As an introduction to this material, I am sharing part of a monthly newsletter authored by Michael Strong, CEO and Chief Visionary for FLOW, a social entrepreneurial group I co-founded. He speaks to the events leading up to the conversation with Michael Pollan in Berkeley on February 27, 2007, as well as the greater meaning of the ongoing dialogue. Strong’s article adeptly references the linkage between this current presentation and my previous blog post on Conscious Capitalism. I invite you to read it with those things in mind while I work on an expanded, written version of my presentation to be posted on my blog in the near future.

Per Michael Strong:

“On Tuesday evening, February 27, 2007, I attended a public dialogue between Michael Pollan and John Mackey in Berkeley. It was an extraordinary event by any standard.

Last April, Michael Pollen’s book The Omnivore’s Dilemma was published and quickly became a New York Times best seller and has stayed on the list ever since. It was named one of the “10 Best Books of 2006″ by the New York Times Sunday Book Review.

The book is a meticulous account of four meals: One from McDonald’s, a second from “Industrial Organic,” a.k.a. Whole Foods Market (WFM), a third from Joel Salatin’s organic farm in Virginia, and the fourth one that Pollen hunted, gathered, and prepared himself. Not surprisingly, the dramatic narrative is from the “worst,” at McDonald’s, to the “most authentic,” his own hunter-gatherer meal. In this continuum, the “industrial organic” meal from Whole Foods comes off as better than McDonald’s but still relatively corrupt and impure. Pollan’s book has had a substantial impact on our culture, especially on that sub-culture of people who are especially interested in food.

When Pollan was in Austin for his book tour, John Mackey, Whole Foods CEO, invited him by to have a conversation about the book. John had felt that Pollan’s book was not an entirely fair and accurate perspective on Whole Foods Market, and wanted to talk about the issues directly with Michael Pollan. This first conversation evolved into an exchange of letters between the two, which are available to the public in earlier submissions to this blog. Eventually Michael invited John to have a public discussion with him in Berkeley, and John agreed; thus the event on February 27.

To Michael’s credit, he introduced John by explaining just how unusual this situation was. In general, when a journalist writes a book or article critical of a particular corporation, the corporation either ignores it or sends out a press release to counter the criticisms. For the CEO of a corporation that had been criticized in a prominent book to engage in the writer in an extended dialogue on the merits of the criticism was in itself unprecedented. For the CEO to then appear in public to discuss the criticism was even more unusual.

John began with a forty-five minute presentation (the entire evening, including John’s presentation, may be viewed here). In it he surveyed the history of our food system, thus putting Pollan’s criticisms in a historical context, and pointing out that the much criticized “industrial” food system had, in fact, been enormously successful at alleviating hunger around the world. He then explained Whole Foods Market’s positive role in changing the way that people eat. His presentation went on to explain both existing and new initiatives that WFM is undertaking to make the world a better place.

I won’t summarize John’s talk here, or the subsequent conversation with Pollan, nor the Q&A session afterwards. Suffice it to say that in this history of corporate – press relationships, I am not aware of any comparable in depth exchange of views. It is fair to say that Pollan, starting off as a critic of WFM, was won over by Mackey’s transparency, integrity, and sense of fair play. The Berkeley audience was similarly won over, and constantly interrupted John to applaud WFM initiatives.

John made it clear during the conversation that Pollan’s attacks had been costly to WFM: in the time since Pollan’s book came out, WFM has lost $2 billion in stock market capitalization. Although it is unlikely that Pollan’s attacks are solely responsible for that drop, John did point out that Pollan’s charges that WFM represented “industrial organic” led to a media “feeding frenzy” attacking and ridiculing the idea of “industrial organic,” with WFM the main target. Given that current and prospective WFM customers would be the demographic most likely to have read Pollan’s book and related media articles, it is likely that a book as high profile as Pollan’s was did indeed have a large negative impact on WFM revenues and, consequently, stock price.

Given this context, John’s response to Pollan was even more astonishing. He thanked Pollen for bringing to light justifiable criticisms of WFM that, in the end, led to new initiatives. And at the same time he clearly pointed out the ways in which Pollan’s expectations regarding large-scale natural foods production and distribution were simply unrealistic in historical context. John calmly and appropriately brought the conversation around to a FLOW motto, borrowed from Michelangelo: “Criticize by creating.”

One of FLOW’s programs in development is “Conscious Capitalism.” The goal of Conscious Capitalism is to move beyond the limited purview of “Corporate Social Responsibility,” to a new perspective: One in which corporate purpose, integrity in pursuing that purpose, and transparency with respect to how an organization pursues that purpose are key, along with a deep recognition of the interdependent system of multiple stakeholders in which business functions. In a world of corporations that are purpose-driven, and which are acting out of integrity and therefore willing to be transparent regarding their practices, the reputation of corporations and respect for capitalism will improve dramatically. John provided an exemplary manifestation of Conscious Capitalism on the evening of February 27.

At the same time, we need to encourage Conscious Journalism, Conscious Activism, Conscious Politics, etc., all driven by purpose, integrity, and transparency, and a sensitivity to the interconnected system in which all function. For me one of the most telling moments of the evening was when Pollan expressed his surprise that his book might have cost WFM significant loss in revenues. Pollan’s perspective was that he was simply practicing the art of journalism to the best of his ability. It had not occurred to him that he could cause great damage to others by means of his reporting. If he had actively believed that harming WFM was a necessary and justified action to take, then his journalism would have been conscious. His lack of awareness alone (watch the video and judge for yourself) reveals a lack of conscious action and intention on his part.

John’s mature, relaxed perspective on Pollan’s often misguided attacks are also an exemplary manifestation of the spirit of constructive dialogue. He was sincerely grateful to Pollan for helping him to develop a clearer perception of the path that WFM should take going forwards. May we all learn to become more conscious and thoughtful in all of our actions and responses, and may we all also learn to be more generous to those who fail to do so.”

• The Past, Present, and Future of Food slide show (PDF)
• PETA “Meet Your Meat” video clip shown during Mackey presentation

I’ve been very gratified and impressed with your responses to my dialogue exchange with Michael Pollan over the last six months. The following lengthy essay is something I have been working on for several months; the ideas have been gestating for many years. The topic is Conscious Capitalism and I encourage you to read this material with your mind open to the possibilities inherent in these ideas. The essay is long and it may take extended time and concentration on your part to read. However, I think the ideas I articulate here are important ideas and they deserve to be read by an intelligent and critical audience.
Some of you may be aware that I am in the middle of two book projects. The Whole Story will relate my business and life philosophies along with my version of the story of Whole Foods Market, the company I co-fo

unded 28 years ago. The second book, The FLOW Papers, includes several of my essays on topics related to the purpose of FLOW, a not-for-profit group I co-founded with Michael Strong in 2003-see www.flowproject.org and www.peacethroughcommerce.com. The following essay will appear in both books in modified forms.
I want to offer every regular reader of my blog an opportunity to co-create these ideas with me. I’m very interested in your constructive feedback. Specifically, I want to know what you like about the essay and the ideas presented within. I would also like your well-considered suggestions on how to improve the essay. Would you be willing to spend a few hours with me while reading and critiquing the following? As you may be aware, I do actually read your responses and often answer specific postings. I would like to begin a pro-active discussion of the ideas presented in the Conscious Capitalism essay.

I believe in the power of healthy systems to disseminate new ideas quickly. The internet is a great system for supporting co-creation of projects, ideas, and social movements. I invite you to help me provide an excellent example of just how powerful a collaborative tool this social networking system can be to help change the world.

If I get valuable feedback on this essay that challenges my thinking and helps improve my presentation of the ideas via my blog, then I anticipate doing the same thing on all the other non-narrative chapters I’m writing for the book. I anticipate placing an additional chapter on the blog about every 3 to 4 weeks until my book is finished and ready for publication.

With love and in great anticipation of your helpful responses,

John

Conscious Capitalism: Creating a New Paradigm for Business

Do we need a new way to think about business, corporations, and capitalism for the 21st century? Do we need to create a new business paradigm? Corporations are probably the most influential institutions in the world today and yet many people do not believe that they can be trusted. Instead corporations are widely perceived as greedy, selfish, exploitative, uncaring-and interested only in maximizing profits. In the early years of the 21st century, major ethical lapses on the part of big business came to light including scandals at Enron, Arthur Anderson, Tyco, the New York Stock Exchange, WorldCom, Mutual Funds, and AIG. These scandals have all contributed to a growing distrust of business and further eroded public trust in large corporations in the United States.

Increasingly, many people believe there must be something wrong with both corporations and capitalism in the world today. The anti-globalization movement is primarily an anti-corporation movement. Many people have come to the conclusion that corporations want to dominate and control the world-in fact David Korten wrote an interesting book called When Corporations Rule the World. While many critics, including myself, take issue with Korten’s assertions, the book does reflect this relatively common belief that corporations are slowly, steadily taking over the world. Since they are greedy, selfish, and uncaring, along this line of reasoning it follows that this corporate hegemony is not a good thing for the world. In short, corporations and capitalism are not generally in favor, and both have serious branding problems in the larger world today.

Our first theories of economics were developed during the Industrial Revolution. Prior to that, economics did not exist as a discipline. Economics was created as an explanatory response to the Industrial Revolution and initial economic models were based on industrial models of the economy. Although economic theory has evolved since Adam Smith wrote The Wealth of Nations in 1776, many economists continue using industrial and machine metaphors to explain how the economy works. Now that we are well into the post-industrial Information Age, these metaphors have become outdated and mislead our thinking about business. For example, recall the trinity of labor, land, and capital as “factors of production”, and therefore as merely a means to the end of efficiency and profits. According to this model, business operates like a machine—various amounts of capital, labor, and land are inputted at the start, and spitting out on the other side of that machine are the profits. According to this model, the purpose of business, as most economists see it, is to transform factors of production into profit for the benefit of the investors.

The world has become much more complex since those simple machine metaphors were first developed. Unfortunately, current business thinking does not easily grasp systems interdependencies, and therefore often lacks ecological consciousness or a sense of responsibility for other constituencies, or other stakeholders, besides investors. Large corporations are still grounded in a theoretical model that does not acknowledge the complex interdependencies of all of the various constituencies. For business to reach its fullest potential in the 21st century, we will need to create a new business paradigm that moves beyond simplistic machine/industrial models to those that embrace the complex interdependencies of multiple constituencies. This is the reality in which corporations exist today and our economic and business theories need to evolve to reflect this truth.

I intend to raise several questions about current business thinking and practice in this chapter. Because my experience as co-founder and CEO of Whole Foods Market is in the retail grocery business, many of my examples, especially of new business thinking, will feature innovations and standard operating procedures at my own company. I encourage you to use your creative imagination to see the possibilities that exist for current business to escape outdated thinking and action, and build upon the Whole Foods Market model in future businesses youmay create as part of a new paradigm.

Voluntary Exchange

In a capitalistic market economy business is ultimately based on voluntary exchange; all the main constituencies of a business (such as customers, employees, suppliers, and investors) voluntarily exchange with the business to create value for themselves and for others. No constituency is coerced to exchange against their will. This voluntary exchange for mutual benefit is the ethical foundation of business (and capitalism). For example, if customers are unhappy with the prices, the services, or the selection of my business, Whole Foods Market, they are free to shop at another competitor. If our team members are unhappy with their wages and benefits, or the working conditions, they are free to seek a job with a different firm that provides more of what they seek. If investors in a public corporation such as Whole Foods Market are unhappy with the economic returns being generated, they are free to sell their shares and invest their money in some other alternative. If suppliers want better terms or different product placement than we are willing to give they are free to seek alternative outlets to sell their products. All the constituents therefore exchange voluntarily for mutual benefit, and they are free to exit the relationship whenever they wish. This voluntary exchange for mutual benefit creates the ethical foundation of business and that is why business is ultimately justified to rightfully exist within a society. This ethical foundation of business doesn’t necessarily mean that everything any particular business does is always ethical, but only that voluntary exchange for mutual benefit is itself an ethical process. A business is still expected to behave ethically in its voluntary exchanges (not lie, steal, or cheat) and to be responsible for any negative impacts it may create (for example, environmental pollution).

The Purpose of Business

Have you ever asked yourself what is the purpose of a business? It is an interesting question that most business people never ask themselves. If you think about it, what is the purpose of a doctor or hospital? Is their purpose to maximize profits? Well, this is certainly not the purpose that they teach in medical schools or most doctors advocate. The doctor’s purpose is to help heal sick people. What about the purpose of the teacher or the school? Do they exist maximize profits? No of course not. Their primary purpose is to educate the young and prepare them to live successful lives in society. What about the purpose of lawyers or law courts? All lawyer jokes aside, the purpose of a lawyer would be to pursue justice and our law courts exist to settle disputes in our society and to bring wrongdoers to justice. All of the other professions put an emphasis on the public good and have purposes beyond self-interest. Why doesn’t business?

What then is the purpose of business and who has the right to define it? Professional economists routinely assume and teach that the purpose of business is to maximize profits for the investors. However, they seldom offer arguments to support this point of view beyond asserting that the business is owned by its investors who have a legal right to hire and fire the management (through the Board of Directors they elect) and also have a legal claim on the residual profits of the business. Both of these assertions are true, but these legal rights do not necessarily equate to defining the purpose of a business—why it exists and what its purpose and goals are. In most cases the original purpose of a business is decided prior to any capital being received from investors. While the capital from investors is obviously very important to any business, there is one participant in business who has the right to define what the purpose(s) of the business will be in the world—the entrepreneur who creates the business in the first place. Entrepreneurs create a company, bring all the so called “factors of production” together, and coordinate them into a viable business. Entrepreneurs set the company strategy and negotiate the terms of trade with all of the voluntarily cooperating stakeholders—including the investors. At Whole Foods we recruited our original investors and they freely invested with the understanding that Whole Foods had other purposes besides maximizing profits. Entrepreneurs discover and/or create the purpose of a business—not investors, or politicians, or lawyers, or economists.

I’ve known many entrepreneurs in my life, and with only a few exceptions most did not create their business primarily to maximize profits. Of course they wanted to make money, but profit was just one of the reasons they started their business. It may be that they were unable to work for anybody else, have strong authority issues, and therefore need to be their own boss. Or they need to be in charge of their own enterprise because that is how they get their sense of self-worth, value, and self-esteem. It could be that they have something to prove to their parents, siblings, or their friends and creating a successful business will exorcise unconscious childhood demons. It could be that they are very creative individuals who have ideas that they want to see tested in reality to see whether or not they work. It could be that they are idealists and want to make the world a better place, and their primary motivation for creating their business is to improve the world. It could be that the entrepreneurs create their business for the sheer fun of it. There are many, many reasons why people create businesses, and while I cannot deny that there are certain entrepreneurs who create their business primarily to maximize profits, I would say that in my life experience they are definitely a minority.

The founding entrepreneurs determine the initial purpose of their business, but eventually these entrepreneurs will retire or leave the businesses that they created. Does the original purpose that the founding entrepreneurs established remain in perpetuity or can it evolve over time? I believe the purpose of any business can evolve over time. This evolution of purpose is the result of the dynamic interaction of the various interdependent stakeholders with each other and with the business itself. Customers, employees, investors, suppliers, and the community all influence business purpose over time. While the investors will have the ultimate legal claim on the residual profits of the business, the purpose of the business itself evolves over time through the co-creation of the interdependent stakeholders. This is a fascinating discovery I’ve made about Whole Foods Market during the previous 28 years. Whole Foods Market’s co-founders created the original purpose of the company in 1980, but the interdependent stakeholders have evolved it over the years. We started with a few simple ideals and core values for the company and then created very simple business structures to help fulfill those ideals. However, over time as the company grew a process of self-organization took place and layers of organizational complexity evolved year after year after year to fulfill the original core values. As the original core values were expressed over time, deeper meanings of those core values were discovered and/or created by the interdependent stakeholders. Whole Foods Market’s purpose has become deeper, richer, and more complex as it has evolved over the years.

The “myth” that the ultimate purpose of business is always to maximize profits for the investors originated with the Industrial Revolution’s earliest economists and is an idea that has remained with us ever since. How did this happen? The classical economists formulated their theories by observing and describing the behavior of various entrepreneurs and their businesses. They observed correctly that successful businesses were always profitable and that, indeed, the entrepreneurs who organized and operated these successful businesses always sought to make profits. Businesses that were not profitable did not survive for very long in a competitive marketplace because profits are essential to the long-term survival and flourishing of all businesses. Without profits entrepreneurs will not be able to invest the necessary capital to replace their depreciating buildings and equipment and won’t be able to make the necessary investments to adapt to the always evolving and competitive marketplace. The need for profit is universal for all businesses in a healthy market economy.

