As a somewhat disgruntled customer of Wild Oats (my suggested motto: “You’d Better Want What We Have, Because We Don’t Have What You Want”), I’ve been looking forward to seeing my local outlet converted to a Whole Foods.
Now Daniel Gross of Slate tells us that the Bush administration has finally identified a proposed merger it doesn’t like. As Gross suggests, it sounds like revenge.
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Dan – Do you think the FTC’s decision has anything to do with the fact that Whole Foods, which is headquartered in Austin, Texas, the only “blue” part of Texas, was the home-away-from-home for many of that state’s most vocal opponents of Governor Shrub?
No idea. But … hmmmm … interesting, isn’t it?
What about the recent May-Federated merger? As near as I can tell, your average Massachusetts mall is now anchored by Sears (if they’re lucky), 2-3 Federated-May’s stores, plus the Gap/Banana Republic/Old Navy triumvirate and the Limited Brands (Victoria’s Secret, Express, Bath & Body Works, C.O. Bigelow, the Limited, White Warn Candle, and Henri Bendel). And then there’s the William Sonoma group..In other words, NOW they’re worried about lack of competition?
If your market has *both* a Whole Foods and a Wild Oats, like Portland, ME does, this merger looks a lot more anticompetitive. But situations like that are the exception rather than the rule; Whole Foods is buying Wild Oats to gain access to new markets, not to eliminate a competitor.Anyway, the real problem with Whole Foods buying Wild Oats is the age-old problem of integration. Wild Oats stores are generally much smaller than Whole Foods stores, which creates real issues of product selection and consistency throughout the chain. This is also by far the largest acquisition in Whole Foods’ history; this is no Bread & Circus buyout, and taking on lots of additional debt as the mainstream supermarkets come on strong with their natural/organic efforts is a risky venture to say the least. If Whole Foods stumbles in digesting Wild Oats, they are at risk of being acquired by a company whose values run counter to their own.All I’m saying is, be careful what you wish for.
Did we forget the Sirius-XM merger? All of a sudden this administration is a bunch of populists.
The issue of one party to a merger competing with the other party in some markets, has been easily handled in other industries. It is not unusual for the acquiring party to divest itself of the acquired party’s outlets in markets in which they compete. Maybe another grocery company would be interested in acquiring those outlets. If not, it is probable that they are not commercially viable.–raj
There has to be some political angle here. Like the CEO’s of Whole Foods and Wild Oats are both donors to the DNC instead of the GOP.Either that or this is the DOJ “clubbing baby seals”…going after an easy target to make it look like they’re doing their job after being asleep at their desks for the past seven years (at least).
Dan,Sorry for the unrelated comment, but I wanted to make sure you saw Keith Obermann’s unfortunate segment on the Herald libel suit. http://www.crooksandliars.com/2007/06/08/olbermann-bill-oreilly-owes-judge-ernest-murphy-an-apology/
The reality is that Whole Foods CEO John Mackey’s own statements before the Commission torpedoed the merger. He actually told the Commission “When Whole Foods or Wild Oats expects the other to enter one of its markets, each plans substantial improvements in quality, including renovations, expansions and competitive pricing,” What a dope.
From the WSJ today (subscription required):Whole Foods Market Inc.’s chief executive told his board that purchasing rival Wild Oats Markets Inc. would enable the company to “avoid nasty price wars” in a number of cities and “eliminate forever” the prospect of a major conventional grocer starting a competing natural-foods chain, according to information released in the Federal Trade Commission’s lawsuit to block the deal.Whole Foods, the biggest natural-foods chain, also intends to close numerous Wild Oats stores and sell several if the $565 million deal goes forward, the agency said.Wild Oats “may not be able to defeat us, but they can still hurt us,” John Mackey, the CEO of Whole Foods, told directors, according to the FTC. It “is the only existing company that has the brand and number of stores to be a meaningful springboard for another player to get into this space. Eliminating them means eliminating this threat forever, or almost forever.”To second Anon 11:04, what a dope.
Mike: Good grief. Even a non-businessman like me would have had the brains to say, “We’re not competing with Wild Oats. We’re competing with Wal-Mart and Safeway. We have to get bigger or we’re going to get crushed. Our proposed merger will be good for competition.” I mean, really. Is that so hard?
Agreed Dan. “Avoid nasty price wars” I think translates into “we won’t have to have sales anymore or run those expensive weekly flyers”.Even the oft-maligned Bush Administration couldn’t ignore these types of statements. Forget the political angle here v. Red/Blue state revenge – sometimes things stink too much for anyone to ignore.