John Mackey’s Conscious Capitalism model has its share of dissenters. But the fiery Texan isn’t about to back down
When John Mackey dropped out of his second university, his aspirations to open a natural foods supermarket looked shaky. He had no money, no business training, and no degree. He hoped to open a vegetarian store in the carnivorous state of Texas. His mother thought he was wasting a good mind to become a grocer.
But Mackey, an unmotivated student, had suddenly found a purpose in natural foods while working at a collective, and he wasn’t going to let it go. Along with his girlfriend Renee Lawson, Mackey rustled up $45,000 from family and friends to start the business.
Mackey and Lawson opened Safer Way in 1978, knowing full well that health food was a gamble. When the couple used their apartment to store food, they were thrown out and forced to move into the second floor of Safer Way, where they showered with a hose.
But Texan customers embraced this unlikely supermarket, and Mackey soon had the confidence to merge with Clarksville Natural Grocery, partly by hinting to owners Mark Skiles and Craig Weller that he would put them out of business. Together, they opened a larger natural foods store in 1980 that would one day change the supermarket game. They called it Whole Foods.
Today, Whole Foods is a $8 billion company with over 300 stores spread across the US and the UK. Many stores span an incredible 40,000 square feet. The organic grocery market is now so big that Walmart and other supermarkets have copied Mackey’s health food model.
Most important to Mackey, however, is his personal mission of Conscious Capitalism, a philosophy of running a business not just for profits but also with purpose, that is starting to gain ground. Companies now understand that Conscious Capitalism doesn’t just mean ‘corporate social responsibility’, and it doesn’t mean short term.
But it didn’t happen easily; it’s taken nearly three decades for Whole Foods to get where it is.
The year Whole Foods opened, the entire store was flooded, all inventory was wiped out, and losses (they had no insurance) were at $400,000. But the supermarket was salvaged by customers, neighbours, creditors, vendors, and investors who quickly responded with aid. The moment would have a huge impact on Mackey’s thinking.
In 1985 Mackey set down a “Declaration of Interdependence” (see box on page 136), stating that Whole Foods would adopt a stakeholder philosophy. Instead of just chasing profits and working for investors, they would at all times keep in mind the needs of employees, customers, suppliers, the environment and community as well.
Mackey’s hope was that Whole Foods would work toward a “new business paradigm” of more responsible capitalism, though he wasn’t sure exactly what that was, or how to do it.
Mackey’s model wasn’t without dissenters. Co-founder Mark Skiles left Whole Foods in the mid 80s because he was worried about the business. “If we have guys who come in to buy a bag of sprouts and then sit around all day reading we’ll go out of business quick,” he told New Yorker Magazine in a recent article on Whole Foods.
But others were sure Mackey’s idealistic style of shop-keeping could work. Walter Robb, now co-chief executive officer and director of Whole Foods, who joined the company in 1991, says, “We began with the idea that we could change the world. Not that we knew what we were doing. When you’re young it’s very inspiring to think you are doing worthwhile work. The purity and intensity of intent was there from the beginning”
The funds certainly weren’t. Robb describes the early years as being always in “survival mode”, with no money to speak of. “We were scrapping, just trying to make it.”
By the late 80s, Whole Foods wasn’t scrapping so much. The supermarket expanded outside of Texas, including to Palo Alto, California, which provided the opportunity to drum up nearby venture capital. Whole Foods went public in 1992, raising $23 million to list on the Nasdaq Stock Exchange.
Meanwhile, Mackey decided Whole Foods would adopt a non-traditional management model, in which decision making would be decentralised. He wanted to ensure even lower-rung employees would be able to make bigger decisions.
A blogger and former Whole Foods employee named ‘Tzimisce’ who has criticised Whole Foods admitted that the opportunities she got at Whole Foods were something she’d be unlikely to get at another corporate job. Employees also embraced Whole Foods’ benefits, which employees voted for themselves and included health insurance for even part-time employees. Starting in 1998, Whole Foods was on the Best Places to Work for the next 12 years to follow.
Whole Foods soon became the United States’ first national “certified organic” grocer. But Mackey knew he’d have to present food in a desirable way to get not just hippies but also foodies in his store. Instead of the traditional crunchy-granola approach, Mackey set up Whole Foods aisles with gleaming stacks of fruits and vegetables, perfectly arranged exotic sushi stations, and glossy, overflowing cheese and chocolate counters. When the customer leaves a Whole Foods store, the smell of freshly baked bread follows them back to their car. Mackey says this shows Whole Foods commitment to its consumer; Forbes called it “food porn”.
Nonetheless, Mackey soon became an evangelist for Conscious Capitalism, publishing essays, speaking about it at universities, building an alliance for businesses, and starting a Conscious Capitalism summit. The first Conscious Capitalism Conference was held in 2008 in Texas and is now expanding around the world. India held the conference in March 2010.
(This story appears in the 22 October, 2010 issue of Forbes India. To visit our Archives, click here.)