Unfortunately, early economists went far beyond merely describing how entrepreneurs always seek profits as an important goal, to concluding that maximizing profits is the only important goal of business. Actually they went even further; the economists soon concluded that maximizing profits is the only goal they should seek. The classical economists went from describing the behavior in which they observed successful entrepreneurs engage while operating their businesses, to prescribing that behavior as the correct behavior that all entrepreneurs should always engage in all of the time. How did they come to this conclusion? I can only speculate here.

One possibility is that the classical economists became enchanted with the efficiency and the productivity of the industrial enterprises that they studied. Industrial and machine metaphors became the primary metaphors used to explain how the world really worked since this reflected the Newtonian scientific world-view that came to dominate the consciousness of the age. Every business was seen as a type of machine with various inputs and profits being the output. Profits from business became the primary capital that investors and entrepreneurs used to not only upgrade and improve existing enterprises, but also the capital used to begin new enterprises. The progress of the larger economy was dependent upon this capital accumulation, through the profits of enterprise being saved and reinvested.

In the United States today, we take for granted the availability of large pools of capital to invest in new businesses because our economy has been producing them for more than 250 years. However, at the beginning of the Industrial Revolution capital was quite scarce. The ability of successful enterprises to accumulate profits and the redirection of accumulated capital by the entrepreneurs and investors into new promising opportunities was largely unprecedented in history. Therefore it isn’t too surprising that classical economists became enamored with the importance of profits, because profits had historically been very rare and they were essential to the continued improvement and progress of society. Industrial Age entrepreneurs had discovered a “perpetual motion machine”—enterprises organized to maximize profits, and through the reinvestment of these profits, the promise of indefinite continued growth.

Great Companies Have Great Purposes

If most entrepreneurs don’t create their businesses for the primary purpose of maximizing profits, then what are their primary goals? The answer to this question varies tremendously from business to business—there are potentially as many different purposes for businesses as there are businesses. Entrepreneurs create their businesses for a diversity of reasons. However, I believe that most of the greatest companies in the world also have great purposes which were discovered and/or created by their original founders and which still remain at the core of their business models. Having a deeper, more transcendent purpose is highly energizing for all of the various interdependent stakeholders, including the customers, employees, investors, suppliers, and the larger communities in which the business participates. While these deeper, more transcendent purposes have unique expressions at each business they also can be grouped into certain well known and timeless categories. Philosophy dates back to Plato the timeless ideals of “The Good”, “The True”, and “The Beautiful” that humanity has been seeking to create, discover, and express for thousands of years. If we add the ideal of “The Heroic” to the above three we have the framework of higher ideals which most great businesses seek to express in some form or fashion. The following examples present these four ideals as created and expressed by great businesses in the world today.

The first great purpose that great businesses express is “The Good”. The most common way this ideal manifests in business is through “Service to others”. Authentic service needs to be based on genuine empathy towards the needs and desires of other people. Genuine empathy leads to the development, growth, and expression of love, care, and compassion. Great businesses dedicated to the great purpose of “Service to others” also develop methods to grow the emotional intelligence of their organizations, an emotional intelligence that nourishes and encourages love, care, and compassion towards customers, employees, and the larger community. While any category of business can be motivated by the deeper purpose of “Service to others”, we find businesses that primarily depend upon the goodwill of their customers to be the most likely to express this particular deeper purpose and to devote themselves to it wholeheartedly. Some of the great businesses that best express the great purpose of “Service to others” include Southwest Airlines, Jet Blue, Wegmans, Commerce Bank, Nordstroms, REI, and The Container Store—all retailers and service businesses. Whole Foods Market also aspires to express the great ideal of “Service to others” as its primary purpose. Devotion to “Service to others” is a deeply motivating purpose that provides tremendous emotional fulfillment to individuals who truly embrace this ideal.

The second great purpose that animates great businesses is “The True”—the “excitement of discovery and the pursuit of truth”. How very exciting it is to discover what no one has ever discovered before; to learn what has never before been known; to create a product or service that has never before existed and that advances the well-being of humanity! This great purpose is at the core of some of the most creative and dynamic companies in the world today. Google, Intel, Genentech, Amgen, and Medtronic are all examples of great companies motivated by the “excitement of discovery and the pursuit of truth”. All these companies have greatly benefited humanity through their successful fulfillment of this great purpose.

The third great purpose that we find at the core of great businesses is “The Beautiful”, which can best be expressed in business through the search for “excellence and the quest for perfection”. A company that expresses beauty in the world enriches our lives in numerous ways. While we more commonly experience “The Beautiful” through the work of individual creative artists in music, painting, film, and artisanal crafts, we can also see it expressed through certain special companies who have tapped into this powerful purpose as they pursue perfection in their chosen endeavor. Some great companies who express this purpose include Apple, Berkshire Hathaway, and Four Seasons Hotels. True excellence expresses beauty in unique and inspiring ways that make our lives more enjoyable.

The fourth great purpose that inspires many great businesses is “The Heroic”— changing and improving the world through heroic efforts. The heroic business is motivated by the desire to change the world, not necessarily through “service to others” or through “discovery and the pursuit of truth”, or through “the quest for perfection” (all three motivations that can have definite “heroic” impulses), but through the powerful promethean desire to really change things—to truly make the world better, to solve what appear to be insoluble problems, to do the really courageous thing even when it is very risky, and to achieve what others say is impossible.

The Ford Motor Company was once a heroic enterprise when Henry Ford first created it. Henry Ford truly changed the world in the early part of the 20th century. Microsoft changed the world in the later half of the 20th century, and so now will Bill Gates’ foundation as it seeks to solve many of the world’s major health problems from AIDS to malaria. One of the best examples of a truly heroic enterprise is the Grameen Bank in Bangladesh begun by Muhammed Yunus. His heroic dedication to ending poverty in Bangladesh and throughout the world resulted his winning the 2006 Nobel Peace prize. I recommend reading his book Banker to the Poor for an inspiring tale of heroic enterprise. Most heroic enterprises are begun by charismatic, heroic entrepreneurs and the organization’s biggest challenge is to successfully institutionalize the heroic purpose after the founding entrepreneur dies or moves on. Very few heroic enterprises have been able to do this over the long-term.

I recommend two books that present the importance of business purpose in great detail are Built to Last by Jim Collins and Jerry Porras, and Purpose: The Starting Point of Great Companies by Nikos Mourkogiannis. I have especially drawn on Mourkogiannis’s ideas for this section and heartily recommend his book.

The Paradox of Profits

My thesis about business having important purposes besides maximizing profits should not be mistaken for hostility toward profit, however. I believe I know something about maximizing profits and creating shareholder value. When I co-founded Whole Foods Market in 1978, we began with $45,000 in capital; we only had $250,000 in sales our first year. In 2006, Whole Foods Market had sales of more than $5.6 billion, with net profits of more than $200 million, and a market capitalization over $8 billion. Profits are one of the most important goals of any successful business and the investors are one of the most important constituencies of the business. Paradoxically, the best way to maximize profits over the long-term is to not make them the primary goal of the business.

I will use an analogy to explain the best way to create long-term profits. The analogy is “happiness” because in my life experience happiness is best experienced by not aiming for it directly. A person who focuses their life energies strictly on striving for their own self-interest and personal happiness is often someone who is also a narcissist, someone who is self-involved and obsessed with their own ego gratification. Ironically, chances are good that they won’t actually achieve their goal of happiness pursuing it in this way. In my experience, happiness is a by-product of other things; happiness comes from having a strong sense of purpose, meaningful work, good friends, good health, learning and growing, loving relationships with many people, and helping other people to flourish in living their lives.

If we have a strong sense of purpose, good friends, loving relationships, meaningful work, and good health it’s very likely that we will also quite frequently experience happiness in our lives. Yet, happiness is a by-product of pursuing those other goals and I think that analogy applies to business as well. In my business experience, profits are best achieved by not making them the primary goal of the business. Rather, long-term profits are the result of having a deeper business purpose, great products, customer satisfaction, employee happiness, excellent suppliers, community and environmental responsibility—these are the keys to maximizing long-term profits. The paradox of profits is that, like happiness, they are best achieved by not aiming directly for them.

Long-term profits are maximized by not making them the primary goal. A business is best not thought of as a machine with various factors of production working in tandem to maximize profits. A business model more in touch with our complex, post-modern, information-rich world is a complex self-adaptive system of interdependent constituencies. Management’s role is to optimize the health and value of the entire complex, evolving, and self-adaptive system. All of the various constituencies connect together and affect one another. If we optimize the health and value of the entire interdependent system and the well-being of all the major constituencies, the end result will also be the highest long-term profits for the investors as well.

Conversely, if a business seeks only to maximize profits to ensure shareholder value and does not attend to the health of the entire system, short-term profits may indeed result, perhaps lasting many years (depending upon how well its competitor companies are managed). However, neglecting or abusing the other constituencies in the interdependent business system will eventually create negative feedback loops that will end up harming the long-term interests of the investors and shareholders, resulting in sub-optimization of the entire system. Without consistent customer satisfaction, employee happiness and commitment, and community support, the short-term profits will probably prove to be unsustainable over the long-term (assuming its competitors manage their businesses to create value for all of their stakeholders).

The most common objection to the above argument is that several thousands of businesses are highly profitable that are not actively managed to optimize the value for all of the stakeholders. Instead they put the interests of their investors first and they are also highly profitable. Doesn’t this disprove my argument? No, because most businesses are simply competing against other similar businesses that are organized and managed with the same overall values and goals—maximizing profits. The real question is, how does a traditional profit-centered business fare when it competes against a stakeholder-centered business? The only study I know that tries to answer this question is Firms of Endearment: the Pursuit of Purpose and Profit by David Wolfe, Rajendra Sisodia, and Jagdish Sheth (2007 by Wharton School Publishing). I highly recommend this as one of the best business books I’ve yet read. The authors identify 30 companies that are managed to optimize total stakeholder value instead of focusing strictly on profits and track long-term stock performance of those that are publicly traded compared to the S&P 500¹. The chart below shows this comparison.

As the chart above indicates, companies that are managed to create value for all of their stakeholders have had extraordinarily high stock market returns both over the short-term and the long-term. This is no accident in my opinion. Rather it is the result of all 30 firms creating a superior business model-the business model that I believe will become the dominant business model of the 21st century.

Stockholders Maintain Legal Control

Optimizing value for all the interdependent stakeholders does not mean, however, a loss of legal control of the business for the investors. The owners/investors must legally control the business to prevent their exploitation by management and by the other stakeholders. However, the owners/investors do get paid last. What do I mean by this statement? The customers get paid first in their relationships with the business—in that they come in, find products or services they desire, purchase those products or services, receive those products or services fairly quickly, and often pay after the product or service has been rendered to them (for example, they eat before they have to pay at a café). Next, the employees render their services and get paid on a short-term, periodic basis. Whole Foods team members receive their pay every two weeks. The suppliers get paid, according to agreed up on terms and timeframes, and government taxes are remitted monthly and quarterly. The owners/investors are paid last, after everyone else has received goods, services, wages, or payment. The investors are entitled to whatever is left over, the residual profits. Because they are paid last, investors must have legal and fiduciary control of the business to prevent management or other stakeholders from exploiting them. Investors usually demand these conditions as a requirement for investing their capital in a business.

Management does have legal and fiduciary responsibility to maximize long-term shareholder value. However, the best way to maximize long-term shareholder value is to simultaneously optimize value for all the major constituencies, because they are all interdependent upon one another. This is one of the most important truths that I have learned while creating and growing Whole Foods Market. I cannot deny that occasionally there are conflicts of interest among constituencies, but in general a “harmony of interests” exists between the different constituencies, since they are so dependent on one another. The best way to maximize long-term shareholder value is to simultaneously optimize the value for all other constituencies. The health of the entire system is what really matters. The following graphic model illustrates one example of what I mean by the phrase “Conscious Capitalism”.

The Whole Foods Business Model: Conscious Capitalism

Whole Foods Market’s Conscious Capitalism

At the center of the Whole Foods Market business model illustrating holistic interdependence, you’ll find our Core Values and Business Mission. Everything else extends from the purpose of the business reflected in the Core Values. Surrounding these central purposes are the various constituencies: customers, team members, suppliers, investors, and the community and environment. All are linked interdependently. Retail business provides a simple model to illustrate that management’s role is to hire good people, train them well, and do whatever it takes to have those team members flourish and be happy while they are at work. The team member’s job, at least at Whole Foods, is to satisfy and delight the customers. If we have happy customers, we will have a successful business and happy investors. Management helps the team members experience happiness, team members help the customers achieve happiness, the customers help the investors achieve happiness, and when some of the profits from the investors are reinvested in business you end up with a virtuous circle. I find myself continually astounded about how few business people understand these linkages. But market analysis increasingly illustrates that the businesses with a sole purpose of maximizing profits, in other words, those that do not understand that their profits are produced by an interdependent system of constituencies, are less successful over the long-term².

Core Values

When businesses have a purpose beyond maximizing profits, that purpose is often expressed in the business mission. Core values constitute the guiding principles the business uses to realize its purpose. Whole Foods Market’s core values very succinctly express what the purposes of the business are—purposes that include making profits but also include creating value for all of the major constituencies. I want to talk briefly about Whole Foods Market’s Core Values. Our business talks and walks our values; we share them with our constituency groups, and invite feedback in the form of dialogs. The core values are: selling the highest quality natural and organic products available, satisfying and delighting our customers, supporting team member happiness and excellence, creating wealth, profits, and growth, and caring about our communities and environment.

Selling the Highest Quality Natural and Organic Products Available

Whole Foods Market is the leading retailer of natural and organic foods in the world;. We have developed strict and explicit quality standards, which we review regularly. We are very proud that we have helped improve the health, well-being and longevity of millions of people, and that we have proven that good health and pleasurable eating are compatible goals. Whole Foods Market resists the continuous trend toward the degradation of the quality of our food through the industrialization of food production. While this industrialization of our food supply has increased efficiency and lowered the cost of many food staples, both of which are beneficial to society, the process has also resulted in many negative unintended consequences. Many of the practices developed for the industrialized food system have resulted in lower nutritional quality for our food and negative environmental impacts such as pesticide contamination and concentrated animal waste products from CAFOs (Concentrated Animal Feeding Operations). We see this particularly in our animal foods production. Widespread factory farm production of our animal foods results in a tremendous cost to the well-being of the animals, along with severe, negative impacts to food safety and human health that are only recently becoming better known in the public arena. To combat this assault on multiple fronts, and to walk our core values, Whole Foods Market is very proud to be developing animal compassionate production standards, working in concert with concerned stakeholder groups.

Satisfying and Delighting our Customers

The customer is our most important constituency, since with no customers, we have no business. We are always aware that customers shop voluntarily—they are not coerced to shop. If they are unhappy with our business they will go trade someplace else. Because of the voluntary nature of business, we design our business model around the customer, who must be treated as an end and not as a means. What I mean by this statement is that the well-being of the customer must be seen as the most important goal overall and not as a means to profit for the business. In my experience, businesses that think of customers as means to the end of profit do not have the same commitment to service, empathy, and understanding of customers’ well-being as the business that treats customers as ends instead of means. Customers are very intelligent! They know when someone is doing a sales job on them, and they know when someone genuinely cares about their well-being.

Supporting Team Member Happiness and Excellence

In order to treat the customers as an end we have empowered our team members to satisfy and delight our customers. New team members are trained to do whatever it takes to satisfy our customers. Happy customers create happy investors. In order to have happy customers we also need to have happy team members because the team members are primarily responsible for creating happy customers. When team members are frustrated, dissatisfied, and unhappy in their work they are unlikely to give the high levels of customer service that the business needs to flourish.

Within a complex interdependent self-evolving system, team members must also be treated as ends and not means. Their well-being and happiness must be an end in itself, not merely a means to the profits of the business. Our internal business model within each store is the self-managing team. These teams are the organizational cells of the business. The teams do their own hiring, work scheduling, and product procurement. They are running their own small business within the store, and they have full responsibility for the business. Each team is empowered on many levels, not only in customer satisfaction.

I also believe that it is absolutely essential to trust team members, and one way to show that trust is through open information. Whole Foods provides open financial information—on all levels since want to be as transparent an organization as possible—without making ourselves overly vulnerable to our competitors. I think it essential that the team members have a sense of shared purpose and power. If team members can align around the values and purpose of the business, they are going to have a greater commitment to the business. They will likely unleash greater energy and creativity through that sense of alignment and shared purpose. At Whole Foods, we consciously reject the command and control management style. This top-down, “Do It My Way” approach is the opposite of team member empowerment. We also teach the importance of “shared fate”, and by shared fate I mean that the better the company does, the better the customers do, the better the team members do and the better the investors do. Once again, I reference the interdependent nature of the relationship of all the constituencies: happy team members create happy customers, happy customers create happy investors.

