FOOD / Whole Foods
Conscious Capitalism

Why Whole Foods Represents the Failures of 'Conscious Capitalism' ... There’s no way to ‘fix’ corporations’ compulsion to produce ever more, ever more cheaply. It’s written into the DNA of global capitalism.

Burgess COMMENTARY
Capitalism has worked well for a long time, not perfect by any means, but a system that has enabled a huge improvement in quality of life over the past 200 years. I studied engineering and economics at Cambridge and graduated in 1961. I became a Chartered Accountant in 1965 and have been involved in both corporate decision making and assisting in international development and humanitarian relief. Much of capitalism is very good, but bits of it are rotten to the core. I believe it is important to be clear about what is good and what is not ... and in fact to start measuring not only the profit of the company and the increase in the stock price, but to measure with numbers the impact a business has on society and the environment. Without such metrics, serious long term value investors cannot make good decisions and are always in danger of being upstaged by the gamblers.
Peter Burgess ( http://truevaluemetrics.org )
Peter Burgess

FOOD Why Whole Foods Represents the Failures of 'Conscious Capitalism' There’s no way to ‘fix’ corporations’ compulsion to produce ever more, ever more cheaply. It’s written into the DNA of global capitalism.

Photo Credit: Wikimedia

It’s hard to think of a better poster child for “conscious capitalism” than Whole Foods Market, the high-end grocery store that made a name for itself selling organic produce in feel-good, mood-lit stores. These days, the chain is floundering and a potential buyout is on the horizon. What does that say about the conscious capitalism it championed?

Same-store sales have declined for six straight quarters, and Barclay analyst Karen Short estimates that 14 million Whole Foods customers walked away during the same period. Last month activist hedge fund Jana Partners swooped in, buying up 8.3% of the company’s shares and demanding an overhaul. Whole Foods responded by reshuffling its board, bringing in a handful of big box retail stars and promoting Gabrielle Sulzberger, who hails from private equity, to chairwoman.

A failing firm isn’t exactly news. In the dog-eat-dog world of global capitalism lots of companies have their moment in the sun only to crash and burn a few years later.

But Whole Foods was supposed to be different.

John Mackey, the company’s chief executive, has long argued that Whole Foods is wired differently — that it runs on a “conscious capitalism” model that outsmarts the competitive pressures of our for-profit system through creativity and innovation.

In Liberating the Heroic Spirit of Business: Conscious Capitalism, Mackey argues that his conscious capitalism model achieves success by honoring not just shareholders, but all stakeholders, including workers, communities, and the environment.

The Whole Foods founder penned his treatise in response to the growing consensus that capitalism is doing irreparable harm to the planet and the people who live on it. Our for-profit system is increasingly viewed as a zero sum game in which ecological destruction, climate change, and rising inequality are firmly linked to the rapacious behavior of multi-national corporations.

Mackey agrees that humans are harming the planet, but he doesn’t think the problem lies in capitalism. Free market capitalism, according to Mackey, is actually a “beautiful,” “heroic,” system that, properly harnessed, can operate “in harmony with the fundamentals of human nature” and the planet.

We don’t need to rein in corporations through onerous labor and environmental regulations, he writes, because the virtuous feedback loop of honoring stakeholders plus innovation will leave “unconscious” firms like Walmart in the dust.

The conscious capitalism model is appealing. It’s simple, easy. We can avert looming environmental catastrophe by becoming conscious consumers who frequent conscious companies. After all, shopping at Whole Foods is a heck of a lot more fun than lobbying for regulations on corporations or convincing people to consume less. More Whole Foods, less Walmart. Problem solved.

Mackey was right about one thing. People do love to shop at Whole Foods, or at least they used to. These days that demon called competition has caught up with the Austin-based company. Behemoths like Kroger, Safeway, Target, and even Walmart now offer a wide-range of organic produce for considerably less than “Whole Paycheck.” Mackey’s conscious company has gone from Wall Street darling to Wall Street basket case in the blink of an eye.

The future of conscious capitalism appears equally bleak. To placate shareholders and mitigate declining same-store sales, last year the company jettisoned its unique purchasing model that wove together a network of autonomous regional production hubs of small farmers and mom-and-pop food startups.

