Tuesday 16 July 2019

'Amazon freed us to think long-term and we must stay true to our values'

Whole Foods Market's John Mackey says companies can make profits while pursuing a higher purpose, writes Group Business Editor Dearbhail McDonald

Whole Foods Market chief executive John Mackey says entrepreneurs have to be relentless about seeking solutions that create value for all stakeholders
Whole Foods Market chief executive John Mackey says entrepreneurs have to be relentless about seeking solutions that create value for all stakeholders

When Amazon, the e-commerce behemoth, consumed Whole Foods Market, the iconic American organic foods grocer, the merger was described by Whole Foods chief executive John Mackey as akin to falling in love.

The near $14bn (€12.1bn) cash acquisition of Whole Foods by Jeff Bezos's Amazon, which followed intense activist pressure on Mackey and the Whole Foods board, was arguably the retail deal of the decade, bringing with it both the promises and threats of a major industry game-changer.

Many wondered if Whole Foods, which began life in Austin, Texas, as a humble, hippie grocer serving other hippies, would be able to retain its founding ethos of sustainability, as well as fair play for customers and employees once it became part of Amazon's web.

A year after the mega-deal, Mackey, a former college dropout worth a reputed $75m as a result of the Amazon merger, has no regrets.

In Ireland for the first time in 20 years, Mackey, one of less than 10 American CEOs to take home a $1 salary, told a group of Irish business leaders last week that the time for apologising for creating value through enterprise is over.

"Business has to make money, it has to make profits, or it will die," Mackey told close to 400 delegates attending AIB Bank's second annual sustainability conference. "Business is not a game. It's not a casino. It's not a machine. It is not a zero-sum game."

It's not every day that Irish executives, including bankers, are told that they are heroes who create prosperity and lift people out of poverty.

But Mackey is an unrepentant free-market capitalist, who insists companies can make profits whilst pursuing a higher purpose.

Anything less is, according to the co-founder of the Conscious Capitalism Movement, a spectacular failure of imagination.

Mackey told his Irish audience that, far from limiting Whole Foods, the tie in with Amazon liberates the grocer from the demands of activist investors and the tyranny of quarterly reports.

"Prior to our merger with Amazon, Whole Foods' ability to operate our business for the long-term good of all of our stakeholders was limited because of the short-term comps-driven pressure of Wall Street," he told the Sunday Independent. "Amazon has freed us to think long-term once again, and I'm proud that with their vision and leadership we're able to improve pay for our team members going forward.

"We are now part of Amazon, but part of my job as CEO is looking out for our 94,000 plus team members to make sure we stay true to our core values and that changes we implement are done in a way that stays true to Whole Foods."

It is somewhat ironic that Whole Foods, one of the most successful Fortune 500 food retailers - with vast amounts of property in the US - found itself up for sale after a period of distress. Much of Whole Foods' own spectacular growth - the grocery chain generated $16bn a year in more than 460 stores in the US, Canada and UK - was achieved through mergers and acquisitions.

Mackey is candid about the highs and lows of food retailing including the dark days of 2008, when Whole Foods' stock collapsed by almost 90pc. The stock later recovered, only to face fresh challenges as natural foods became more prevalent, cheaper and aggressively targeted by rival Walmart which went on to become the largest seller of organic produce in the US.

"When you run a business for 40 years, you encounter many highs and lows," says a stoic Mackey. "One of the most pivotal moments of the company happened early on during the Memorial Day flood of 1981, when Austin experienced the biggest flood in more than 70 years, which devastated the city. It left our store with nearly eight feet of standing water and almost wiped us out. That experience drew our young company together though. It demonstrated to us that all our stakeholders have the potential to form close relationships with us, to care and to commit intensely.

"If all of our stakeholders hadn't cared so much about our company then and come together in support, Whole Foods Market would have ceased to exist. That's pretty humbling."

For Irish agri-food businesses facing Brexit and other headwinds, Mackey says entrepreneurs have to be relentless about seeking solutions that create value for all stakeholders.

"Falling into the trap of trade-offs at the expense of other stakeholders means you aren't trying hard enough to find a creative solution to address the challenge," says Mackey.

Are there plans to add Ireland to Whole Foods global stable? Not just yet. But Mackey, who says Ireland has been transformed in recent decades, is not ruling it out after a leisurely stroll down Dublin's Grafton Street and sampling Irish food fayre during his brief stay.

Feted by an array of business bibles including Barron's, Marketwatch, Fortune and Esquire, among others, Mackey has spent much of the second act of his corporate life championing conscious capitalism.

Mackey is coy on climate change, the biggest challenge facing society and food producers, stating that he believes human ingenuity will overcome many of the challenges.

You get the sense that Mackey, like many corporate leaders in the US, is sceptical about climate change. And although conscious capitalism is his creed, he is keeping shtum about many of the lightning rod issues raging in his native country just now.

"As a public figure leading Whole Foods, I generally try to keep my thoughts on the economy and politics to myself," he says.

Mackey is unequivocal that younger generations will force big business to act ethically.

"As the next generation of leaders and entrepreneurs, they will play a huge role in driving the conscious capitalism movement and demanding that businesses think much bigger than just profits."

Sunday Indo Business

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