Another innovative practice at Whole Foods is the sharing of salary information, so that what everyone gets paid is open information. I believe this is the best way to deal with envy, which exists as part of human nature and in any organization. To deal directly with envy, a business must open up and becoming more transparent. When unjust employment compensation exists, the situation will be noticed and a feedback mechanism will develop to correct it. Conversely, by having such transparency, people can see what skills and qualities are most highly valued and rewarded in the organization so that they can know what to strive for with their own career objectives. We also have a salary cap at Whole Foods, which is currently 19 times the average pay (raised from 14 times average pay on November 2, 2006); more about that in just a second.

Yet another innovation is our benefits vote, wherein we let team members vote every three years on what benefits they can enjoy. After fielding repeated and ongoing requests for various benefits as I traveled around to our stores to meet with team members, I realized that I was not smart enough to figure out the right mix of benefits for Whole Foods. Our team members were forever asking me if they could have this or that additional benefit. Requests for addition benefits are endless. But this is also true for every stakeholder—the desire for a better deal. Every stakeholder is always looking for more. Customers are always looking for lower prices and higher quality. Investors want higher profits. Team members want higher pay and additional benefits. The government wants higher taxes, and the community wants larger donations. I realized that I was not smart enough to figure out the right mix of benefits for Whole Foods team members; instead the executive leadership now decides what percentage of the total revenue will go toward benefits for the company, and then assigns a cost for every potential benefit. Every three years our team members prioritize and vote on the benefits that they most prefer. This process results in benefits that reflect the needs and desires of the majority of the team members in the company.

I also believe in promoting gain-sharing to the largest extent possible. Gain-sharing means creating incentive and compensation for every team member working at a company. Through this process, a team member basically receives his/her just rewards for efforts expended and teamwork is critical to success. A business should clearly define what it is that it wants to reward and then set up an incentive program around those criteria.

We also grant stock options to all team members in the company, and 93 percent of our stock options go to non-executives. We have instituted fully paid health insurance for all of our full-time (30 hours per week) team members, or close to 90 percent of all the people that work for Whole Foods. The remaining 10 percent part-time (less than 30 hours per week) team members are encouraged to buy our discounted health insurance if they wish. We also offer personal wellness accounts that allow team members many additional options for their health spending, and health saving accounts. These allow team members to cover the deductible for the health insurance plan or to pay for health services that are out of coverage, such as acupuncture and chiropractic. Money not used rolls over to the next year’s wellness account or into a health savings account. We also grant stock options to all team members in the company, with an unprecedented 93 percent of our stock options going to non-executives.

The Distribution of Stock Options

Our emphasis on team member happiness is working and when team members provide us with feedback, we respond. We are very proud of the fact that Whole Foods Market has been named by Fortune Magazine as one of the 100 best companies to work for during the last nine consecutive years through 2006. Does an emphasis on team member happiness pay off for investors? In a zero sum world it would not. Team member gains would necessarily mean investor losses. Fortunately we don’t live in a zero sum world. Rather, we live in an interdependent world where the flourishing of the various stakeholders creates mutual benefits for each other. The chart below clearly shows that creating a great place to work and employee happiness does not necessarily come at the expense of the investors in the business. The companies comprising Fortune Magazine’s list of the 100 Best Companies to Work For have significantly outperformed both the S&P 500 and the Russell 3000 indices since the list was first created in 1998. This is strong evidence that supports the ideas I’m articulating in this chapter.

Fortune’s “100 Best Employers” vs. Stock Market 1998-2005

Creating Wealth, Profits, and Growth

While creating value for both customers and team members are very important, so is creating value for the investors. All three stakeholders are interdependent upon one another. All must flourish together. As one of our core values, we feel that Whole Foods Market has a responsibility to create prosperity through profits and growth. We consider ourselves stewards of the investors’ money and because of this, frugality is important. We strive never to waste the investors’ money. Profits are created through voluntary exchange for mutual benefit, not through exploitation of people. This very important truth reveals as false the many critiques of capitalism, such as Marxism, which argues that all profits should belong to labor because labor creates all of the value of the business. However, this Marxist theory of labor value isn’t true. All value is not created through labor in business, although of course labor does create a significant portion of value (and also receives the appropriate share of the value it generates). Management also creates value with strategic direction, proper resource allocation, and through organizing the business in effective and efficient ways. Investors create value through the capital they have invested. Without sufficient investment capital businesses are unable to buy necessary equipment or invest in necessary leasehold improvements to operate the business or make investments in research and development for the future. Investors deserve competitive returns on their business investments; otherwise they will withdraw their capital from the business and redirect it to alternative investments which give them higher returns. The different suppliers trading with the business also deserve fair returns in exchange for the goods and services they provide to the business, as do the landlords who provide the real estate to operate the business. Everyone trading with a business is trading voluntarily and their own profits are created through exchange with the business. Any money left over from the myriad of voluntary exchanges is justly owned by the investors in the business. This is their profit. They have been paid last after every other trader has completed their exchanges.

Profits create wealth, prosperity, and additional capital. Capital inputs fund most technological innovation and progress. For example, 200 years ago 95 percent of the world’s population was considered poor. Today about 60 percent of the global population is still poor. In the last 200 years we have seen the poverty rate drop from 95% to 60%. At the current rate of growth, we are going to see world poverty drop considerably in the next 50 years; by the year 2050 only about 25 percent of the world’s population will remain below the poverty level. We are seeing this happen right now with the explosion in the economies of two of the most populated countries in the world-China and India. These two economies are growing at extremely rapid rates and hundreds of millions of people are being lifted into the middle class and moving out of poverty. This illustrates one of the most important purposes of business. Business has the fundamental responsibility to create prosperity for our society and for the world.

The Whole Foods Market system of Conscious Capitalism and managing the business for the benefit of all its stakeholders works very well and it creates tremendous long-term shareholder value. Whole Foods is the fastest growing and the most profitable public food retailer, percentage-wise, in the United States. Our same store sales have averaged close to 10 percent for the last 10 years. If you compare that to conventional supermarket companies such as Kroger’s, Safeway, Albertson’s, Wild Oats or Wal-Mart you’ll see that our same-store sales are somewhere between 300 and 500 percent greater than same-store sales at conventional markets. Our sales per square foot currently exceed $900, more than twice as high as any of our previously identified competitors. Our store return on after-tax invested capital is 34 percent overall, and higher for stores that have been open for more than one year. Whole Foods Market’s stock price has increased almost 3000 percent since our IPO in 1992. The sum of $10,000 dollars invested during our IPO would be worth nearly $300,000 today.

Suppliers are Partners

The fourth stakeholder group consists of thousands of suppliers who provide us with invaluable goods and services. Without our suppliers we wouldn’t have anything to sell and the business would quickly cease to exist. I believe the best attitude toward the various suppliers of any business is to view them as essential partners in the enterprise. To keep the system of interrelated stakeholders healthy, most of the suppliers of a business should also flourish through their voluntary trade with the business. While in the competitive marketplace it is impossible for all suppliers of a particular business to simultaneously succeed—inevitably some will fail through a lack of quality or efficiency—it is essential that most suppliers successfully flourish in order to have the capital to improve their quality and the efficiency of their products and services. Honesty, fair trading, and an attitude of helping one’s suppliers to learn, grow, and continuously improve are valuable attitudes to have in relating to the vendor stakeholder group. As suppliers improve the quality and efficiency of their goods and services, this will also improve what the business can offer to its own customers. I’ve watched the suppliers in the natural and organic products marketplace continuously improve for almost 30 years. A large part of Whole Foods Market’s success has been the result of the continuous improvements and countless innovations of our vendor community.

Caring About our Communities and Environment

The fifth constituency is our community and the sixth is the environment. I believe that business is best thought of as a citizen existing within the communities where it does business. Business even enjoys the same legal status as a person. As citizens, businesses have responsibilities to their communities just like every other citizen. These responsibilities are not infinite, just as we do not have infinite responsibilities as individual citizens to our government or to the local communities in which we live, but we do have some. Most community responsibilities are met through following all the laws that exist in the communities and by paying all the taxes assessed on the business. However, just as individuals may choose to give additional community support beyond simply complying with all laws and paying their taxes, so may business. Vital dynamic communities need philanthropic support from both individuals and from businesses that participate within the community.

I believe philanthropy is consistent with citizenship and should be managed prudently and efficiently just like every other aspect of a business. Philanthropy, executed properly, can also contribute to shareholder value through increased goodwill with customers, team members and communities. In my experience, philanthropy is not a win/lose situation, where money is being taken away from investors and shareholders and given to someone undeserving. Instead, with business viewed as an interdependent system of various constituencies, if you manage the business for the health of all the constituencies, optimizing the community constituency provides positive feedback effects on the shareholder constituency. For example, when our stores do the right thing by our communities, we create goodwill with our customers and team members, so that they both feel good about the business. We also tend to generate good public relations by doing the right thing in our communities, leading to positive media attention. We are enhancing the long-term brand and viability of our business and all of the above ultimately pays benefits to our investors.

In meeting our responsibilities as citizens, Whole Foods Market donates five percent of our after tax profits to non-profit organizations, with nearly 75 percent given away on a local basis. Whole Foods Market supports various food banks, local community events, school functions, and Boy and Girl scouts, whose families might also patronize our stores. We likewise support health initiatives such as fighting AIDS, and breast and childhood cancers. With 188 stores currently, we give to thousands of local organizations. Many of our customers belong to or volunteer with the organizations we support, and as they trade with Whole Foods Market, we are in turn supporting them in the communities in which we live and do business. Many of our stores also compensate team members for community service work, either on an individual basis, or as a group.

Whole Foods Market trades throughout the world and we recognize our responsibilities as global citizens, as well. Poverty remains one of the most serious global challenges, and one of the ways we are trying to be good global citizens is through the creation of Whole Planet Foundation. Our mission with Whole Planet Foundation is to create economic partnerships with the poor and developing world communities that supply our stores with products. Through innovative assistance for entrepreneurship, including direct micro-credit loans, as well as intangible support for other community partnership projects, we seek to support the energy and creativity of every human being we work with in order to help create wealth and prosperity in emerging economies.

Whole Planet Foundation’s current efforts center in both Costa Rica and the Lake Atitlan district of Guatemala, in villages from which Whole Foods purchases pineapples, bananas, and coffee. Additional projects are being set up in India and Nicaragua, and eventually we will have micro-credit projects throughout the world. Whole Planet Foundation partners with Grameen Bank, which pioneered micro-lending to the poor (both Grameen Bank and its founder, Muhammed Yunnus won the 2006 Nobel Peace Prize). Most loans will go to women, who tend to be the most economically and socially marginalized constituents in many rural communities. Grameen’s work in other parts of the world has shown that women have a huge impact on their communities when given access to credit with which to start small businesses. The system Whole Planet Foundation employs is consistent with Whole Foods Market’s long-standing internal philosophy of empowerment. For more information on the Whole Planet Foundation go to http://www.wholeplanetfoundation.org/

The silent stakeholder that can never speak for itself is the environment. All of our other constituencies can speak up when they are unhappy about something. We consider the environment as linked to our community constituency. As a business, we exist within both a local and global environment. Whole Foods wants to be a responsible citizen in the environment in which we live. We do this by supporting organic and sustainable agriculture and by selling sustainably-harvested seafood.

From its start in 1978 as Safer Way, Whole Foods Market has promoted organic food and the agricultural systems from which it derives. By helping to develop markets, customers, distribution networks, and even the national standards for labeling for organic foods, Whole Foods has also promoted the environmental benefits that accompany the increasing number of organic farms, dairies, ranches and sustainable agricultural practices. For example, organic farms utilize no synthetic fertilizers and pesticides, resulting in reduced usage of fossil fuels, and less chemical contamination entering food chains and water supplies. While some products are transported long distance to meet consumer demand, Whole Foods Markets also stock as many locally-grown and/or manufactured products that meet our quality standards as are available in our market areas.

Organic and sustainable agricultural methods, in addition, build healthy, vital soil rich with microorganisms and nutrients, featuring superior moisture retention and a resistance to erosion. Other benefits include increased biodiversity when compared to the vast mono-cultural fields found on industrial farms, and the maintenance of food safety and the integrity of soil and crops by prohibiting the use of genetically modified organisms. Organic agriculture typically acknowledges the role food animals have in our foods systems and preserves the integrity of meat and dairy products by prohibiting the use of antibiotics and artificial growth hormones.

Whole Foods Market is working towards animal compassion with livestock animals and eliminating cruel practices in commercial livestock production. Whole Foods Market refuses to sell commercial veal from tethered calves, foie gras from force-fed ducks, or live lobsters, feeling that the methods used to produce and transport and display before sale these animals are too inhumane. Helping create alternatives to the “factory farm” methods of raising livestock is a goal that Whole Foods Market is strongly committed to and we have created animal compassionate standards through a multi-stakeholder process to try to raise the bar. Our standards can be seen in more detail at: http://www.animalcompassionfoundation.org/standards.html.

Industrial pollution and over-fishing cause tremendous damage to our oceans. Coral reefs have declined by 30% in the last 30 years. It is estimated that the total number of whales in the world has declined 90% in the last 100 years. World supplies of cod, swordfish, marlin, halibut, skate, and flounder have been reduced by over 50% in the last 50 years. We are fishing out the oceans, it is happening in our lifetimes. Whole Foods refuses to sell seafood species such as blue fin tuna that are considered to be endangered species by a consensus of seafood experts. We have long supported The Marine Stewardship Council, both financially and through participation on their Board of Directors.

Whole Foods Market addresses its energy usage in several ways. We track our energy use by store, and are moving that analysis down to the equipment level, so that we can track when outdated appliances need to be replaced. We utilize solar energy and other green building practices in our newer stores, and harness the idealistic energy of many of our younger team members in our Green Mission teams. Our Green Mission team members throughout the company are empowered to work together to systematically lessen our environmental impacts. Our Green Teams have been highly effective in moving the company forward to greater and greater environmental integrity through numerous reusing, recycling, and re-education initiatives.

Finally, in 2006, Whole Foods Market took the lead as the largest corporate purchaser of wind energy credits in the nation as we offset 100% of our building energy needs with wind energy credits. Each store and office has a comprehensive recycling program, and we open up many of our recycling initiatives to our customers.

In summary, Whole Foods Market meets its responsibilities to both local and global communities, often with innovative programs, and has led by example in many pro-environment initiatives. Whole Foods is also aware that its operations provide many opportunities for improvement in the future. As with our other constituency groups, we have no intention of becoming complacent.

Creating a New Paradigm for Non-Profit Organizations

I want to briefly discuss the limitations of the current non-profit models that exist in the world today. In my opinion, most modern American non-profit organizations operate with a mentality that creates inefficiencies, waste, and stagnation; most non-profits are ineffective in fulfilling their mission. Fully 99 percent of non-profit organizations are dependent upon donations from the business sector or private citizens in order to exist; they’re not sustainable on their own. Most non-profits feel pretty good about themselves because they have idealistic, altruistic goals—they have stated purposes beyond maximizing profits. They are do-gooders, trying to do good things in the world. But these good intentions beg the question—are these altruistic goals enough by themselves to make non-profit organizations good and ethical, and do these goals also make them effective? Are the noble purposes by themselves enough? And just because the goals are idealistic does that mean that a non-profit organization is able to completely transcend self-interest? I argue, probably not.

It’s my position that non-profit organizations also need to evolve to a more holistic model, just as business needs to. Below we have a great graphic depicting a common view of the good, altruistic non-profit organizations versus the evil, selfish greedy corporations.

A wall exists between the non-profits and for-profits consisting partly of the stereotypes that exist in our society today. Non-profits are viewed as good because they have altruistic, idealistic goals. As you can see on the graphic, non-profits often believe that money “grows on trees”, and because their ideals are altruistic, they are seen as “angels”. Non-profits sponsor idealistic events like AIDS walks and they have an environmental consciousness. On the other side of the wall you see the clear contrast with the for-profit sector of business. You see the stereotype of the greedy businessman with dollar signs in his eyes, grasping after money, and smokestacks popping up all around the world. The world is plastered with high-rise buildings and the environment is being destroyed, with the angel being transformed into a devil because again, the only goal is to maximize profits and that it is seen as simply selfish and greedy.

I think these stereotypes have outlived their usefulness. As a global society we need both non-profit and for-profit organizations to become holistic and integral, the wall that separates them needs to be torn down, and the polarities integrated. Corporations must rethink why they exist. Corporations need to become more conscious, and identify deeper and more comprehensive purposes for why they exist. They must evolve past machine metaphors and learn how to think holistically in terms of creating value for all there interdependent constituencies. Likewise non-profits must become economically sustainable and must discover that money and profits are good, not evil, and that they are a necessary part of a healthy holistic organization. A great example of this is Grameen Bank.

