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Organic, Inc.: Natural Foods and How They Grew Excerpt from Organic, Inc.: Natural Foods and How They Grew

by Samuel Fromartz

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Introduction

When I was single in New York, with a work schedule that regularly stretched into the evening, I’d eaten a lot of takeout and restaurant food and limited my cooking mostly to the weekend, much as I enjoyed it. Now, in a more domestic setting, with a paltry choice of decent places to dine nearby, I lost my appetite for eating out. “I could make this better at home!” I’d say, when faced with a subpar restaurant meal.

It was inevitable that this outlook would one day bring me to Whole Foods Market, already a fast-growing mecca for foodies in Washington. The first thing that grabbed me -- just as it was designed to do -- was the veritable garden of fresh fruits and vegetables that greeted me as I walked into the store. Containers of beautiful strawberries were piled next to raspberries from South America. Deep-red hothouse tomatoes from Holland, cherry tomatoes from Maryland, grape tomatoes from Baja, heirloom tomatoes from Pennsylvania. There was Lacinata kale, red and green Swiss chard, bok choy and baby bok choy, Napa cabbage, baby Asian greens, daikon radish, broccoli rabe, red-leaf, green-leaf, and romaine lettuce along with bulk spring mix. Organic peaches were available in the summer, apples and pears year-round. Not all of the produce was organic, but much of it was, and I began buying it, figuring the lack of pesticides was a bonus for freshness and taste. Then I would move around the perimeter of the store, trying my best not to dump fresh seafood and meat and dairy on top of the produce. It would have made more sense to pick up the veggies last, so that they would be on top, but the hard facts of consumer enticement had dictated the layout of the store: the gorgeous array of fresh fruits and vegetable were the gateway to this consumer paradise. They had certainly hooked me. Without kids, I didn’t think much about cost. Quality was all.

In New York, you have to understand, I didn’t do supermarkets because they were impossible, nasty, and crowded. I relied on old-fashioned neighborhood and specialty stores like the Staubitz butcher shop on Court Street in Brooklyn, and Sahadi’s on Atlantic Avenue, where I stocked up on spices, dried fruit, hummus, thick Middle Eastern yogurt, and olive oil. In Greenwich Village, there was Murray’s Cheese Shop, where the long wait was exceeded only by the number of exotic cheeses in stock, and Faicco’s Pork Store across the street, with unequaled Italian sausage. You got fresh pasta at Raffetto’s on Houston Street and fresh mozzarella scooped by hand from the vat in the back of Joe’s Dairy on Sullivan Street. Then I would bike down to Chinatown for bargain seafood and vegetables or visit Russ & Daughters on the Lower East Side for smoked salmon and pickled herring, as my elderly father kibitzed with the staff.

But in Washington, I discovered that Whole Foods had brought many of these specialty foods into one convenient, upscale setting. Even the lighting was spectacular -- it was designed, a marketing consultant told me, to make people look better, feel better, and thus want to buy more. The quality of the goods themselves wasn’t always up to the stuff I bought in New York, but it was high, the produce especially.

I began to notice something else, too. The store was getting more and more crowded and competition for parking had become fierce. Soon, Whole Foods offered valet parking -- at a supermarket! -- but it was free, so I took advantage of it. My business instincts kicked in, no doubt influenced by the awareness of how much money we were spending at Whole Foods each week -- and by implication, how much others must be spending, too.

I decided to get a piece of the action. Following the dictum of stock market guru Peter Lynch, who quaintly advised investing in what you knew, in companies you liked, I bought Whole Foods stock. This time, at least, it worked. Moreover, owning the stock justified whatever superfluous purchases struck my fancy -- French soaps, organic orange juice, a pricey T-bone, sushi-quality tuna, Venezuelan chocolate, Italian ricotta. If they swelled Whole Foods’ bottom line, they also swelled mine.

The more I spent at the store, the more I made on the stock, give or take a few swoons along the way, such as the company’s ill-advised launch of a natural-food dot-com. Luckily, though, it always returned to what it knew best -- selling good food in a pleasant atmosphere. And it grew steadily, even as the economy dipped into a brief recession. Overall, I earned a return in excess of 130 percent by the time I sold the stock, over a period ending in mid-2002, when I began this book project (thus cutting my sole financial connection to the organic food industry). Ellen and I had, in effect, eaten for free at Whole Foods for two and a half years. Had I continued to own the stock, it would now be up more than sixfold.

Who would have thought that a natural-food supermarket could have offered a financial refuge from the dot-com bust? But it had. Sales of organic food had shot up about 20 percent per year since 1990, reaching $11 billion by 2003, and had garnered outsized attention in the $460 billion supermarket industry. Whole Foods had grown in lockstep with the organic sector, which was no mean feat. Greater sales meant greater profits. With 172 stores in the United States, Canada, and Britain, where it had purchased the Fresh & Wild chain, it had become a growth company boasting $4 billion in sales in a stagnant industry littered with casualties, thanks to Wal-Mart’s strategy of “everyday low prices.” Whole Foods managed to sidestep that fray by focusing on, well, people like me. And it had done so without many noticeable marketing expenditures, like the insert ads or double coupons that supermarkets routinely offer to keep customers shopping.

Something besides advertising was driving this market and Whole Foods had tapped into it.

Copyright © 2006 Samuel Fromartz

For more information, please visit www.fromartz.com