Whole Foods Market is facing hard times. Once the darling of both sustainability advocates and Wall Street, Whole Foods is no longer the unstoppable force of years past. The beleaguered grocer was recently the target of an activist shareholder takeover, and also faces legal, social, and systemic hurdles.
Earlier this month, the Second U.S. Circuit Court of Appeals in New York revived a potential class action lawsuit against Whole Foods Market. The appeals court opined that the lower court was mistaken in its ruling against Manhattan resident Sean John. John alleged that Whole Foods had regularly and flagrantly overcharged customers by misrepresenting the weights of pre-packaged foods such as pecan panko, coconut shrimp, deli cheese, and cupcakes.
Because people tend to consume the foods they buy long before potential systemic overcharging comes to light, there’s a tough evidentiary hurdle to overcome when attempting to prove this sort of allegation. However, a 2015 investigation into a Whole Foods Market in New York showed that of 80 pre-packaged items tested by the city’s Department of Consumer Affairs, fully 100% had mislabeled weights and 89% failed to meet federal labeling standards. This finding served as the basis for John’s class action suit. While it is difficult for a customer to prove that they were overcharged for any single, usually already-eaten item, it’s very likely that most every shopper has been overcharged at some point.
The New York investigation (and Whole Foods’ subsequent $500,000 settlement) was yet another nail in the grocer’s coffin, and even a public apology by the chief executive duo couldn’t revive business. With other major chains picking off their customer base and their exclusive cachet looking more like greenwashing, Whole Foods Market was ripe for takeover by Jana Partners, a hedge fund seeking to fiddle with any number of their business practices. Kroger and Albertsons have been floated as potential buyers.
At the same time, Whole Foods Market is shedding much of what made it special in the first place: its small neighborhood feel. Since opening in 1980, Whole Foods specialized in finding high quality products from small scale, local producers that gave each store or sub-chain its own character. Earlier this year, however, the chain abandoned whatever remained of their regional character by going all-in for centralized buying. This may satisfy the perennial customer complaints about high prices, but selling mass-produced, available-everywhere goods means that they may as well sell out the name, too.
Also diminishing their local-ish image is a decision by the Whole Foods Brentwood (California) location to end a lease with a popular newsstand run by Marck Sarfati. Sarfati, who has run his stand for 28 years, is fighting back. Although many Whole Foods customers (and some celebrities) signed his petition, it looks like the Brentwood store is kicking him out in lieu of increased parking, a double-blow to that neighborhood feel.
Whole Foods Market was supposed to save us from all of this. According to co-founder and CEO John Mackey, Whole Foods follows a more enlightened vision, “conscious capitalism.” The idea that people can make social progress, saving the planet and each other, simply by voting with their dollars for the “right” products is as appealing as it is lazy. The downward spiral of Whole Foods Market and Mackey’s brand of alt-capitalism comes as more people are figuring out that capitalism itself is pretty much a scam. Perhaps both are in mid-jump over the wild-caught, free-range shark.