Grameen Bank is a non-profit organization begun in Bangladesh by Muhammed Yunus that has not only helped millions of people lift themselves out of poverty, but it has also become financially sustainable. Grameen Bank provides a great model toward which other non-profits should aspire. Started in 1983 by Muhummad Yunnus, in his native Bangladesh, Grameen Bank offers small, collateral-free loans to (predominantly) poor women who pass certain criteria. Founded on the basis of trust and solidarity, Grameen (Village) Bank works with its customers on their business plans, and requires a particular code of conduct that emphasizes community building behaviors and actions. Principal and interest from the loans, typically repaid by small weekly installments, go back into the borrower’s local operating funds, to fund new loans. By providing financial opportunity to traditionally underserved clients, Grameen Bank has realized a repayment record of more than 97% (one of the best bank repayment records in the world). This contrasts with a repayment rate of less than 60% over the same timeframe in the traditional Bangladesh banking world that caters to middle and upper class clients. In the 20+ years Grameen Bank has been in business, the income of more than 50% of the families of Grameen borrowers have risen above the poverty level.

In Bangladesh today, Grameen operates 1,084 branches, serving 2.1 million borrowers in 37,000 villages. On any working day Grameen collects an average of $1.5 million in weekly installments. Of the borrowers, 94% are women. Although operating in the realm of philanthropic organizations in that it has altruistic goals and ideals, Grameen Bank employs a model that is self-sustaining. Although it welcomes donations, the alternative bank does not rely on the business or private sector for its operating expenses, and provides a sustainable model toward which other non-profits should aspire. Grameen methods are now applied in projects in 58 countries, including the US, Canada, France, the Netherlands and Norway.

Once the conceptual wall separating non-profits and profits is torn down, it becomes clear that businesses and non-profits are potentially much more alike than they are different. They both can become holistic, and at a higher integral level, non-profits and for-profit businesses look remarkably similar. An ideal non-profit’s organizational model looks very similar to the Whole Foods Conscious Capitalism model introduced earlier. The non-profit expresses core values and it has similar constituencies to a business: employees, customers, suppliers, and investors/donors. The donors want the organization to achieve its societal mission, and if it does the donors will be happy, and will send increased financial resources to the non-profit organization. Just because it has a social mission does not exempt the non-profit from community and environmental responsibilities. The holistic non-profit has a very similar model to the holistic business, an important point I want to underscore. The following graphic illustrates the holistic model for non-profit organizations.

Non-Profit Business Model: Sustainability

Conclusion

The old paradigm of maximizing profits and shareholder values as the sole purpose of business has created negative unintended consequences. Businesses and corporations are seen as greedy, selfish, and evil. Business is seen as despoiling the environment and causing harm in the world. Business has a very bad brand. We can remove most the hostility toward business and capitalism if we can change the way we think about it and if businesses work on becoming better citizens. Business needs to become holistic and integral with deeper more comprehensive purposes. Corporations must rethink why they exist. If business owners/entrepreneurs begin to view their business as an complex and evolving interdependent system and manage their business more consciously for the well-being of all their major stakeholders while fulfilling their highest business purpose, then I believe that we would begin to see the hostility towards capitalism and business disappear around the world.

In summation, business is fundamentally a community of people working together to create value for other people, their customers, employees, investors, and the greater society. Business interacts within a harmony of interests. At the same time non-profits need to become economically sustainable and discover that money and profits are good, not evil, and necessary for them to fulfill their purposes. A holistic perspective is essential for non-profits. A new Conscious Capitalism paradigm will improve the effectiveness of each type of organization.
But on a basic philosophical level, why try to “do good” in the world? Why isn’t the pursuit of our own self-interest enough? Perhaps we need to look more closely again at what Adam Smith wrote. The Wealth of Nations was a tremendous achievement, but economists would also be well served to read Smith’s other great book, The Theory of Moral Sentiments. There he explains that human nature is not just about self-interest. It also includes sympathy, empathy, friendship, love, and the desire for social approval. As motives for human behavior, these are at least as important as self-interest; for many people, they are more important.

When we are small children we are egocentric, concerned only about our own needs and desires. As we mature, we grow beyond this egocentrism and begin to care about others—our families, friends, communities, and countries. Our capacity to love can expand even further, to loving people from different races, religions, and countries—potentially to unlimited love for all people and even for other sentient creatures. This is our potential as human beings, to take joy in the flourishing of people everywhere. Let us each realize our potential for deeper love and extend it out into the world—let us together create this new business paradigm of Conscious Capitalism.

²Sisodia, Rajendra, Wolfe, David, and Sheth, Jagdish, Firms of Endearment: the Pursuit of Purpose and Profit, (manuscript), Wharton School Publising, 2007.

Q: Why am I opposed to profit?

A: I am not opposed to profit. As I have pointed out, Whole Foods Market is a highly profitable company. Profits are good. Profits are an important part of what business is about, but profits are not the sole purpose of business. Business has other purposes than merely maximizing profits. Entrepreneurs who create businesses rarely create businesses solely for the purpose of maximizing profits and entrepreneurs are the ones who ultimately define, in my opinion, the purpose of the businesses they create.
Most businesses have purposes besides maximizing profits, because entrepreneurs create them for other purposes. There may be certain occasions where an entrepreneur creates a business and is only concerned with maximizing profits; he or she is entitled to do so, it certainly is not unethical. But strictly profit based business probably won’t be as successful or profitable a business over the long-term as it could be. I do not think it will compete well head-to-head with a more holistic and integral business model, if the business strategy and all other things are equal. I am not arguing that a business cannot operate solely for profits, I’m merely stating that many, if not most, businesses are not that way when entrepreneurs first created them. If business leaders become more conscious of the fact that their business it is not really a machine but part of a complex interdependent and evolving system with multiple constituencies, they will see that profit is one of the important purposes of the business, but not the sole purpose. They will also begin to see that the best way to maximize long-term profits is to create value for the entire interdependent business system. Once enough business leaders come to understand and accept this new business paradigm, I believe that Conscious Capitalism will reach a takeoff point and the hostility toward business will largely dissipate over the long-term.

Q: Does philanthropy equal social responsibility?

A: No, philanthropy is actually just a small part of the social responsibility of business. The social responsibility of business is about creating value for all of its constituencies. If you are creating value for your customers and employees, acting with integrity toward your suppliers, if you are a good citizen paying taxes, if you take responsibility for your environmental impacts, you’ll fulfill most of your social responsibilities. However, if a business is responsible to its investors, employees, customers, suppliers, and the environment but refuses to contribute toward philanthropic organizations, it would be neglecting the important community constituency. It would be a stingy neighbor to have, but it could still be creating value in the world through the value it creates for its customers, employees, suppliers, government, and the environment. The contrary is also true: a business could be highly philanthropic to its communities, but if it is creating shoddy or harmful products, exploiting its employees, cheating its suppliers, and doing significant damage to the environment it can hardly be considered an ethical or socially responsible business no matter how great its philanthropy is.

Philanthropy is not primarily what social responsibility is about, but it is also not “theft” from the investors if a business chooses to contribute some money to the communities where it has a presence. That would be part of its responsibility as a citizen and such donations will not only help the community, but will simultaneously create good will with customers, employees, the media, and other citizens in the community. I believe that while philanthropy does not equate to social responsibility by itself, philanthropic donations are certainly consistent with being a responsible citizen in the community in which business exists.

One common objection to philanthropy is where to draw the line? If donating five percent of profits is good (as Whole Foods does), wouldn’t 10 percent be even better? Why not donate 100 percent of our profits to the betterment of society? But the fact that a business has responsibilities as a citizen in the various communities it exists in doesn’t mean that it doesn’t have any responsibilities to investors or other stakeholders. It’s a question of finding the appropriate balance and trying to create value for all of the stakeholders simultaneously. Whole Foods donates five percent of its profits to the community stakeholder (in addition to the taxes we pay). Is five percent the “right amount” to donate to the community? I don’t think there is a right answer to this question, except that I believe zero percent is too little. It is an arbitrary percentage that the co-founders of the company decided was a reasonable amount and which was approved by the owners of the company at the time we made the decision. Corporate philanthropy is a good thing, but it ultimately requires the legitimacy of investor approval, and the investors as the owners of the business have the right and the authority to withdraw their approval if they wish. In my experience, most investors understand that modest philanthropy can be beneficial to both the corporation and to the larger society. They understand that philanthropy is consistent with creating long-term profits for the investors because of the interdependent nature of the business enterprise.

An argument that I frequently field is that corporations or businesses don’t have any special competence in philanthropy; therefore corporations should stick to what they do best, which is maximizing their profits and allowing the individual shareholders to engage in philanthropy. This is a deceptive argument for a couple of reasons. Number one is that this line of reasoning overlooks the fact that business is legally treated as a citizen of the community in which it exists. If you want to maximize shareholder value in an integrated holistic system, philanthropy can be part of that strategy, and it is the responsibility a citizen has in his or her community in any case. The same people who argue against corporations engaging in philanthropy frequently argue that government is also incompetent in engaging in civic activities. As their argument develops, now they assert that business is incompetent and government is incompetent, so that puts all civic responsibility onto individual citizens. I ask you, are individual citizens inherently more competent in philanthropic endeavors than businesses? I would argue that because business taps into more complex feedback loops and may enjoy the results of more detailed research on the effectiveness of its investments, business probably has the potentiality to be more competent in philanthropic practice than could most individuals.

From my perspective, we need to acknowledge civic responsibility at the individual, corporate, and governmental levels. Civic responsibilities cannot be completely met by the voluntary individual sector of society. Corporations have great contributions to make in philanthropy. Perhaps some corporate philanthropy is misguided and money is wasted, however, I will point out that corporations make investments all the time that do not work out. Corporations make mistakes all the time, and they can make mistakes in philanthropy, just like they can make mistakes in other areas of their business such as the people they hire and promote or their investments in new equipment or facilities or their mergers and acquisitions. . Not everything a business attempts will succeed, but that simple truth does not negate the business process. Corporations may not always be successful in the philanthropic arena either; they will occasionally make mistakes. These mistakes do not negate the worthwhile value of most philanthropic efforts. In most cases business philanthropy creates beneficial social value.

Q: Who should control corporations, stockholders, or stakeholders?

A: One of the objections I hear frequently is that I am advocating for stakeholder control of corporations, replacing stockholder control. I am certainly not arguing for that. As I have already pointed out, stockholders own the corporation, they get paid last based on residual profits left over from the business and it’s essential that they have the final say on who comprises company management through the Board of Directors. They need to have the ultimate power to fire management through the Board of Directors if they are unhappy with the performance of the company. Without that power it is inevitable that the stockholders will eventually be exploited by the management or some of the other constituencies of the business. I am not arguing, and have never argued, for anything that weakens the property rights of the investors and stockholders. That line of reasoning is a misunderstanding.

Q. What about conflicts between various stakeholders? How do you create balance between all the conflicting desires and demands of all the different stakeholders? For example: if more is given to the employees doesn’t that necessarily result in less being available to the other stakeholders such as the investors and vice versa? How do you avoid conflict and keep all of the stakeholders happy?

A. Conflict between the various stakeholders in a business is inevitable from time to time simply because each stakeholder wants more. Customers want higher quality and lower prices, employees want higher wages and better benefits, investors want higher profits, governments want higher taxes, and community groups want greater donations. The potential for conflict is always there. However, the fundamental mistake that most people make when thinking about this issue of conflict between stakeholders is that they create analytical separations between the stakeholders and leave it at that. They see them as separate from each other and the business-each pursuing their own interests. When this type of analytical separation is done it also engages in a form of reductionism-it ignores the relationships between the stakeholders and the business and with each other. The business is more than just the sum of the individual stakeholders. It is also the interrelationship, the interconnection, the shared purpose, and the shared values that the various stakeholders of the business co-create and co-evolve together. No complex, evolving, and self-adapting organization can be adequately understood merely through analyzing its parts and ignoring the greater system that also exists. This is a very important idea to understand because while the analytic mind will focus on the conflicting interests of the stakeholders it will tend to ignore or fail to see what the intuitive systems mind understands-that the stakeholders are interconnected together in a “harmony of interests”. In a healthy complex, evolving, and self-adapting system this harmony of interests between stakeholders proves to be far more important and resilient than the various conflicts of interest that the analytic mind focuses on.

A holistic business creates value for all of its stakeholders. Given the desire of each stakeholder for more how is the value divided between the stakeholders to keep them happy? There is, of course, ultimately no magical formula to calculate how much value each stakeholder should receive from the company. It is a dynamic process that evolves with the competitive marketplace. No stakeholder remains satisfied for long. It is the function of company leadership to develop solutions that continually work for the common good. It is the art of excellent leadership to seek the win-win-win-win-win solutions in the context of competitive market processes that optimize the value of the entire business system, and for each of the stakeholder participants within that business system.

Q. My final point of clarification is the quote from Adam Smith that is frequently used to try to negate my point of view. The quote is “By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.” Adam Smith in The Wealth of Nations.

A. To me this quote has two parts to it, the first one is a reinforcement of Adam Smith’s famous ‘invisible hand’ metaphor (which I think was the most profound insight into social history ever made) which implies that through a voluntary exchange people acting in their own self interest, pursing their own good create value for the greater society. That is true! I am not arguing against that. I believe in the invisible hand. Period. The second part of the statement, however, is what I disagree with, “I have never known much good done by those who have affected the trade of the public good.” The fact of the matter is that much of the good that is done in this world is done by people who intend to do the good. The invisible hand metaphor correctly points out that much good is done for the public accidentally, so to speak, by simple pursuit of self-interest. Through voluntary exchange, acting in self-interest, parties both voluntarily exchange, and both parties benefit or the exchange wouldn’t happen. That process creates a social good, true, but it is also true that very much good is done because people have an intention to “do good”. All the “good” is not done accidentally.

I believe that the ‘invisible hand’ of Adam Smith should be supplemented by the ‘visible hand’ of intentional “do-gooding”, and that individuals, governments, and businesses have endless opportunities to attempt to do-good in the world. Business has the opportunity to “do good” and create value for all the various constituencies that trade with the business voluntarily. I also believe that supplementing the ‘invisible hand’, with a ‘visible hand’, if done consciously, on an ongoing basis by individuals and corporations around the world, would help push humanity into an era of accelerated progress that would be unprecedented in world history. That is what Whole Foods Market is trying to do, and that is what Conscious Capitalism really means.

Thanks for your recent letter to me. I appreciate the fact that you wrote the letter in an overall positive tone. I want to respond to your letter with an equally positive tone and match your efforts in “constructive criticism.” I’ll take your letter section by section, with my responses below each section. I will then conclude by writing about some of the new initiatives Whole Foods Market will be beginning very soon, which I hope you’ll find exciting. I know that I’m very excited about them.

I’ll only say a couple of things as an introduction. One of these is that I’m disappointed that you didn’t respond at all to my short section on the history of the organic foods movement and how difficult it was for Whole Foods Market to develop sufficient supply and scale to actually get authentic organic foods into the hands (and mouths) of millions of people. You completely ignored that section. Without Whole Foods Market’s pioneering work and without the growth of our stores and distribution centers, it is very unlikely that the organic foods movement would be where it is today. You obviously admire the retail food co-op movement (which I supported myself in Austin prior to co-founding Whole Foods Market), but in fact this movement has never been large enough to successfully grow the organic foods movement. In 2005 the total sales of all the retail food co-ops in the United States combined was only about $700 million (source–National Cooperative Grocers Association), which was less than 15% of Whole Foods Market total sales that year. The simple truth is that the organic foods movement was largely a fringe movement with the number of adherents numbering only in the thousands before Whole Foods Market came into existence. The year-round supply of organic foods across the United States today consumed by millions and millions of people is in large part due to the success and growth of Whole Foods Market. Why do you not understand or appreciate this truth?

My second disappointment is that you don’t comment on the examples we gave of supporting networks and co-ops of small producers and family farms throughout our supply chain. I gave two solid examples in my letter—CROPP for Organic dairy products and Country Natural Beef—but there are many others. These networks and co-ops of small producers and family farms that banded together for distribution and marketing economies of scale are an important alternative to the large scale corporate farms that you find so alarming.

Last month, John Mackey, the president of Whole Foods, wrote me a letter (also published on the Whole Foods Web site), taking issue with some of the points I have made about his grocery chain-in my book “The Omnivore’s Dilemma,” in my column for TimesSelect and in some of my public remarks. What follows is my response to Mr. Mackey.