It’s now prioritizing a centralized, bulk-buying strategy that looks a lot like, well, Walmart. It also initiated a $1.25bn share buyback program and has promised to cut costs by $300 million and raise same-store sales 2% by 2020.

But according to its 13D filing, Jana Partners — whose founder and fund manager Barry Rosenstein recently bought the most expensive home in America — wants even more. Like Whole Foods, Jana is experiencing a slump, suffering negative returns in 12 of the last 19 months; it’s expecting to cash in on its investment in the organics chain. A potential forced sale, most likely to private equity investors known for slash and burn tactics, remains on the near-term horizon.

The point of this dour appraisal is not to crow over Whole Foods’s misfortune. It’s to take a hard look at models that claim to solve the ills of capitalism without challenging the in-built drives of our for-profit system.

Mackey has loudly declared unions akin to herpes and state regulation little more than “crony capitalism” — that all we need to solve things like the climate crisis are better, smarter, “conscious” capitalists. The crisis of Whole Foods belies this notion. There’s no way to “fix” corporations’ compulsion to produce ever more, ever more cheaply. It’s written into the DNA of global capitalism.

Attractive as the conscious capitalism model may be, we simply can’t rely on companies to deliver dignified workplaces, equitable models of food production or a better relationship between consumers and the planet.

All stakeholders are not equal in our global economy, and even the best-intentioned businesses run up against the implacable foes of profit and competition. Ultimately, the thorny problem of sustaining both decent livelihoods and a livable planet won’t be solved by buying better things. It’ll be solved through political struggle and demands that put people before profit.

Ron • 2 minutes ago 'There’s no way to ‘fix’ corporations’ compulsion to produce ever more, ever more cheaply. It’s written into the DNA of global capitalism.' Now combine the above with the enormous spending elephant in the giant capitalism room. Well actually the LACK of spending elephant. The aforementioned elephant in the room, which is seemingly being ignored, is actually a very simple math problem. The lower, lower middle and middle classes by percentage, purchase the overwhelming majority of goods and services produced. As the income levels for these demographics continue to drop, there will be less goods and services purchased. Who's going to buy the cars, shoes, clothes, services, even food, in our worldwide consumer based economy? After all the upper 5% can only purchase so many cars, or clothes, or shoes, or food, or whatever. So who's going to pick up the slack here? The wealthy and ultra-wealthy? The reality? You can't sell a product or service if people are not being paid enough to afford it. And the bottom line is more and more people are reaching that point in our wonderful (sarcasm intended) neoliberal/globalist based economy. • Reply•Share ›

Avatar airvicemarshalpark • 19 minutes ago Whole Foods is nothing more than a throwback to the Yuppie era of the 1980s. As such, it can never veer from that path of cultural antiquity, conspicuous consumption, big shoulder pads and sheepskin car seats in your BMW. It was an era when paying too much for things that used to be cheap was a virtue itself. It is not without notice that the WF model arose in the Austin of the '80s. A time when Austin stopped being weird for weird's sake and turned Yuppie. 1 • Reply•Share ›

Avatar Drclaw99 airvicemarshalpark • 5 minutes ago it really depends on what you buy there. Processed goods are as you say, but their basic produce is competitive with others, particularly when you are buying local and regional. • Reply•Share ›

Avatar Daniel Lavigne • an hour ago 'Conscious Capitalism'? Is that what might save us as the world falls apart due everyone's greed for 'More!'? Gads! Why are we exposed to this non-stop continuity of CONSCIOUS CRAP? For any Parents that MIGHT still care about their Children's future: Our collective drive for 'More!' must now END as we face the desperate need to STORE all Personal Vehicles . . or tell our Children that, due our love affair with 'Our Prized Mobility' . . their future will not be what was hoped and anticipated! A special note to any who, totally distraught by the reality of what we face, are now considering 'Suicide': Please note that 'Pre-Departure Donations'are being accepted from individuals prepared to outline 'why' they have decided to choose that route . . as opposed to joining the effort to otherwise wake the world. http://PreDepartureDonation... • Reply•Share ›

