Whole Foods Chief John Mackey Says
He Bashed Rival on Web

JOSH FINEMAN & DANNY KING
Bloomberg News 12jul2007

[More on Whole Foods]

John Mackey, the chief executive of Whole Foods, criticized Wild Oats Markets in anonymous messages on the Internet in the years before his company agreed to take over the smaller rival, Mackey revealed yesterday. The critical comments were posted on online financial chat boards hosted by Yahoo under the user name "rahodeb" from 1999 to mid-2006, Mackey said in an e-mailed statement.

Wild Oats "has lost their way and no longer has a sense of mission or even a well thought out theory of the business," rahodeb posted on Yahoo's Whole Foods message board on March 28, 2006. "They are floundering around hoping to find a viable strategy that may stop their erosion."

Mackey's online identity was described in a legal document released Tuesday by the Federal Trade Commission. The agency is suing to block Whole Foods' acquisition of Wild Oats because it thinks the combined company would control too much of the natural-foods market and thereby suppress competition. Whole Foods is the largest U.S. natural-foods grocer.

Wild Oats spokeswoman Sonja Tuitele declined to comment.

Mackey, 53, posted "under an alias to avoid having his comments associated with the company and to avoid others placing too much emphasis on his remarks," Whole Foods said in an e-mailed statement.

Whole Foods, of Austin, agreed in February to buy Wild Oats for $565 million. The company has said it will "vigorously challenge" the FTC and continue to pursue the merger.

Wild Oats of Boulder, Colo., "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," Mackey told board members, according to the suit. "Eliminating them means eliminating this threat forever, or almost forever."

Mackey's comments have threatened the merger, said Robert Lande, a professor at the University of Baltimore Law School who worked for the FTC from 1978 to 1984. "This merger is in real big trouble thanks to him shooting his mouth off," Lande said.

The postings, however, probably didn't have much impact "without his name and title on them," Lande said. "Proving in court that Wild Oats' stock price would have risen more without those statements, that's an impossible case to me."

source: 13jul2007

SEC Opens Inquiry Into Online Posts
By Whole Foods CEO John Mackey

KARA SCANNELL / Wall Street Journal 13jul2007

The Securities and Exchange Commission has opened an informal inquiry into the online postings of Whole Foods Market Inc.'s chief executive, according to people familiar with the matter.

For about eight years, Whole Foods CEO John Mackey posted numerous comments about the organic supermarket chain on Yahoo stock forums using a pseudonym. In some of his postings Mr. Mackey, the company's co-founder lauded Whole Foods' stock, cheered its financial results and bashed a company Whole Foods made a bid to acquire.

While it isn't clear that Mr. Mackey violated any laws in his posting, they have raised numerous legal questions.

The SEC is likely to examine whether Mr. Mackey's comments contradicted what the company previously said or were overly optimistic about the firm's performance.

In addition, the SEC will likely look at whether the CEO selectively disclosed material corporate information, which could violate a securities law passed in 2000, known as Regulation Fair Disclosure, which was designed to prevent executives from sharing information with favored clients or analysts.

Whole Foods didn't immediately return calls seeking comment.

In the past, Reg FD has run into challenges with many critics saying it violates freedom of speech. The SEC lost one of its early attempts to enforce Reg FD in 2005 when a federal judge in Manhattan threw out the lawsuit against Siebel Systems Inc., saying the SEC had applied the law in an "overly aggressive manner." The SEC didn't appeal. It has since brought other allegations against corporations for Reg FD violations.

Mr. Mackey's posting came to light as the Federal Trade Commission began investigating the company's planned acquisition of Wild Oats Markets Inc.

On Wednesday, Whole Foods said that among millions of documents it gave the FTC were postings its CEO made from 1999 to 2006 "under an alias to avoid having his comments associated with the Company and to avoid others placing too much emphasis on his remarks." Mr. Mackey used the pseudonym Rahodeb after his wife Deborah.

The company statement from earlier this week said: "Many of the opinions expressed in these postings now have far less relevance than when they were written."

source: 13jul2007

Rahodeb's Greatest Hits

13jul2007

For about eight years until last August, Whole Foods Market Inc. CEO John Mackey posted numerous messages on Yahoo Finance stock forums under the logon "Rahodeb" (an anagram of Deborah, Mr. Mackey's wife's name).

Rahodeb cheered Whole Foods' financial results, trumpeted his gains on the stock and bashed Wild Oats Markets Inc., a company that Whole Foods is currently trying to acquire. Rahodeb even defended Mr. Mackey's haircut when another user poked fun at a photo in the annual report. "I like Mackey's haircut," Rahodeb said. "I think he looks cute!" Below are some posts of particular note.