Michael, just for the record I’m co-founder, Chief Executive Officer and Chairman of the Board of Directors, but not the President of Whole Foods Market. A.C. Gallo and Walter Robb are Co-Presidents of the company.

June 12, 2006

Dear John Mackey,

Thank you for your letter, and for the time you spent with me in Austin last month. I was delighted to have a chance to meet and to learn more about Whole Foods. Thank you, too, for the $25 gift certificate, which more than makes up for the $6 I spent on the disappointing Argentine organic asparagus. Though I know you are troubled by some of the critical things I have written and said publicly about Whole Foods, it was clear from our conversation that we agree about a great many things, including our concerns about the future direction of organic agriculture. Since you are in a position to do much to shape that future, that cheers me no end.

I want to take this opportunity to address some of the points you made in your letter, and to pose a few of the questions that it begs. I hope you will take my remarks in the spirit in which they are offered – as constructive criticism of an important institution that can do much to advance what you call the “reformation” of the American food system, something we both want.

Let me start by explaining why I did not seek to interview anyone from Whole Foods for my book, which you imply in your letter represents a journalistic lapse. (You should know I have interviewed people from the company several times in the past, particularly in connection with an April 2001 story I did for The New York Times Magazine “Naturally,” for which I interviewed Margaret Wittenberg. Over the years I have also interviewed several store employees of Whole Foods and a great many of its suppliers.) For the purposes of “The Omnivore’s Dilemma,” I approached Whole Foods less as a journalist than a consumer, since my goal was to capture how the store represents itself and the food it sells to a typical shopper: the signs and displays, the brochures, the labels, the photographs on the walls. Admittedly, this is not a systematic way to describe a supermarket chain-it depends on the sample of stores I visited and what they happened to be selling on any given day. It could be you have stores that sell substantially more local food than the stores I observed. But the fact remains that what I observed I observed, and that is what I wrote in the book. Nothing in your letter leads me to believe my account of what you sell in my local Whole Foods or the farms it comes from is inaccurate.

It is difficult to discuss this with you here, Michael, because you are falling back upon your own subjective experience as your only reference point. I want to point out, however, that we never merely “observe what we observe.” We bring to our observations our expectations, beliefs, biases, and world views, and these serve as perceptual filters that tremendously influence our observations. One of the main purposes of my letter to you was to try to get you to examine some of your biases and beliefs about Whole Foods Market that may be filtering what you are actually observing about us. If you come into our stores (or anywhere else) looking for what you don’t like, it is all-too-easy to find it.

With all due respect, Michael, I also think your response here is pretty weak because the fact is that you didn’t try to contact us. I think if you are going to criticize us publicly to hundreds of thousands of people and are going to compare us unfavorably with Wal-Mart, then you at least owe us the courtesy of talking to us first and hearing our side of the story. You certainly spent plenty of time talking directly to Joel Salatin for the book and didn’t approach him as simply an innocent “consumer.” Quite the opposite: you went and lived at his farm for about a week. That kind of first hand knowledge and experience is the essence of good journalism in my opinion and I think Whole Foods Market also deserved to be treated fairly and with respect.

I do appreciate your offer of journalistic access and “transparency,” though you may be interested to know that other journalists have not found you and other Whole Foods executives to be so accessible in the past. When researching his important new book “Organic, Inc.,” Sam Fromartz was turned down in his effort to arrange an interview with you. He was told (in an email from Amy Hopfensperger): “… we do not grant interviews for book requests at this time for several reasons. With the explosive growth in the organic and natural food industry and Whole Foods Market’s position as the leader in this industry, we are not interested in leaking any competitive information that may benefit our competitors.” I would hope this does not accurately reflect your feelings about talking to journalists, and to judge from my recent contacts with you, it does not. Transparency at every level is critical to reforming the food system.

Regarding Sam Fromartz, there is a misunderstanding here that I believe I can clear up. Whole Foods Market is very open to journalists who are writing stories in newspapers or magazines or doing radio or television shows about our business. This accessibility has resulted in several thousand stories in every kind of media about the company. However, Whole Foods Market hasn’t been very open to book authors in the past primarily because until Sam Fromartz, no author had ever approached us about writing a history of the organic or natural products industry. Instead, each year we are approached by several dozen business book authors who want to write in detail about our management methods, company culture, and/or strategic direction. We’ve almost always turned down these types of book requests since we believe our management, culture, and strategy are important proprietary information that we are not eager for our competitors to get hold of. However, in fact, we actually did work with Fromartz to some extent as both Margaret Wittenberg, our Vice President of Quality Standards, and David Smith, our Vice President of Marketing at the time, did talk with him while he was researching his book. He therefore wasn’t shut out from access to all of Whole Foods leadership, although I didn’t personally talk with him. By the way, I read Fromartz’s book, Organic, Inc., which I thought was very good, and I wish now that I had personally met with him.

We also cooperated with Peter Singer in his latest book, The Way We Eat: Why our Food Choices Matter. Peter was able to interview me directly because I greatly admire him and am indebted to him for helping to wake me up to the reality of animal suffering (he is probably more responsible than anyone else for my vegan diet). I’ve talked to our PR team about this and we will be open in the future to granting interviews to authors writing about the natural or organic food industries. We will still not be accessible to business book authors, however, for the reasons I mentioned above. In any case, if you had approached Whole Foods Market for an interview with me it would have been given. Why? Because I loved your book The Botany of Desire and would have given you the interview just to meet you and talk about food. This is the same reason I gave Peter Singer the interview. Both you and Peter are aligned with many of my values and I want to support both of you with your work. It is as simple as that.

I confess I am of two minds in deciding how to respond to the substance of your letter: whether I should attempt to cast doubt on your claims that Whole Foods wholeheartedly supports local, artisanal, and grass-based agriculture, or whether to simply applaud and encourage your inclinations in that direction. I take heart in the fact that you feel compelled to defend a commitment to these forms of agriculture, not only because I share it, but because you are in as strong a position as any individual in America today to help rebuild local food chains and build a market for pasture-based livestock farming. I don’t need to tell you how important these two things are – or that the survival of local agriculture is critical to preserving farmland near America’s metropolitan areas; to reducing our consumption of fossil fuel (17 percent of U.S. fossil fuel consumption goes to feeding ourselves); and to making the food system better able to withstand threats, whether from pathogens or terrorists (or both). The decentralization of the food system is not just a matter of sentiment or political correctness but of national security. Further, as we discussed, grass farming represents one of the most encouraging trends in American agriculture today, holding out great promise for improving the health of the animals, of the American land, and of the American consumer.

Yet, to be perfectly candid, I have trouble squaring some of your claims of support for local agriculture with what I see when I shop at Whole Foods. I see more signage about the importance of local produce than I see actual items of local produce. You write that 45 percent of your suppliers are local, i.e. located within 200 miles of the store – an impressive statistic, but perhaps a misleading one. Given the concentration of organic produce in a tiny handful of corporate hands (with Cal-Organic/Grimmway and Earthbound dominating the market nationally), it’s not surprising that you would have a relatively high number of local suppliers among your vendors – since just two of those vendors could supply the great bulk of your produce sales. The more telling statistic would be this: As a percentage of sales (rather than of vendors), how much of the produce sold at Whole Foods is produced locally? My guess is that number is considerably lower than 45 percent, even if you count Cal-Organics and Earthbound as “local farmers” in California, a claim that strikes me (and would probably strike them) as a stretch. Leaving aside food miles, these are not the sorts of corporations most people have in mind when they talk about local agriculture.

Since you’ve already shared that your personal observations are the only basis for assertions about Whole Foods Market’s support of large industrial organic producers, let me restate some of the statistics I provided in my previous letter: “Of our top 150 suppliers/brokers in the produce category, 22% of our purchases are from large corporate farms and 78% are from independent and family farms (some of these smaller farms pool together under one brand name to help improve marketing and distribution). 60% of these 150 suppliers grow organically, and/or represent growers who do so.” In addition, Whole Foods Market is currently doing business with over 2,400 independent farms. My point in reiterating these statistics is to hammer in one very important point about Whole Foods Market: we buy from a variety of organic farms-some are very large such as Grimmway, some are very small, and the great majority is someplace in between. Both your and Fromartz’s books over-emphasize the growth of the larger organic farms and mostly ignore the 2,400+ smaller and middle sized farms that Whole Foods Market does business with. In almost any vibrant distribution system, some of the producers are going to be substantially larger and more successful than most others. This is the normalized pattern we find in every growing business system, but this doesn’t mean that only a few companies monopolize the organic produce industry. They certainly don’t as their relatively small 22% share of Whole Foods Market produce business clearly proves.

Your letter to me, however, does raise some interesting questions about scale that your book never addresses: when is a farm too large to be considered “small?” How far can food be transported before it is no longer considered “local?” How much machinery is a farm allowed to use before it becomes “industrial” (and therefore no longer “good”)? Your book doesn’t hesitate to assign heroes and villains to a very complex story, but unfortunately it never defines its terms so the reader is left wondering when a hero slips over to the “dark side” and actually becomes a villain. In your book and the various interviews I’ve read and heard, Earthbound seems to be “guilty” of successfully growing to become a large “industrialized corporate farm.” At what point in their growth did they cross over? At what point is big too big? In point of fact, however, Earthbound is not quite the large monolithic industrialized organic farm that you portray it as being. Earthbound buys its product from 185 organic farms of varying sizes and consolidates this diverse group of farms together under one brand and one distribution system. This greatly lowers marketing and distribution costs and makes organic greens more affordable for millions of people. Isn’t that a good thing? When exactly does the use of machinery or input substitution cause an organic farm to become an “industrial organic farm?” How many different crops must it grow, and how many different animal species must be integrated into the farm, before it is considered a polyculture farm? Do you also believe that being a corporation is inherently a bad thing? In your book, Joel Salatin is portrayed in heroic terms. How large and successful could he become before he was no longer a hero in your book? If his farm became a corporation, took in investment capital, and successfully grew, would it no longer be ethically good in your opinion?

Speaking of Salatin, while I find many things that he is doing to be very inspirational, there are other practices of his that deserve criticism, especially regarding animal welfare. A Whole Foods Market animal compassion representative has visited his farm and was disturbed by some things that he observed. In addition, Singer and Mason’s new book offers the following criticism of some of Salatin’s practices:

“But is Polyface really such a good place for animals? Rabbits on the farm are kept in small suspended wire cages. Chickens may be on grass, but instead of being free to roam, they are crowded into mobile wire pens. A review of sustainable poultry systems by the National Sustainable Agriculture Information Service noted that with Salatin’s pens: ‘The confined space inside the pens makes bird welfare a concern’ and the crowding ‘can lead to pecking problems,’ because the birds lower in the pecking order cannot run away. Out of five sustainable poultry systems investigated, the mobile wire pens were placed last for animal welfare, with a ‘poor to fair’ rating. Herman Beck-Chenoweth, author of Free Range Poultry Production and Marketing and a poultry producer himself, calls Salatin’s way of raising chickens ‘a confinement system with a grass floor,’ adding that although it is a big improvement over the broiler houses used by companies such as Tyson and Perdue… it is a confinement system just the same.” (The Way We Eat: Why our Food Choices Matter—Peter Singer and Jim Mason p. 255-256).

After visiting a great many large organic farms to research my book, many of them your suppliers, it seems to me undeniable that organic agriculture has industrialized over the past few years, and that Whole Foods has played a part in that process-for good and for ill. (Sam Fromartz’s “Organic Inc.” demonstrates as much, as I think does “The Omnivore’s Dilemma,” especially in Chapter Nine.) Big supermarket chains will naturally find it easier and therefore more profitable to buy from big farms selling lots of one thing. This is the way of the world, or at least of capitalism. And as I tried to make clear in my account of the organic industry, much is gained when organic gets big; I offer the story of Earthbound Farms as a positive case in point. The water and soil in California are in far better shape because of large-scale organic farms like Earthbound, as you point out in your letter. (The statistics you cite in your letter speak eloquently to this point.) But surely we can recognize all these important gains without turning a blind eye to the costs: the sacrifice of small farmers and of some of the founding principles of organic farming (its commitment to polyculture, for example; to “whole” rather than highly processed foods; to social and economic sustainability, etc.)

We both know other executives in the organic industry who accept these trade-offs as inevitable and necessary. They call themselves realists, and believe that those of us who regret the passing of local organic agriculture and the founding values of the organic movement should just get over it – that the organic Twinkie or organic Coca Cola is good news for the environment, case closed. You obviously don’t feel this way. Your letter and our conversation make clear that you care deeply about the values behind the organic movement, that much more is at stake here than pesticide residues. That’s why I would rather not get into an argument about “how local are you.” What I would much rather do is applaud you for carrying however much local food you carry, and to urge you to make it possible for your stores to carry much more.

If people freely choose to eat Twinkies or drink Coca Cola, then I would prefer that they be organic for the very reason that you listed above–it’s better for the environment. Regarding carrying more local food, thanks for the encouragement. I agree with you. I’ll have much more to say about this at the end of my letter.

As we discussed, the company’s shift a few years ago from “backdoor sales” to a regional distribution system has made it more difficult, if not impossible, for small local farmers to sell directly to individual Whole Foods stores. For some farmers, this may be a boon as you suggest, but for the many Bay Area farmers I have spoken to, it has shut them out – they don’t grow enough to supply a distribution center, or the centers are too far from their farms. You write that all of your stores are in fact free to buy locally, which I was surprised and delighted to hear. I hope you’ll take steps to encourage them in that direction. I have interviewed dozen of organic farmers for whom selling to Whole Foods over the years has been critical to their success; for what it’s worth, they feel much less welcome since you moved to the regional distribution model. Which leads me to my next question: is there anyone, at the regional level, charged with the specific mission of locally sourcing as much food as possible? And do Whole Foods buyers have the authority to pay a premium for local produce, in the same way they now routinely pay a premium for organic? Such a commitment by Whole Foods to local sourcing – not everything, but whatever and whenever possible – could go a long way toward rebuilding local food systems across America.

Michael, let me agree up front with you that Whole Foods Market needs to do a better job of helping more local growers sell directly to our stores without going through our distribution center. This is true for the Bay Area as well. I know that over the years some smaller farmers have stopped selling to us and have been frustrated with our Regional Distribution Centers. We should and will do a better job of this in the future because we are making it a company priority. That being said, neither your book nor your letter is fair to Whole Foods Market on this issue. You can always find frustrated ex-suppliers for just about any company in the world and Whole Foods Market is no exception. I think this is another example of your expectations possibly coloring your observations-you are seeing what you expect (want?) to see. Below is a partial list of small local growers that we work with in the Bay area. Some of them sell through our distribution center and some sell directly to our stores.

There are many more growers than this in the total mix, but products from these small- scale growers can be relied on to be present on the sales floor for most of the summer. With the exception of Coke Farm, all these growers deal directly with the regional buyers and/or store buyers.

• Pinnacle Ranch (Phil Foster/Pinnacle, Hollister CA – row crop, onions)
• Capay Fruits and Vegetables (Capay, CA – heirloom tomatoes)
• Ryan O’Shannon Farm (Mike McDowell, Petaluma, CA – strawberries, tomatoes)
• Swanton Berry Farm (Jim Cochran, Davenport CA – strawberries)
• Blue Moon Organic (Greg Rawlings Aptos CA – strawberries)
• Full Belly Farm, Guinda, CA – heirloom tomatoes, melons)
• Hungry Hollow (Jim Durst, Esparto, CA – heirloom tomatoes, melons)
• Wooley Farm (Brad Johnson, Live Oak, CA – melons, eggplant, squash, tomatoes)
• Goldbud (Ron Mansfield, Placerville, CA – peaches)
• Alterra Organics (Mike Milovina Mendocino County – Mendocino blueberries (awesome!)
• T+D Willey (Madera, CA – summer vegetables, tomatoes, row crop)
• Wilgenburg Greenhouse (Hans Wilgenburg/ Fresno CA – tomatoes, cukes)
• Lone Willow Ranch (John Texiera/ – heirloom tomatoes)
• Lagier Ranch (John Lagier, Escalon – grapes, apricots, paige mandarin, boysenberries)
• G+S Farm, (Glen Stonebarger/Brentwood, CA – corn, pluots)
• Happy Boy (Freedom, CA – specialty veg, heirloom tomatoes)
• Two Dog Farm (Mark and Libby Barytle , Davenport CA – dry farmed tomatoes)
• Sadies Farm (JP McDaniel, Aptos CA – tomatoes)
• Molino Creek (Davenport CA – dry farmed tomatoes)
• Coke Farm (Aromas CA)

Growers who sell primarily to the distribution center:

• Jim Durst – Hungry Hollow
• Brad Johnson – Wooley Farm
• Dinesse Willey – T+D Willey
• Phil Foster – Pinnacle Ranch
• Hans Wilgenberg – Wilgenberg Greenhouse
• Glenn Stonbarger – G+S Farm
• Capay Fruits and Veg
• Ron Mansfield – Goldbud
• John Texiera – Lone Willow Ranch (was store direct last year, but has requested to be through the DC this year.)
• John Lagier – Lagier Ranch
• Coke Farm (via WFP)
• Alterra Organics

Growers who are primarily direct to stores:

• Full Belly
• Swanton Berry Farm
• Ryan O’Shannon
• Happy Boy
• Frog Hollow
• Blue Moon Organics
• Knoll
• 2 Dog Farm
• Sadies Farm
• Molino Creek Collective

Whole Foods Market would like to try working again with any of the Bay Area farmers you know who are unhappy with Whole Foods Market and no longer sell to us. Please encourage them to contact our Northern California and Pacific Northwest Produce Director, Karen Christensen, at 415-307-5337 about selling directly into our stores again. You’ve also got my e-mail address. Please encourage those farmers to contact me directly via e-mail (but don’t give my e-mail address out to anyone else, please) if they don’t want to talk to Karen. I want to talk to them. Thanks.

