Whole Foods Market, Inc. (NASDAQ: WFMI) has been under fire of late from outside groups, although this time it is not over the founder’s secret web posting, not over a merger and antitrust issues, and not over high prices leading to name ‘Whole Paycheck.”  It is almost daily now that one group or another is attacking CEO and founder John Mackey over his editorial opposing President Obama’s healthcare reform.

This morning’s release came from CtW Investment Group calling for Mackey’s removal because of the risks to the brand and over Mackey’s history of personal discipline.  The CtW Investment Group works with pension funds sponsored by unions affiliated with Change to Win, a federation of unions representing nearly 6 million members, to enhance long-term shareholder returns through active ownership. The group noted that ‘these funds are substantial long term Whole Foods shareholders.’

Mackey also recently admitted that much food is processed and rubbish or ‘junk’ when addressing some of the items sold at stores when considering his new health kick.  He has even joked about ‘bribing’ some employees to lose weight.

Mackey has now caused a group of boycotters to create a site called WholeBoycott.com and there is even a Facebook page calling for customers to boycott Whole Foods.  Facebook’s page even notes, “Let them know your money will no longer go to support Whole Foods’ anti-union, anti-health insurance reform, right-wing activities.”

The boycott and criticism is over his criticism over what we can do as an alternative to ObamaCare and to stop deficit spending, when he wrote about ‘eight things we can do to improve health care without adding to the deficit’ in a WSJ piece.  He covered many issues which are controversial and fly in the face of what the administration is calling for.

Still, this is an issue of free speech.  CEOs often say things that cause a stir and sometimes they do result in a boycott.  The problem is that some of the comments will enrage certain customer.  But our take is that damage here may be minimal, particularly when considering the average income of the Whole Foods shoppers versus the average income of those who support every aspect presented in healthcare reform.  On August 11, Whole Foods stock was at $27.79.  Today’s share price after a 2.5% gain is $28.83.

Mackey actually took far more of a risk by being a ‘Rahodeb’ anonymous poster criticizing Whole Foods rival Wild Oats before Whole Foods announced its acquisition.  That could have gotten him in trouble with the SEC had there been a provision for it, and it is almost surprising that there was not any serious action taken against Mackey over that.

Mackey has drawn his line in the sand in this chapter of class-warfare and this chapter of the US health care saga.  Some of these customers have as well.  Mackey has to hope that this boycott doesn’t go too high up the chain.  He is at least lucky that Whole Foods is not a grocery store for the masses.  It is a luxury brand with premium prices on even the exact same item sold at rival grocery chains.

Our take is that if Mackey did serious damage to the Whole Foods brand, then it would start to be reflected in its share prices.  This stock has been listing flat to lower after the post-earnings pop but is up since the Mackey editorial.  Before the earnings report it was under $25.00.  After the earnings, the stock popped to $28.70.

Mackey may ultimately need to change his name to ‘Mavericky’ before he speaks out again.  Unless the stock heads significantly lower because of real business loss, then there is probably no long term fallout from this version of a Mackeyism.

Jon C. Ogg
August 25, 2009

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