Rahodeb on Whole Foods

Mackey the boastful, on Nov. 29, 2000:

"Obviously WFMI is no Wal-Mart (not yet anyway!)"

Criticizing rival Sunflower, an organic grocery store opened by Supervalu:

"Sunflower isn't too impressive. These guys won't hurt Whole Foods. Wait and see."

Predicting Whole Foods will someday be a mammoth, June 25, 2004:

I believe that what is really happening with the stock is that some really smart institutions are finally realizing what I realized many years ago: Whole Foods Market is going to be a really large company someday. They will hit their $10 billion sales target by the end of the decade (probably before then) and they won't stop there. It will double to $20 billion 4 years after that (18% CAGR) and probably double again from there to $40 billion within 5 years of then.

The entire food retailing segment is undergoing a huge transformation. Wal-Mart is going to dominate the low price side of the business and Whole Foods is going to dominate the quality/service/healthy side of the business. Those companies stuck in the middle — Safeway, Kroger, & Albertsons — have huge labor union problems that aren't going to go away, but are likely to only get worse. The future has never looked brighter for Whole Foods than it does right now.

Soliciting advice on corporate strategy, in June 1999:

"If Whole Foods acquired Harry's do you think they should keep the Harry's name or change it to Whole Foods Market? How strong is the brand name/goodwill in Atlanta for this company?"

In April of 2000, talking about Whole Foods' market chances:

"My point is, you can't have it both ways in America. Either the market has considerable opporunity (remember, we are talking about from this point onward, not from a revenue base of $0) and WFMI is the only company to figure this out (which, in my history in finacial and capital markets and business opportunities in America, has never happened before) or the market doesn't really have that much opportunity, which allows WFMI to generate excess returns (which they have done at times) only to some point. … It is my ongoing intention to challenge your position about WFMI at every turn when I believe that you are misleading people."

On the future demand for organics:

"Organic food a passing fad? If so, it's a 30+ year fad now."

Commenting on a new Whole Foods line:

"Their new 365 Organic label has great packaging and great products in my personal experience. Their salad dressings which you criticize I particularly like. Have you had the 365 Organic Miso dressing? It's my personal favorite."

On the possibility of a buyout, in March 2002:

"Would WFMI ever sell out to another company? Probably not as long as Mackey is running the company. The company seems pretty committed to being independent."

In August 2001, some insight into the changing market:

"The way I see it the aging of the baby boomers and their quest for health and longevity will fuel Whole Foods' growth for many years to come. I don't see their growth slowing down until the end of this decade. My buy and hold strategy is going to continue to pay off for me on Whole Foods for many more years to come. Join me — you won't be sorry."

And, the same month, a look at Wild Oats:

"I knew OATS was going to eventually crash (and I made quite a bit of money shorting them) because I know their stores, understood their strategy, and knew that Whole Foods would crush them in head to head competition which is exactly what has happened. So a tsunami may hit Whole Foods Market some day again. So what?!"

On the trouble with food co-ops, in July 2000:

"Given a choice between the drab dinginess of most food co-ops and a beautiful, well-stocked Whole Foods Market, most people desert the co-op in droves."

On his insights into Whole Foods, in March 2000:

"I'm pretty sure that I understand WFMI far better than you do and that is why I'm so confident in my attacks on your "facts" and arguments. Let us keep this dialogue going over the next couple of years and we will see who is right about WFMI and who is wrong. Let us together discover who knows more about WFMI — you or me."

Rahodeb on His Identity

Claming to be George W. Bush, denying he's John Mackey, in January 2004:

"I've stated my identity on this board before, but no one apparently believed me. I am George W. Bush and a long-time customer of Whole Foods Market. I own quite a bit of stock in the company and have owned it since the IPO back in 1992. … At the end of the day it doesn't matter what my non-screen identity really is or what yours is or who anyone else's is on this board.

"dcc7 [the screen name of another member of the forum] has claimed that my true identity is John Mackey. You can believe that one or not. Doesn't matter to me. If I really am Mackey, then I'm the ultimate insider at Whole Foods and you would be well served to pay attention to what I have to say on this board. If you don't believe I'm Mackey (admittedly the idea seems pretty far fetched) then you should still pay attention to what I have to say on this board if my ideas and arguments make sense. If they don't make sense or you disagree with me — well that's what bulletin boards like this are all about."

April 25, 2006:

"I am a smartass. So what."

February 2003:

"Just saying I was wealthy on this board triggered angry and envious responses. So many people are stuck in a zero-sum paradigm of the world."