The issues in pastured meat and milk are similar in some ways, different in others. I was pleased to hear you speak of the importance of grass in both beef and milk production, and applaud your efforts to push the organic dairy industry to make grazing mandatory and reject the organic feedlot model. The story in beef is more complicated. I recognize the economic advantages of sourcing grass-fed beef from overseas; it is a commodity in New Zealand while still an artisanal product here. Yet Whole Foods’ commitment to developing an American grass-fed meat industry would have such a profound impact, both on the environment and the welfare of the animals, that I would urge you to take a broader view of the matter. I am not, contrary to what you might think, an absolutist on local food. I recognize that there are times and cases when supporting local agriculture in other countries is the best way to go; Slow Food calls it “virtuous globalization” when the power of a global market can be used to defend an endangered local food or food culture. But that’s not what’s happening in the case of grass-fed beef.

To build a viable grass-fed beef industry in America would do so much for the land -not just remove the insult of chemicals and ruinous commodity crop production, but also actually restore the land to health. It would also do wonders for the health and happiness of millions of America cattle that now live in misery on feedlots, and encourage farmers to convert cropland back to grassland. I also believe that, by organizing a national supply chain based around regional differences in the season that grass-fed meat should ideally be harvested, Whole Foods could develop a 12-month national supply of fresh, high-quality domestic grass-fed meat. True, the meat would not always be local, but the local effect, as the source of it shifted from one region to another over the course of the year, would be profound. Whole Foods has the power and know-how to do things in this area no one else can do.

Michael, we are in complete agreement here. Whole Foods Market could and should do more to support local animal production. We are going to. More on what we are exactly going to do at the end of the letter.

As you point out several times in your letter, Whole Foods’ freedom of action is constrained by the desires of its consumers, who want asparagus in January, fresh berries all year long, convenience foods, etc. I appreciate that you “don’t try to channel our customers into adopting any particular dietary regime.” And yet your stores – with their extensive information, signage, and well-informed counter help – are clearly in the business of educating people. You are selling information and stories as well as food, which is to say, you have set yourself the mission of leading, not just following, the consumer. Any retailer can treat the consumer as a dumb beast that wants what we wants when we wants it – appealing to the narrowest conception of our self-interest. Such an approach to the consumer has done much to create the debased industrial food chain we now have – the “pile it high and sell it cheap” philosophy that ramifies up and down the food chain, degrading the land, emiserating the animals, and making us fat and sick. But as Whole Foods recognized before many others did, there is another consumer being born out there, one who takes a broader view of his interests, understands that spending more on higher-quality food is worth it on so many levels, and who treats his food purchases as a kind of vote for a better world. You have helped to create that new consumer, educating him about organics and persuading him to spend more for better food-something we will have to do if the food system is ever to be put on a truly sustainable footing.

In the same way we now need (as you pointed out in our meeting) to raise the bar again on American agriculture, we need to raise it on the American eater too, teaching him about the satisfactions (and nutritional benefits) of eating in season, from his locality, and from a food chain based on grass rather than corn. I think we agree that this is where the “reformation” now is headed; you are in a position to lead rather than to follow it there. To do so is also, I daresay, in your company’s self-interest: as competitors like Wal-Mart and Safeway move into selling industrial organic food, Whole Foods can distinguish itself by moving to the next stage, doing things they can’t possibly do. “Local” surely is one of those things: and your buyers already know exactly how to do it. All Wal-Mart knows is how to source industrial organic food from China.

You are absolutely right here, Michael, and your message is very inspirational. Thank you.

After spending time with you and reading your letter, I’ve wondered if perhaps I did, as you imply in your letter, present a unfair caricature of Whole Foods in “The Omnivore’s Dilemma,” suggesting a store where organic, local and artisanal food is just window dressing to help sell a much more ordinary industrial product. Indeed, nothing would please me more than to conclude I owe you and the company an apology. I’m not quite there yet. But I sincerely hope you will prove my portrait of Whole Foods wrong, that the company has not thrown its lot in with the industrialization, globalization and dilution of organic agriculture, but rather stands for something better. For my own part, I stand ready to write that apology, and look forward to doing it.

Michael I’m not looking for an apology from you. Who cares about that? That’s just ego stuff. Just as you are trying to “wake me up” to the importance of local food, I’m trying to “wake you up” to the fundamental integrity of Whole Foods Market and our company commitment to our core value of “selling the highest quality natural and organic foods available.” While I don’t share your fear of globalization of the food supply, I do share your commitment toward helping promote local foods. I will say, however, that buying only local foods may be good for local farmers, but it can also be devastating to poor farmers all over the world who need to sell their products to the developed world to help lift themselves out of poverty. A strictly local foods philosophy is not a very compassionate philosophy. As Singer and Mason write in their new book, “keep your dollars circulating in your own community is not an ethical principle at all. To adhere to a principle of ‘buy locally,’ irrespective of the consequences for others, is a kind of community-based selfishness” (Singer and Mason p. 141). Whole Foods Market intends to continue to buy quality natural and organic foods from around the world, because our customers want us to and because doing so helps support some of the poorest economies in the world. You may not have liked those organic asparagus from Argentina very much, but Argentina is not a wealthy country (ranking only #65 in GNI per capita at $3,720 versus $41,400 in the USA-source: The World Bank, 2004) and helping their farmers to sell organic foods is very beneficial to them. Do you not feel any ethical obligation to help poor people around the world? What better way to help them, than to be willing to buy their agricultural products? Argentina isn’t able to sell us automobiles or jet planes or computers, but one thing they can sell us is organic asparagus. If we don’t buy their organic asparagus then how are they going to be able to afford to buy iPods from Apple, computers from Dell, or books from Michael Pollan? (You aren’t just restricting your books for sale only locally in Berkeley are you? Why not? After all, lot’s of fossil fuel gets used distributing books across the U.S. and the world.)

Organic farming is spreading rapidly all over the developing world and it is doing so primarily because there is a huge U.S. market that wasn’t there before Whole Foods Market’s successful growth helped create it. Organic farming is very, very good to the small poor farmer in these countries for several reasons:

• Over-population and the consequential over-working of the small farms have really depleted the soil, and organic farming is beginning to help bring that soil back to health. As we both know, the health of the soil is essential to long-term sustainability of every farm.
• Organic foods pay much better to developing world farmers than conventional farming does, with premiums as great as 100% for growing organically. These higher prices for organic foods are currently helping raise the standard of living for hundreds of thousands of poor farmers around the world. If organic continues to grow and spread, then eventually it will help millions of developing world farmers lift themselves out of poverty.
• Small farmer poisoning due to pesticide applications is a very big problem all over the developing world; the U.S. organic foods demand has saved countless farmers from illness or death due to pesticide poisoning. Sickness and the death of the (mostly male) developing world farmer is a leading cause of poverty.

Michael, I agree that Whole Foods Market could and should do more to promote local agriculture, while simultaneously supporting global organic foods. We have a responsibility to take a leadership role to promote more local agriculture. This has really become clear to me the last couple of years as we’ve been developing our animal compassionate standards. We haven’t found very many of our existing animal food suppliers really willing to convert over to more animal compassionate methods. We’ve come to realize that we are going to have to create an alternative animal compassionate system from the ground up and we’re going to need to do it on a local basis market by market all across the United States.

In my first paragraph of this letter I promised to tell you about some exciting new initiatives that Whole Foods Market is launching. So here goes:

1. We’ve hired our first animal compassionate field buyer, Andrew Gunther, who is going to work exclusively on developing sources of animal products that meet our new strict animal compassionate standards. Andrew is well qualified for this post as he has owned and managed a very successful organic farm in the U.K. and has pioneered animal compassionate methods on his farm for chickens, ducks, turkeys, beef cattle, and pigs. Andrew is a knowledgeable and passionate man concerning animal welfare. We’re lucky to have him working with us. All of Andrew’s initial animal compassionate suppliers will be relatively small in scale. If you check out our animal compassionate standards you will see that the standards have specific provisions requiring access to pasture (going beyond the current organic standards regarding pasture). Pasture is not optional in these standards but is one of the core values. If you know of any animal compassionate farmers (including 100% grass farmers) interested in selling to Whole Foods Market, please have them contact Andrew at Andrew.Gunther@wholefoods.com.
2. Whole Foods Market is changing the job responsibilities of our Regional Buyers to focus more on sourcing local products for their stores.
3. We have set up an annual budget of $10 million to promote local agriculture (especially animal agriculture) wherever we have stores through long-term loans at low rates of interest. Select Regional and Store Buyers will be empowered to extend these loans to help support smaller scale agricultural entrepreneurs. This money will be used to help local producers of grass fed beef, goat milk dairies, organic pasture based eggs, animal compassionate dairy cows, chickens, turkeys, sheep, pigs, etc. Some of the money will also be used to help support local vegetable farmers as well. It is Whole Foods Market’s intention to help finance local agriculture all over the United States. We are going to “walk our talk” with financial support for local, small scale agriculture. We are inspired by the initial success of our Whole Planet Foundation’s work with micro-credit loans in developing world communities that we trade with. We see that these small loans are making a huge difference in the lives of poor people in Guatemala and Costa Rica (with new loan projects being set up in India and Honduras in 2007-and eventually around the “whole planet”). We intend to do a similar thing to support local agriculture wherever we have stores. We believe this financial assistance of $10 million per year can make a very significant difference in helping local agriculture grow and flourish across the United States and in parts of Canada and the U.K. as well. Each year we will make an additional $10 million available for loans. Also as the loans are paid back, we will recycle the returned capital back into additional loans. Over time this will result in a very positive and strong multiplier effect on local agriculture.
4. Whole Foods Market is committed to supporting local farmers markets across the United States (and also in Canada and the U.K.). Beginning soon, many of our markets where we have stand-alone stores (no other retailers sharing our parking lots) will close off major sections of the parking lots on Sunday to provide a place for local farmers to sell their products directly to customers. Whenever possible we will work in cooperation with any existing farmers markets. In most cases, our stores have excellent store locations and heavy customer traffic to help these farmers markets to successfully flourish. This support of local farmers markets is consistent with our stakeholder philosophy since it directly benefits five of our six major stakeholders-customers, team members, suppliers, community, and environment. Also, our shareholders will benefit directly if store traffic increases enough to offset the amount of sales lost to the local farmers, and they will definitely benefit indirectly through increased customer and community goodwill.
5. Our Regional and Store Marketing Teams are now directly responsible for communicating and educating our customers about locally produced products. Some of our Marketers are already doing this, but company-wide we aren’t doing nearly enough to tell the stories of our local producers. This is going to seriously improve over the next 12 to 24 months.

I also look forward to continuing this dialog, and to following Whole Foods progress. Here’s to the “reformation”!

Yours very truly,

Michael Pollan

I’ve enjoyed our dialog Michael. “Viva le Revolution!” Take care.

John Mackey

June 12, 2006

Dear John Mackey,

Thank you for your letter, and for the time you spent with me in Austin last month. I was delighted to have a chance to meet and to learn more about Whole Foods. Thank you, too, for the $25 gift certificate, which more than makes up for the $6 I spent on the disappointing Argentine organic asparagus. Though I know you are troubled by some of the critical things I have written and said publicly about Whole Foods, it was clear from our conversation that we agree about a great many things, including our concerns about the future direction of organic agriculture. Since you are in a position to do much to shape that future, that cheers me no end.

I want to take this opportunity to address some of the points you made in your letter, and to pose a few of the questions that it begs. I hope you will take my remarks in the spirit in which they are offered — as constructive criticism of an important institution that can do much to advance what you call the “reformation” of the American food system, something we both want.

Let me start by explaining why I did not seek to interview anyone from Whole Foods for my book, which you imply in your letter represents a journalistic lapse. (You should know I have interviewed people from the company several times in the past, particularly in connection with an April 2001 story I did for The New York Times Magazine “Naturally,” for which I interviewed Margaret Wittenberg. Over the years I have also interviewed several store employees of Whole Foods and a great many of its suppliers.) For the purposes of “The Omnivore’s Dilemma,” I approached Whole Foods less as a journalist than a consumer, since my goal was to capture how the store represents itself and the food it sells to a typical shopper: the signs and displays, the brochures, the labels, the photographs on the walls. Admittedly, this is not a systematic way to describe a supermarket chain—it depends on the sample of stores I visited and what they happened to be selling on any given day. It could be you have stores that sell substantially more local food than the stores I observed. But the fact remains that what I observed I observed, and that is what I wrote in the book. Nothing in your letter leads me to believe my account of what you sell in my local Whole Foods or the farms it comes from is inaccurate.

I do appreciate your offer of journalistic access and “transparency,” though you may be interested to know that other journalists have not found you and other Whole Foods executives to be so accessible in the past. When researching his important new book “Organic, Inc.,” Sam Fromartz was turned down in his effort to arrange an interview with you. He was told (in an email from Amy Hopfensperger): “…we do not grant interviews for book requests at this time for several reasons. With the explosive growth in the organic and natural food industry and Whole Foods Market’s position as the leader in this industry, we are not interested in leaking any competitive information that may benefit our competitors.” I would hope this does not accurately reflect your feelings about talking to journalists, and to judge from my recent contacts with you, it does not. Transparency at every level is critical to reforming the food system.

I confess I am of two minds in deciding how to respond to the substance of your letter: whether I should attempt to cast doubt on your claims that Whole Foods wholeheartedly supports local, artisanal, and grass-based agriculture, or whether to simply applaud and encourage your inclinations in that direction. I take heart in the fact that you feel compelled to defend a commitment to these forms of agriculture, not only because I share it, but because you are in as strong a position as any individual in America today to help rebuild local food chains and build a market for pasture-based livestock farming. I don’t need to tell you how important these two things are – or that the survival of local agriculture is critical to preserving farmland near America’s metropolitan areas; to reducing our consumption of fossil fuel (17 percent of U.S. fossil fuel consumption goes to feeding ourselves); and to making the food system better able to withstand threats, whether from pathogens or terrorists (or both). The decentralization of the food system is not just a matter of sentiment or political correctness but of national security. Further, as we discussed, grass farming represents one of the most encouraging trends in American agriculture today, holding out great promise for improving the health of the animals, of the American land, and of the American consumer.

Yet, to be perfectly candid, I have trouble squaring some of your claims of support for local agriculture with what I see when I shop at Whole Foods. I see more signage about the importance of local produce than I see actual items of local produce. You write that 45 percent of your suppliers are local, i.e. located within 200 miles of the store – an impressive statistic, but perhaps a misleading one. Given the concentration of organic produce in a tiny handful of corporate hands (with Cal-Organic/Grimmway and Earthbound dominating the market nationally), it’s not surprising that you would have a relatively high number of local suppliers among your vendors – since just two of those vendors could supply the great bulk of your produce sales. The more telling statistic would be this: As a percentage of sales (rather than of vendors), how much of the produce sold at Whole Foods is produced locally? My guess is that number is considerably lower than 45 percent, even if you count Cal-Organics and Earthbound as “local farmers” in California, a claim that strikes me (and would probably strike them) as a stretch. Leaving aside food miles, these are not the sorts of corporations most people have in mind when they talk about local agriculture.

