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Whole Foods’ secrets are out of the box

Bob Moon Aug 15, 2007

Whole Foods’ secrets are out of the box

Bob Moon Aug 15, 2007


Tess Vigeland: Government regulators have let the organic cows out of the barn, so to speak. Some “trade secrets” involving the country’s leading natural food chain aren’t so secret anymore.

The Federal Trade Commission filed papers with an anti-trust court that’s reviewing Whole Foods’ proposed takeover of the Wild Oats chain. Those papers were accidentally left exposed on a court website, and the AP got hold of them.

Industry analysts might not be surprised by the revelations, but they do provide a glimpse into how Whole Foods is playing hardball against Wal-Mart. Marketplace’s Bob Moon has more.

Bob Moon: The FTC is trying to stop Whole Foods’ planned takeover of its smaller competitor, Wild Oats Markets. The agency filed papers yesterday and blacked out parts of the electronic documents. But the AP found a way to read those sections, essentially “un-deleting” them.

The regulators discussed closely-held marketing strategies used by Whole Foods. For example, the chain negotiates “ground rules” with its suppliers, barring them from selling directly to Wal-Mart. The feds say that makes it more expensive for Wal-Mart to go through distributors.

David Livingston: Well, that’s capitalism. That’s what we do here in America.

Industry consultant David Livingston says every company bargains for the best price — and forcing up costs for the competition should come as no surprise.

Livingston: Perhaps they wouldn’t like the public knowing about this, but behind the scenes, all companies are knowledgeable what goes on.

Livington thinks the strategy is an effective weapon against the Wal-Mart juggernaut. It means the giant chain that prides itself as always having the lowest prices might not when it comes to organic foods.

Industry consultant Frank Dell says suppliers are probably already plenty loyal to Whole Foods, which has spent years selling their goods. It might not take much to persuade those suppliers that Wal-Mart isn’t their friend.

Frank Dell: They’re continually looking for a lower and lower price. And is that the best interest of the supplier?

Maybe not, but in this case, the FTC is looking out for the consumer. It’s arguing if Whole Foods can gobble up Wild Oats markets, it could have even more influence over prices.

In Los Angeles, I’m Bob Moon for Marketplace.

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