours for that long. Is it your expectation to do this another five, ten, fifteen years? Or what else might you do? Would you go into government, would you run for office? Would you what else would you do? I will not run for office and I will not go into governments. Think about it this way. Whole Foods is like, I don't have biological children, so Whole Foods is like

it's for me. It's the equivalent of my child. It's kind of grown up now, right, it's a it's not a Mayby anymore. But parents love their children their whole lives, even when they're grown up. Um, I will leave Whole Foods sometime in the next few years, but I haven't

announced the retirement date yet. And Covid, I'm you know, Covid is it's a crisis, Like I'm dealing with the crisis here for that and uh uh I always make this joke that it's like, Whole Fridge is my daughter, and I literally married my daughter off to the richest man in the world, and uh, I just kind of came along to to make sure the marriage settled in well. And I've I'm still here, but I know that the

time will come eventually for me to leave. It's just not yet and I'm not quite sure when it will be. So what I tell people all the time is the hardest thing in life is to be happy. Happiness is the most elusive thing in life. And you seem like a very happy person. The secret to happiness is gratitude, right, you wrote that in your book, Yes, gratitude, and it was like you asked me that question earlier about you know, how do you feel you could have made a lot

more money as big as your corporation is. Other encouragement, more money any poisons happiness. Gratitude is the key. And I'm grateful for what I have, not envious for what I don't have. I mean, I have good health, I have an amazing marriage, I have great friends. I have this amazing business that I'm part of. I have materially and financially everything I'll ever need. Life is blessing. It's I'm just so happy to be alive. It's an amazing

life is beautiful and amazing. And I'm just grateful every day and I get up happy to be alive. And and uh so there you there you have that's my game. Well you should bottle that and put that in your and your stores. If I could bottle that, I would be a billionaire. You've been listening to John Mackie, CEO at Whole Foods on the David Rubinstein Show peer to peer conversations. And that's it for this hour of Bloomberg Best. I'm at Baxter and I'm Denny Spelton. This is Bloomberg.