After visiting a great many large organic farms to research my book, many of them your suppliers, it seems to me undeniable that organic agriculture has industrialized over the past few years, and that Whole Foods has played a part in that process-for good and for ill. (Sam Fromartz’s “Organic Inc.” demonstrates as much, as I think does “The Omnivore’s Dilemma,” especially in Chapter Nine.) Big supermarket chains will naturally find it easier and therefore more profitable to buy from big farms selling lots of one thing. This is the way of the world, or at least of capitalism. And as I tried to make clear in my account of the organic industry, much is gained when organic gets big; I offer the story of Earthbound Farms as a positive case in point. The water and soil in California are in far better shape because of large-scale organic farms like Earthbound, as you point out in your letter. (The statistics you cite in your letter speak eloquently to this point.) But surely we can recognize all these important gains without turning a blind eye to the costs: the sacrifice of small farmers and of some of the founding principles of organic farming (its commitment to polyculture, for example; to “whole” rather than highly processed foods; to social and economic sustainability, etc.)

We both know other executives in the organic industry who accept these trade-offs as inevitable and necessary. They call themselves realists, and believe that those of us who regret the passing of local organic agriculture and the founding values of the organic movement should just get over it – that the organic Twinkie or organic Coca Cola is good news for the environment, case closed. You obviously don’t feel this way. Your letter and our conversation make clear that you care deeply about the values behind the organic movement, that much more is at stake here than pesticide residues. That’s why I would rather not get into an argument about “how local are you.” What I would much rather do is applaud you for carrying however much local food you carry, and to urge you to make it possible for your stores to carry much more.

As we discussed, the company’s shift a few years ago from “backdoor sales” to a regional distribution system has made it more difficult, if not impossible, for small local farmers to sell directly to individual Whole Foods stores. For some farmers, this may be a boon as you suggest, but for the many Bay Area farmers I have spoken to, it has shut them out – they don’t grow enough to supply a distribution center, or the centers are too far from their farms. You write that all of your stores are in fact free to buy locally, which I was surprised and delighted to hear. I hope you’ll take steps to encourage them in that direction. I have interviewed dozen of organic farmers for whom selling to Whole Foods over the years has been critical to their success; for what it’s worth, they feel much less welcome since you moved to the regional distribution model. Which leads me to my next question: is there anyone, at the regional level, charged with the specific mission of locally sourcing as much food as possible? And do Whole Foods buyers have the authority to pay a premium for local produce, in the same way they now routinely pay a premium for organic? Such a commitment by Whole Foods to local sourcing – not everything, but whatever and whenever possible – could go a long way toward rebuilding local food systems across America.

The issues in pastured meat and milk are similar in some ways, different in others. I was pleased to hear you speak of the importance of grass in both beef and milk production, and applaud your efforts to push the organic dairy industry to make grazing mandatory and reject the organic feedlot model. The story in beef is more complicated. I recognize the economic advantages of sourcing grass-fed beef from overseas; it is a commodity in New Zealand while still an artisanal product here. Yet Whole Foods’ commitment to developing an American grass-fed meat industry would have such a profound impact, both on the environment and the welfare of the animals, that I would urge you to take a broader view of the matter. I am not, contrary to what you might think, an absolutist on local food. I recognize that there are times and cases when supporting local agriculture in other countries is the best way to go; Slow Food calls it “virtuous globalization” when the power of a global market can be used to defend an endangered local food or food culture. But that’s not what’s happening in the case of grass-fed beef.

To build a viable grass-fed beef industry in America would do so much for the land – not just remove the insult of chemicals and ruinous commodity crop production, but also actually restore the land to health. It would also do wonders for the health and happiness of millions of America cattle that now live in misery on feedlots, and encourage farmers to convert cropland back to grassland. I also believe that, by organizing a national supply chain based around regional differences in the season that grass-fed meat should ideally be harvested, Whole Foods could develop a 12-month national supply of fresh, high-quality domestic grass-fed meat. True, the meat would not always be local, but the local effect, as the source of it shifted from one region to another over the course of the year, would be profound. Whole Foods has the power and know-how to do things in this area no one else can do.

As you point out several times in your letter, Whole Foods’ freedom of action is constrained by the desires of its consumers, who want asparagus in January, fresh berries all year long, convenience foods, etc. I appreciate that you “don’t try to channel our customers into adopting any particular dietary regime.” And yet your stores – with their extensive information, signage, and well-informed counter help – are clearly in the business of educating people. You are selling information and stories as well as food, which is to say, you have set yourself the mission of leading, not just following, the consumer. Any retailer can treat the consumer as a dumb beast that wants what we wants when we wants it – appealing to the narrowest conception of our self-interest. Such an approach to the consumer has done much to create the debased industrial food chain we now have – the “pile it high and sell it cheap” philosophy that ramifies up and down the food chain, degrading the land, emiserating the animals, and making us fat and sick. But as Whole Foods recognized before many others did, there is another consumer being born out there, one who takes a broader view of his interests, understands that spending more on higher-quality food is worth it on so many levels, and who treats his food purchases as a kind of vote for a better world. You have helped to create that new consumer, educating him about organics and persuading him to spend more for better food-something we will have to do if the food system is ever to be put on a truly sustainable footing.

In the same way we now need (as you pointed out in our meeting) to raise the bar again on American agriculture, we need to raise it on the American eater too, teaching him about the satisfactions (and nutritional benefits) of eating in season, from his locality, and from a food chain based on grass rather than corn. I think we agree that this is where the “reformation” now is headed; you are in a position to lead rather than to follow it there. To do so is also, I daresay, in your company’s self-interest: as competitors like Wal-Mart and Safeway move into selling industrial organic food, Whole Foods can distinguish itself by moving to the next stage, doing things they can’t possibly do. “Local” surely is one of those things: and your buyers already know exactly how to do it. All Wal-Mart knows is how to source industrial organic food from China.

After spending time with you and reading your letter, I’ve wondered if perhaps I did, as you imply in your letter, present a unfair caricature of Whole Foods in “The Omnivore’s Dilemma,” suggesting a store where organic, local and artisanal food is just window dressing to help sell a much more ordinary industrial product. Indeed, nothing would please me more than to conclude I owe you and the company an apology. I’m not quite there yet. But I sincerely hope you will prove my portrait of Whole Foods wrong, that the company has not thrown its lot in with the industrialization, globalization and dilution of organic agriculture, but rather stands for something better. For my own part, I stand ready to write that apology, and look forward to doing it.

I also look forward to continuing this dialog, and to following Whole Foods progress. Here’s to the “reformation”!

Yours very truly,

Michael Pollan

May 25, 2006

Dear Michael,

I am deeply appreciative of your efforts to encourage your readers to take a closer look at where their food comes from. I especially like the way you lead your readers to understand that their everyday choices do make a difference both in the food supply chain and the environmental sustainability of the planet. As you point out in the “Big Organic” (Supermarket Pastoral) chapter of your book, credible information about the sources of our food in conventional foods stores is limited to non-existent.

As the co-founder and CEO of Whole Foods Market, I lead an innovative business that has offered customers numerous choices in natural and organic foods for more than 27 years. Yes, the business has grown in size — from one store to our current 184 — keeping pace with the increasing popularity of these products in the developed world. And, as a Fortune 500 company, we might be considered a big company by many people. However, Whole Foods Market has done more to advance the natural and organic foods movement in general and local organic growers and artisanal food producers specifically than any other business currently operating in North America. These points are not mentioned in your otherwise engaging examination of modern food systems. Quite the opposite, in fact, as you go out of your way to criticize Whole Foods Market and associate us (unfairly and inaccurately) with what you call “Industrialized Organic” and “Big Organic.”

Whole Foods Market’s co-presidents, Walter Robb and A. C. Gallo, and I try to be available to the media, as you might have realized during your research on other pieces that have been written on our company in the last few years. I am not aware of any attempt on your part to contact company leadership in any way. I greatly enjoyed reading your book Botany of Desire and I certainly would have enjoyed speaking with you in person while you were conducting your research. I may have been able to clear up some misconceptions before they appeared in print.

Because of our success and growth, Whole Foods Market attracts a lot of praise, comparison and, sometimes, hostility — along with the occasional puzzling ethical or moral judgment. As a retail business that operates at a level of transparency far exceeding that of almost any other business of its size, I find this curious but figure that these judgments are a by-product of our success. Your book focuses on several points, either by implication or actual statement that I find troublesome in terms of their accuracy. I want to provide you with additional background on these points and provide you with the names of Whole Foods Market spokespersons who can assist with any research materials or clarification that you may need in the future.

I regret that you did not engage in any serious research about how Whole Foods Market actually does business or you would have discovered that we support local and small farm food production all over the United States as well as in other parts of the world. Whole Foods Market, despite its size, does not operate as a typical monolithic corporation such as Wal-Mart (with which you associate Whole Foods Market several times in your book). Our company continues to operate on a decentralized model wherein each of our 11 regions, as well as each store, has a high level of autonomy. Differences in product offerings, suppliers, and seasonal availability result in a significant variation of items on our shelves from region to region and even store to store within the same city. However, our strict quality standards, the highest in the industry, are observed with every supplier and retail outlet. In other words, you may find a variation in the types and kinds of products, but each has been screened by our rigorous quality standards.

Before I provide you with examples of how Whole Foods Market supports local growers of natural and organic products and artisan food producers, I want to emphasize an important point about our company. Whole Foods Market offers a range of food choices to our customers. We screen our offerings by the quality standards I mentioned earlier and try to offer as many natural and organic products as possible, but we don’t try to channel our customers into adopting any particular dietary regime. Instead, we provide opportunities for each to make individual choices that satisfy their everyday demands and lifestyle needs.

Some customers prefer to eat primarily from their “foodshed” or they wish to support local growers. Individual Whole Foods Market stores attempt to meet the needs of these customers as far as is practical given the constraints of seasonality and availability of products meeting our quality standards. Other customers want to enjoy particular foods from throughout the world, either because of their ethnic background or because they appreciate expanded choices and novel cuisines. Most of our customers prefer a combination of local, national, and global food choices, and appreciate — even demand — the range of choices Whole Foods Market offers.

We understand the line of reasoning that champions eating locally and in season. Whole Foods Market stores offer as many local, seasonally available foods that meet our quality standards as are available in a particular market area. Our customers, however, regularly desire products that may not be in season in many parts of the United States. Accordingly, due to such market demand, we offer the freshest, most sustainably grown products we can find on a year-round basis while also continuing to develop our relationships with local and regional producers in season. That may mean that a Whole Foods Market customer desiring fresh organic asparagus in January will find only spears with an Argentinean or Chilean origin in our produce department. Many of our customers want fresh asparagus and this is where we can reliably source organically grown produce at that time of year. In your book you report the following: “My jet-setting Argentine asparagus tasted like damp cardboard. After the first spear or two no one touched it.” I want to apologize to you for your unpleasant experience with our Argentine asparagus and I’ve enclosed a $25 gift certificate to help compensate you for your negative experience.

The following information provides key points about Whole Foods Market and its supporting role in the growth of organic and sustainable agriculture over the last 25 years. I will also include examples about how Whole Foods Market works with natural and organic food producers at the local and regional level. I am providing only highlights. Should you wish to follow up on any of this information, I encourage you to contact:

• Margaret Wittenberg, Vice President of Communications and Quality Standards
• Kate Lowery, National Public Relations Director
• Jim Speirs, Vice President of Global Non-Perishable Procurement
• Edmund Lamacchia, Vice President of Global Perishables Procurement

Organic: Whole Foods Market is a Big Part of the Story
I find it perplexing that your book provided so little context for the history of the organic movement in the 20th century. The snapshot your book provides on the current state of the organic industry is just one stage in its evolution. The organization of the organic movement started in the 1960s in limited areas. As organic farming and foods were embraced by the counterculture in the 1960s and 70s, networks of co-ops developed and came together for purchasing and distribution purposes. These soon dissolved since members could not agree on ideals and because most of the co-op models were not economically sustainable. A few of these models still are working, including one I belonged to in Austin many years ago, however none of them have been able to offer a strong enough market presence to sustain local or even regional agriculture.

In the days when organic co-ops were plentiful, very little product actually came from small-scale, local, progressive farms. The cornerstones of the income statement in the early co-ops were rice, apple cider, peanut butter, cheese, tofu, eggs, some seasonal fresh products, and membership fees. In the 1960s and 70s, agriculture at the local and regional level was already in decline, having been decimated by low producer prices, lack of concern about diet by the American consumer, increasing desire for fast foods, decline in food quality, and an increasing, government-supported focus on chemical practices. Local agriculture hit rock bottom in the mid-1980s. The Greenbelt Alliance along with developing marketplace forces driven by the increasing numbers of “California Cuisine” restaurants and the for-profit natural foods sector supported many of the young growers who created the next generation of family farms. Without that effort in the 1980s, the snapshot that you capture in “Big Organic” would not have the same appearance. The focus on integrated marketing (including direct-to-consumer sales), crop diversification, product differentiation, and the general move toward agricultural sustainability through Integrated Pest Management (including organic) practices preserved and created the current resources that exist in local and regional agriculture. By offering multiple outlets for their products and working tirelessly to educate consumers, Whole Foods Market stores, along with many regional independent stores, are an integral part of saving and supporting regional and local agriculture.

As one regional example, in the 1960s and 70s, very little organic produce was actually available in New England. During our limited local season, Bread & Circus (which started in 1975 and became part of Whole Foods Market in 1992) bought vegetables from a few local small farms that were just outside of Boston. The farmers claimed that their produce was organic but without any national or local law defining the term, the organic label was used loosely. Still, our customers loved the freshness of the local product after a winter of week-old organic produce from California, much of which arrived by air in the early days (imagine the relative cost of that produce!). By the early 1980s, we had a few more stores in the area, therefore more buying power, and we started to buy, through brokers, from legitimate organic farms. Our selection was still very limited, maybe 20 percent local organic in winter, but at least at this point we had real, local, organically grown produce from trusted sources.

The local organic farm scene grew in the 1980s as young farmers experimented with vegetable growing and delivered directly to our stores. As the number of stores in the region grew, we opened a small distribution center. These farms appreciated the convenience of sending a produce-filled truck to a central distribution point from which we could deliver to our stores. This development allowed the farmers to maximize their efforts on the farm, rather than spend so much time on the delivery, and allowed us to receive more frequent produce shipments in the stores. We still buy from the farmers that we originally worked with in the 1980s, if they are still in business. As part of Whole Foods Market, we have grown to more than 30 stores in the New England and New York area, and our local growers have a much larger market for their products.

But the limited growing season and the dense population in New England force any food business to make choices in meeting consumer demand. Whole Foods Market customers are going to eat fresh fruits and vegetables in the winter. We have the choice of either offering them conventionally-produced vegetables or organically-produced vegetables that will have a lot of transportation miles on them. The organic fruits and vegetables at this time of year are going to be from large farms to insure quality and supply, and some of them may be from organic producers in another hemisphere.

Local Procurement
In other parts of the country, we sell a tremendous amount of locally-grown food, working with thousands of local producers. For example, in 2005 in the produce category alone, 45% of our suppliers were considered to be local (within 200 miles) and 34% were regional (within 400 miles) —only 21% would fall into your category of “Big Organic” national producers. Of our top 150 suppliers/brokers in the produce category, 22% of our purchases are from large corporate farms and 78% are from independent and family farms (some of these smaller farms pool together under one brand name to help improve marketing and distribution). 60% of these 150 suppliers grow organically, and/or represent growers who do so. Economies of scale are important at all levels of the organic food chain in order to lower costs and improve distribution.

As a decentralized company with 11 operational regions and 8 distribution centers, Whole Foods Market is highly unusual when compared to the average “industrial” operation. Regional distribution helps suppliers gain access to all stores within the region, a benefit to their bottom line that otherwise would not occur in a conventional grocery operation. Whole Foods Market continues to build distribution centers, which increases our ability to support regional and local production. Our individual stores are not prohibited from purchasing from local farmers, and, in fact, all of our 184 stores purchase regularly from local growers. Many growers, likely the ones you profiled as “missing in action” at the Berkeley store, are probably using our distribution center on their own volition to take advantage of distribution economies of scale. As a result, the growers spend less time on the road, and place their product in front of a much larger customer base.

Continuing on the theme of seasonality and distribution, the local grass-fed beef sold in the Union Square Farmers Market that you have publicly championed is fresh for a very limited time during the year and would need to be sold frozen for the majority of the year, if sufficient supplies were actually available to meet demand. Whole Foods Market does sell locally-raised meat whenever possible, however most of our customers want their grass-fed meat fresh, rather than frozen, and they want it year round. We can source an abundance of fresh meat from New Zealand, which, with its moderate climate, has an abundance of good pasture throughout the year. Although Whole Foods Market would like to sell local grass-fed beef regularly, another challenge is that a small producer typically needs to sell the whole animal, which leaves Whole Foods Market with the cuts our customers will not buy. Our farmers in New Zealand have different markets around the world that absorb the cuts our customers will not purchase. The farmers in New Zealand can move the beef more quickly, selling Whole Foods Market the cuts that our customers prefer and selling the other cuts to customers elsewhere. We do try to make it work whenever we can, such as with a local organic beef farmer from Southern Vermont who sells to our three stores in New York City. With a great deal of effort, Whole Foods has figured out how to market this producer’s entire animal. The popular cuts like rib eyes and strip loins get sold as premium product, while the end cuts get made into hamburger and stew meat for our prepared foods section.

