Virtuous Retail. "We're just basically outcompeting everyone," says John Mackey, explaining the success of his Whole Foods "organic" supermarket chain, as quoted by Seth Lubove in Forbes (2/14/05). He sure is: "Safeway and Albertsons have annual sales ten times as large," as Whole Foods, "but are valued at only $8 billion apiece." Whole Foods is valued at $6 billion. Winn-Dixie has "six times as many stores" as Whole Foods and "three times as much in sales," but "is valued at just 10 percent of Whole Foods' market value." While "profits are expected to fall 31 percent at Safeway and 6 percent at Albertsons for 2004," and A&P, Pathmark and Winn-Dixie "piled up a total of $195 million in losses" --- at Whole Foods "net income rose 32 percent to $137 million." Whole Foods, wholefoods.com, today has 166 stores and generates $4 billion in revenue -- its stock, trading at about $100 a share, is "up more than fivefold in five years."

Some of that performance is thanks to "organic foods, which can carry a price premium of 40 percent to 175 percent over regular foods." Indeed, Whole Foods pulls down $800 per square foot in sales, which is "double the industry average." But there's more to it than inherently fat margins. "It's theater," says Christina Minardi, a Whole Foods regional manager. "It's a very visual style," adds Walter Robb, a co-president. "More than half of shopping decisions are made on impulse," he adds. And so at the 59,000-square foot Whole Foods store at NewYork's Time Warner Center, for example, "multihued layers of produce are symmetrically stacked up to 4 feet high, " and a "prepped-foods section is laid out like a pungent open-air bazaar." At the butcher counter, Louis Colameco, founder of Wellshire Farms meat company, is sizzling up some bacon and sausage: "I don't sell to Albertsons," he says. "They don't have the mission Whole Foods has." Okay. So, what, exactly, is that mission -- other than making lots of money??

John Mackey states it neatly: "Management's job is to take care of employees. The employees' job is to take care of the customers. Happy customers take care of the shareholders. It's a virtuous circle." Mackey's mission also has involved acquisition, "a total of 16 ... in 24 years." It entails a certain grass-roots orientation, as well: "We allow innovation and experimentation to occur at the store level," Mackey says, "It bubbles up from the leadership at each store." And, for all the theatrics, Whole Foods also takes care of the basics -- like having enough checkouts open. But the real secret may be wrapped up in this little factoid: Americans "now spend only six percent of ... total income buying groceries, down from 17 percent half a century ago." It seems that about "two-thirds of Whole Foods' sales comes from perishables and prepared meals ... at old-guard chains that figure is below 50 percent." By the way: "Americans spend $430 billion a year on food sold at 34,000 supermarkets." John Mackey says he intends "to more than double sales to 10 billion in five years." He will add "15 to 20 new stores" this year.

Tim Manners, editor