Whole Foods CEO: We’re in a ‘virtuous circle’ of cutting costs and lowering grocery prices
“We’re going to continue to lower our prices over time at Whole Foods,” he said on “Power Lunch.” “Cut our costs, lower prices, get more business, lower prices, cut costs, and so I think we’re in a virtuous circle right now.”
Mackey, who co-founded the pioneering organic grocer 40 years ago, credited synergies with Amazon for being a key driver of the price reduction. The e-commerce titan acquired Whole Foods, which has long carried a reputation of being expensive, for $13.7 billion in 2017.
“We’ve made three significant price reductions since the merger, and we have a fourth that we’re beginning now,” said Mackey, whose new book, “Conscious Leadership: Elevating Humanity Through Business,” was released Tuesday.
Mackey’s comments come as the U.S. continues to battle the coronavirus pandemic, during which grocery prices have increased as supply chain issues bubbled up, particularly in the meat industry. Rodney McMullen, CEO of Kroger, the nation’s largest supermarket chain, told CNBC last week he sees food inflation stabilizing after early pandemic-related rises.
For Whole Foods, Mackey said taking a broad look at its business operations has created the space for the price reductions in recent years.
“You have to work on every detail of your business. You have to look at where you’re spending your money. Amazon’s brought new critical tools to Whole Foods to help us think it through — to cut down our shrink, cut down our spoilage, cut down our theft that’s occurring,” he said. “We’re just bringing a more critical eye to our costs at Whole Foods.”
In September 2019, Whole Foods said it was changing its eligibility requirements to buy into health-care coverage, raising the minimum to 30 hours worked per week up from 20 hours. At the time, the company indicated about 1,900 workers, or less than 2%, would no longer be eligible under the change that was set to go into effect in January.
Mackey noted Whole Foods has a minimum wage of $15 for employees, a policy implemented company-wide for Amazon’s U.S. workers in 2018. “That’s forcing us to be more productive. … To partly compensate for that, we’re doing some automation,” he said, such as more self-service checkouts. He also alluded to other changes that “I’m not really free to talk about” and further technology integration between Whole Foods and Amazon.
“The net result is we are lowering our costs,” he added.
Earlier this month, Amazon opened a Whole Foods location in Brooklyn, New York, that is designed specifically to fulfill online grocery orders, which have surged in popularity during the pandemic. It’s the company’s first store concept of that kind.
Mackey said he believes the increased adoption of online grocery shopping will stick for some people. But he said he feels that “more and more people will return to their old patterns” as the health crisis subsides. He said, “There will be more people shopping online going forward than there were pre-Covid, but it’ll be back to pretty much the way it was a year or two from now.”