Avatar TheRealMidnite • an hour ago Lol! Well, if you fell for such an obvious red herring as 'conscious capitalism' (or it's even lamer and just as thoroughly inbred cousin, 'green capitalism') you really have only yourself to blame... • Reply•Share ›

Avatar Steve1027 • 2 hours ago Whole Foods represents the failure of just plain capitalism. Remember how they used to use prison slave labor? The profit motive is a crappy way to organize a global civilization. In fact, it's precipitated the sixth mass extinction of life on Earth. Kill the system before it kills us and much of everything else too. 1 • Reply•Share ›

Avatar Political Atheist • 2 hours ago mackey, once a democrat, became a libertarian when he made the big bucks. funny how that is. there is no conscious capitalism at whole foods: once they strove for good customer service and to educate the public on eating better but now, they have cut staff and dept budgets to the bone, screwing employees and the 'good customer service' they always, in the past, extolled. and if you actually read the ingredients on their 365 products, they are no better, and in some cases worst than the stuff you by at regular super market. macky just wants his bread buttered on both sides. just another bullshit artist. 1 • Reply•Share ›

Avatar Drclaw99 • 2 hours ago I shop at WF (for fresh stuff only) and will continue to do so for as long as they have regional organic produce, which cannot be found at other places, including my local food co-op. Still-it had a positive impact for a time, as the rise of it's competitors shows. But-one cannot complain about the cost of local and regional organic food while at the same time bemoaning the ascendance of walmart; local and regional is always going to be more expensive because the cost of labor dominates the final product cost. Walmart, and now WF has gone to large scale producers precisely because people value cheap over good. No-capitalism will not save the planet, but it also is possible to have a better model for it. The problem is that Mackey is committed to capitalism first, and ethical behavior is used as a selling point. There are other companies reverse these priorities. Clearly though,the system is broken since it rewards rapacious behavior. lack of shareholder transparency, no checks on executive compensation, crony boards etc all incentive the extraction of wealth as opposed to the creation of it. Models that incentivize worker owned means of production, penalize large differences between worker and white collar salaries, make corporations responsible for the product over it's entire life cycle can ameliorate this. Unfortunately this is impossible when or govt is a wholly owned corporate subsidiary. 1 • Reply•Share ›

Avatar Jay Reedy • 2 hours ago Yes; and I predict a renewal of interest in Marx's insightful and prescient analysis of the exploitative workings and dynamics of capitalism, whether in Trump's America or Putin's Russia.. • Reply•Share ›

Avatar berrylium • 3 hours ago Mr. Mackey fails to appreciate the difference between conscious capitalism and capitalism with a conscience, which is, perhaps a contradiction in terms. Now his business model will be eaten alive by the mindless cancer of growth that is American capitalism. All that aside, where will one be able to go to buy food that isn't long-term slow poison? I cannot help but think of the Kushner family viewing slums as real estate 'asset classes' and ignoring the health and comfort of the tenants who are seen only as objects to be exploited. In like manner, the new owners of Whole Foods will not care what harm they do to customers as long as they can keep a productive asset class in their portfolios. • Reply•Share ›

Avatar oneleft1 • 3 hours ago 'I hope that we shall crush in its birth the aristocracy of our monied corporations, which dare already to challenge our government to a trial of strength, and bid defiance to the laws of our country.' – Thomas Jefferson. “The power of all corporations ought to be limited . . . the growing wealth acquired by them never fails to be a source of abuses.” – James Madison 4 • Reply•Share ›

Avatar gininitaly • 5 hours ago It's time for the mega corporations to die... on a finite planet unfettered growth is suicide! It's time to get back to a real 'free market' economy that's smaller, local, seasonal and more cooperative, with a sense of community that cherishes human connection and feels responsible for the health of the planet that nurtures us and so ourselves... and accept that being less Wall St. profitable is to the benefit of everyones quality of life. We should be able to choose to be surrounded by people who don't need to be lured into being addicted consumers and debtors for the profits of the very few who already have so much money that they have decided that humanity and the planet itself are expendable as long as they hold all the chips. This is madness. 5 • Reply•Share ›