Whether local, national, or global, any meat producer we buy from must adhere to our strict vendor standards and criteria. Whole Foods Market has the highest natural meat standards in the industry, and we are spearheading the development of national Animal Compassionate Standards (which several European countries have in place, but which are lacking in the U.S.). In addition, Whole Foods Market provides educational support for producers through our non-profit Animal Compassion Foundation. As a side note, you may be interested to know that many of our meat producers do not finish off their animals with corn. They are grass-fed until the end.

Here are additional examples of how Whole Foods Market supports local growers and producers:

• In our South Region, consisting of Georgia and the Carolinas, we set up a mini co-op to consolidate product from local vendors. Whole Foods Market also provided a market for the row crops produced by former tobacco growers (who were part of a government project to grow alternative crops instead of tobacco).
• In the still-recovering New Orleans market, local shrimpers rely heavily on the two Whole Foods Markets to buy their catch.
• In New England, Whole Foods Market works with many small farms that supply a single store, several stores, or many stores through our distribution center. Some specific examples are:
• Our Hadley store in western Massachusetts sits in the Connecticut River Valley amid many small farms, and has authority to buy from local producers. During the season, Hadley buys local produce from over 25 small local farms.
• Whole Foods Market stores in eastern Massachusetts are encouraged to source from local growers; this results in many stores having their own individual growers from the local community.
• In the Tri-State area of New York, customers define “local” in a very narrow geographical area. Customers in northern New Jersey do not consider product from Connecticut or Long Island “local,” even though the farms might be geographically closer to them than farms in southern New Jersey. Our customers in Jersey want Jersey produce in season. Whole Foods Market developed a complicated system that distributes Jersey produce to the Jersey stores, Long Island produce to our two Long Island stores, upstate New York produce to our NYC stores and Connecticut produce to our Connecticut stores.
• Our flagship store in Austin supports local growers and encourages in-store product demonstrations and samplings. Our local Texas growers, like the Goodwins from Buda, Carol Ann and Larry from Boggy Creek Farm in Austin, and the folks from Bella Verdi farms in Dripping Springs, are frequent guests at the store. Whole Foods Market and these growers see our businesses as a part of each other’s on-going success.

In addition, Whole Foods Market works with local food artisans on a market by market basis. Scratch bakers and dessert makers, tortilla producers and fresh salsa crafters, hummus experts and falafel sandwich purveyors, gourmet dog biscuit peddlers and handmade jewelry artists all have shelf-space. Products offered at Whole Foods Market vary store by store, thus supporting the local producers in each market. We most decidedly do not have a cookie cutter model for our stores, other than our model for celebrating local foods and producers.

On-going Support for Organic Agriculture
Whole Foods Market was a pioneer in the organic arena, we did not wait to “get on board” with organic until its health and environmental benefits were corroborated by science and economic analysis. Whole Foods Market has supported organic agriculture from our earliest days in Austin, Texas. We actively sought out sources of organic produce and food since 1978 and continued this practice as we grew. Did you realize that Whole Foods Market was the sole retailer representative on the federal National Organic Standards Board for five years? And that we continue attending National Organic Standards Board meetings and maintain a close watch on the issues to ensure the ongoing integrity of organic standards. Whole Foods Market led the consumer response against the USDA’s draft National Organic Standards that included provisions for genetically modified food crops, the use of human sludge as fertilizer, and irradiation of food products.

Whole Foods Market chaired the Organic Aquaculture Feasibility Task Force in 2001 to explore whether organic standards could be created for aquaculture while still maintaining organic livestock standards and principles. The task force suggested it was possible but would take a lot of work to achieve. Unlike many other retailers, Whole Foods Market will not allow either wild or farmed fish sold in our stores to be labeled as organic since neither has a national organic standard currently in place.

Whole Foods also led the citizen outcry at the potential diminishment of organic livestock feeding standards. The Congressional newspaper Roll Call noted that Whole Foods Market’s efforts alerted legislators and consumers, resulting in an overwhelming amount of direct consumer feedback to individual legislators. Whole Foods Market took the lead on this issue rather than waiting for the organic community to develop an action plan because of an extremely short timeline.

Whole Foods Market was the first national grocery retail chain to be certified as organic. While not required by law, we felt this certification would underscore our commitment to organic and would provide assurance to our customers that even as the company expands, our commitment to organic is as strong as ever.

Helping Convert More Agricultural Land to Organic
The most important story about the rise of organic agriculture is the reduction of the use of synthetic pesticides and fertilizers, many of them petroleum based, and/or produced and distributed with huge energy inputs. Beyond this impressive reduction in the use of pesticides, many of the agricultural practices developed within the organic community have spread out into conventional agriculture with tremendous beneficial impacts. Some of the more significant impacts include:

• The use of Bacillus thuringiensis (Bt) in the strawberry industry, the use of border plantings and cover crops to protect water ways and improve soil tilth, and the development of insectaries for producing beneficial insects improve the quality of the food we eat while protecting the environment.
• Acres of land in California treated with cancer causing synthetic materials: 1989 = 5.2 million, 2004 = 3.8 million – 28.8% reduction, with similar acres in production
• Pounds of pesticides known to cause cancer applied in California: 1989 = 181 million, 2004 = 175 million – 3.3% reduction (unfortunately the positive story is in specific counties and on specific commodities)
• Acres of land in California treated with reproductive disrupting synthetic materials: 1989 = 4.5 million, 2004 = 2.3 million – 49% reduction
• Pounds of pesticides known to cause reproductive disruption applied in California: 1989 = 36 million, 2004 = 24.12 million – 33% reduction
• Pounds of registered pesticides applied to Strawberries in Monterey County: 1985 = 10.5 million, 2004 = 3 million – 71% reduction
• Pounds of registered pesticides applied to Artichokes in Monterey County: 1985 = 162,908, 2004 = 62,567 – 61.5% reduction
• Pounds of bio-pesticides with little environmental toxicity applied in Monterey County: 1984 = 1,037, 2004 = 7,000 – 575% increase

Your book implies that some large-scale organic farming is harmful to the soil and environment. Your farm visit to Greenways may have misled you into making gross assumptions about other organic operations. The implication that some large-scale organic farming practices release harmful nitrogen into the atmosphere is curious when it is not even clear that Greenway’s practices produce harmful nitrogen emissions.

Soil with healthy organic matter converts excess nitrates into dinitron (N2). N2 is an inert nitrogen gas that does not add to the Greenhouse Effect, and generally perpetrates much less environmental harm than nitrates. Stanford University’s Department of Biological Sciences released a paper in March of this year entitled “Reduced Nitrate Leaching and Enhanced Denitrifier Activity and Efficiency in Organically Fertilized Soils,” that reported organic and integrated fertilization practices support more active and efficient denitrifier microbial communities, which may shift some of the potential nitrate leaching losses in the soil into harmless dinitrogen gas losses in the atmosphere.” Granted you did not have access to this information while you were writing, however, similar research findings are available.

Walking Our Talk with Organic Dairy
Whole Foods Market’s private label milk is from the nation’s largest cooperative of organic family farmers, CROPP. CROPP was founded in 1988 by seven Wisconsin-based farmers who were attempting to meet the crisis of the loss of family farms. The 533 small to mid-size member dairy farms feature a herd-size average of 66 cows. The certified organic, traditionally pasteurized milk (not ultra-pasteurized) is produced and bottled in California, the northeast, northwest, and midwest, and is distributed nationwide by Whole Foods Market. The farmers who belong to CROPP are dedicated to humane animal practices such as pasturing and allowing animals to express natural behaviors.

Other organic milk suppliers who sell to Whole Foods Market are audited (by Whole Foods Market team members with backgrounds in animal husbandry) for humane raising practices, including commitment to a pasture-based production system. I personally went to visit two of the largest organic dairy farms last week that have been highly criticized for their animal welfare practices (particularly their inadequate access to pasture). One of these farms has made very substantial changes to their pasture access and has been unfairly attacked, in my opinion. The other dairy is definitely a CAFO (Concentrated Animal Feeding Operation) using organic feed and is violating the spirit of the current organic dairy standards. Tougher organic pasture standards will be necessary to force this dairy to upgrade their practices. Whole Foods Market does not buy any milk from this company. Whole Foods Market has strongly urged the USDA and the National Organic Standards Board through the public comment process, as well as through a detailed, public presentation at the April 2006 USDA Organic Pasture Symposium, to tighten up humane animal care standards for organic dairy cattle, specifically focusing on pasture as a requirement for raising and feeding these animals. The organic pasture requirement for dairy cows was not well specified in the original regulations, and this has led to some abuses. However, I am hopeful that this flaw can and will be corrected within the organic regulations in the coming year.

Creating a Third Way with Country Natural Beef
Whole Foods Market is very committed to the success and sustainability of smaller family ranching. I believe this is a solution of scale that lies squarely between your “Joel Salatin” meal and the “industrialized organic” meal. As we both know, the reality of regional foods from family farms and ranches is that very few can produce the volume to effectively market themselves outside of small farmers’ markets. Farmers’ markets are a good thing to be sure, but by themselves, they aren’t going to have the scale or the convenience to really reform industrial agriculture in the United States.

While you point out that industrial organic is a modest improvement over conventional industrial agriculture, I believe a third path is possible. Previously I explained how Whole Foods Market has partnered with CROPP to supply all of our stores with organic milk under our private label (with average herd size of only 66 cows). Another great example is Country Natural Beef (CNB), who we’ve been trading with for over 12 years now. Like CROPP, CNB represents a viable “Third Way” for small family farms to find success in an industrialized agricultural world.

By joining together, the ranchers who make up Country Natural Beef take advantage of the reality of the cattle business as an extremely capital-intensive and low-margin business that takes 27 months from conception to processing. They mobilize member capital to fund what amounts to a wholesale meat company to directly reach their retail partners like Whole Foods Market. Here are the numbers:

• Country Natural Beef was paid more than $26 million in 2005 for beef representing more than one quarter of Whole Foods Market’s total national beef sales last year.
• The approximately 89,000 cows raised for Country Natural Beef are spread over 92 family ranches, averaging 542 cows per ranch, along with five larger ranches (averaging 7,800 head each) such as Padlock Ranch, which is operated by 18 family members who hold ranch ownership under one name.
• Less than four percent of money is used to run the business, meaning that almost $25 million of those dollars paid from Whole Foods Market went directly to 97 individual Country Natural Beef member working ranches.
• Those dollars are responsible for bringing 11 young families back to family ranches during the past 12 years and are helping hold well over four million acres of land as open space as cattle ranches.
• Whole Foods Market works with Country Natural Beef to set mutually beneficial prices based on sustainable ranching costs of production.
• All Country Natural Beef ranches are third-party certified by the Food Alliance for humane animal handling, equitable labor practices and sustainable, environmentally friendly land management.

Whole Foods Market’s ability to partner with many more cooperatives of producers with shared values such as CROPP and Country Natural Beef could make a significant, meaningful and lasting impact on the land and the success of agricultural families.

This is not “supermarket pastoral.” Whole Foods Market’s commitment to buying and promoting regional foods from family farmers and ranchers is real, and the solution demonstrated by the success of Country Natural Beef is something to observe and study.

CAFOs & Whole Foods Animal Compassionate Standards
Whole Foods Market shares the concerns you expressed in your book about large scale CAFOs, whether these be conventional or organic. These “factory farm” operations need to be eventually outlawed, in my opinion, and this is an area where major change is necessary in the organic regulations. Whole Foods Market is so concerned about the way livestock animals are being raised for food in the United States that we are in the process of creating Animal Compassionate Standards, which we are hopeful will eventually have a revolutionary impact. Creating these standards has been a multi-stakeholder process with many dozens of animal farmers participating along with representatives from several animal welfare groups — Humane Society of the United States, PETA, Animal Welfare Institute, VIVA, Animal Rights International, and Compassion Over Killing — plus a number of internationally renowned animal scientists. We have been working with these stakeholders for over 2 1/2 years now and have created final standards for ducks, pigs, sheep, and beef cattle. The Compassionate Standards for turkeys, lobsters, and broiler chickens are very near completion, while laying chickens and dairy cows will be completed before the end of 2006. I urge you to review the standards that we have already completed, which are available on-line at: http://www.wholefoodsmarket.com/issues/animalwelfare/index.html#standards

Animal Compassion Foundation
To help facilitate both research and the conversion of conventional animal farm over to more compassionate livestock operations, Whole Foods Market created the Animal Compassion Foundation. So far Whole Foods Market has donated more than $1.3 million to fund the foundation over the past two years. I urge you to take a look at the important work this foundation is doing to better the lives of farm animals. Animal Compassion Foundation

The Future Evolution of Organic Foods
Industrial agriculture grew tremendously throughout the 20th century. Synthetic fertilizers, synthetic pesticides, and synthetic herbicides were not in widespread use 65 years ago. There were no such things as CAFOs more than 40 years ago. GMOs are less than 20 years old. The organic movement has largely grown in response to the industrialization of agriculture. It is a reform movement that has been growing and evolving for less than 60 years, and didn’t gain any serious traction until about 20 years ago. The first stage in the “Organic Reformation” has concentrated primarily on getting the synthetic chemicals off our farms and out of our food. We have made great progress in achieving this goal considering where we started from. However, we now know that getting the synthetic chemicals off our farms and out of our food is only the first stage in the Organic Reformation. Much, much more is needed — especially with improving the soil, dismantling CAFOs, improving local organic production and availability, and improving animal welfare. Rather than despair that the Organic Reformation has been corrupted by the industrialization of agriculture, I believe that we simply need to evolve to the next level. Your book is an important contribution for raising consciousness for the need for further evolution of the Organic Reformation. Joel Salatin’s farm is a valuable example and model for what is possible and is an inspiration to many of us. Many organic farmers are beginning to work with similar methods that Salatin has pioneered. You are probably already familiar with Holistic Management International. This non-profit organization is helping to spread effective pasture management systems similar to what Salatin has done. It was founded by one of Salatin’s mentors, Allan Savory. You can find their website at http://www.holisticmanagement.org/index.html in case you aren’t familiar with their work.

Offering the First Lower Priced All-Organic Line in the U.S.
Finally, with our private label 365 Organic product line, Whole Foods Market offers our customers every day, affordable organic choices from “soup to nuts.” Well aware of our moniker “Whole Paycheck,” through initiatives like our organic store brands and the purchasing discounts we can now enjoy because of our size, our food prices have decreased in many categories over the last few years. Our prices for the same products are actually lower for many staples than those in conventional grocery stores or competitor natural foods retailers, while our selection continues to include a range of items from staples to higher quality or more exotic choices.

In summation, Whole Foods Market has supported the growth of, and driven significant demand for, organic agriculture for more than 27 years. Throughout this time Whole Foods Market stores have supported local growers and food producers in store market areas. Because of our unique, mission-driven business model, our success has allowed expansion throughout the hemisphere and into Europe, where we can offer healthy and environmentally sustainable food options to an ever increasing customer base in store environments that celebrate good food and an abundance of choice. I am not sure if merely because of our size and success Whole Foods Market deserves the pejorative label “Big Organic” or “Industrial Organic,” or even to be linked to those categories. I would argue instead that organic agriculture owes much of its growth and success over the past 20 years to Whole Foods Market’s successful growth and commitment to organic. As an organization we continually challenge ourselves to be responsible and ethical tenants of the planet. Through our stores, large and small organic farmers, both local and international, can offer their products to an increasingly educated population that is more interested in organics every day.

Again, I value the wake up call provided to such a wide audience by The Omnivore’s Dilemma with its overview of the social, ethical, and environmental impacts of modern food production. Whole Foods Market is extremely excited about the possibility of a more educated and informed consumer base. However, I feel that the book misrepresented key points about Whole Foods Market, and this leads me to question some of your objectivity as a journalist. Much of the organizational, economic, and social and agricultural activism leadership information about Whole Foods Market is readily available from a variety of public sources. In addition, our leadership team members, many of whom have been with the company for more than 15 years, are readily available to speak with the media. Going forward, I trust that the information I’ve provided will find its way into your making a more accurate portrayal of Whole Foods Market. Michael, Whole Foods Market is one of the “good guys” in this story about the “industrialization of agriculture.” We want to transform our food procurement pathways into more holistic, ecological, and sustainable systems. We should be working together as allies to accomplish this essential mission.

Sincerely,

John Mackey, Co-founder and CEO
Whole Foods Market