On his admiration for Mr. Mackey and his own philosophies:

"I don't think of myself as a "New Ager." Where I live I will keep private. While I'm not a "Mackey groupie", I do admire what the man has accomplished — building a $1.6 billion business from scratch is quite an achievement. What have you accomplished in comparison, whtmewrry99?"

On being anonymous, in January 2002:

"Half the fun of bulletin boards is the anonymity of them. I love being able to assume another identity and express my opinions and beliefs without being put into various stereotyped categories by others, which would likely occur without anonymity."

On his politics, in March 2003:

"I am neither 'kneejerk' or a 'conservative.' My positions are very well thought out. They are based on years of life experience, encyclopedic reading, and clear, honest thinking. Conservative? Hardly. I'm more a revolutionary than anything else. My political views fall into the category of 'Independent' with a strong tilt towards 'Libertarianism.' Teach me to dance? That is very sweet of you. Thank you, but my life is pretty full right now."

In June 2003, on not being John Mackey:

"Another person who thinks my name is John (Mackey)! Well if you really believe I'm John Mackey you should probably pay more attention to what I say on this Board. I would be the ultimate Whole Foods Insider!"

Rahodeb on World Events

Commenting on President Bush's 2004 re-election, Nov. 3, 2004:

"3.5 million popular vote victory, over 51% of the total vote, and when it is all said and done — 286 electoral votes to Kerry's 252.

"The anger and hatred of Bush by the Left has not produced victory but rather defeat. Combined with additional seats in the Senate and the House, the defeat of Tom Daschle in South Dakota, and a majority of State Governorships (plus future Bush nominees to the Supreme Court) means that the Democratic Party continues to lose support and power in America. Time for the Democrats to accept reality, regroup, move away from the Michael Moore's and other Leftist extremists in their Party and move back towards the center. If they do, then they might begin to win more elections and eventually regain majority status. If they don't — well the Republicans will dominate political power in America for decades to come."

On a book called "The Skeptical Environmentalist" by Bjorn Lomborg, in October 2004:

"Well, 'The Skeptical Environmentalist' was pretty convincing to me and I've read very widely about the environment for many years. Lomborg has challenged the current environmental paradigm of doom and gloom. Anyone who authoritatively challenges consensus beliefs is going to be viciously attacked by people who see the world differently. People don't like to change their beliefs and prefer to dismiss and attack opinions that differ from their own.

"I recommend your reading Lomborg's own defense of the critical attacks on his personal website. Again I find his defense intellectually compelling."

On equal opportunity, in March 2003:

Equality of opportunity sounds good in theory but is impossible to actually practice in the world and maintain liberty. Why? How do you create equality of opportunity genetically? Some people simply have greater genetic potential. I will never be as beautiful as Christy Turlington, as smart as Albert Einstein, or as good a basketball player as Michael Jordan. Neither will I ever be as rich as Bill Gates (no matter how well my Whole Foods stock does!).

Rahodeb on John Mackey

Criticizing Mackey for the company's weak investments outside of retail, in October 2000:

"Everything Whole Foods has done outside of retail hasn't worked."

And again in November 2000:

"Despite WFMI's ineptness in investing in businesses outside its core retail expertise, the company continues to open great new stores with high sales, produces strong comp sales growth for stores over 12 months in age, and continues to grow core retail earnings at a 20%+ clip."

On Mr. Mackey's personality and message:

"Mackey's message seems to be that Whole Foods is going to run its business for the benefit of its customers, employees, and its long-term investors—not to please the Street or sell-side analysts. Based upon the strong rise in the stock the message has been well received by the Market, if not by the sell-side analysts.

"I like the message. Why should Whole Foods worry about inflation when they can't do anything about it? They shouldn't and they don't."

On a June 2004 New York Times Magazine piece about Mr. Mackey:

"Overall I thought the article was good. However, I'm more enthusiastic about Whole Foods than the journalist was. It seems hard for him to believe that a business can be both profit seeking and socially responsible at the same time."

Commenting on Mr. Mackey's sense of style, in April 2000:

"I like Mackey's haircut. I think he looks cute! If his hair bothers you now you should have seen what it looked like 10 years ago! The guy was/is clearly into alternative lifestyles and is one of Paul Ray's Cultural Creatives I outlined in my 2 posts to Hedge.

"You must not patronize any of WFMI's stores. Tatoos, piercings, unusual dress, and interesting haircuts are everywhere in the stores. In comparison, Mackey looks like a model for Brooks Brothers!"

In July 2000, on Mr. Mackey's future at Gaiam.com:

"I doubt Mackey will stay heavily involved with Gaiam.com. I expect his CEO role is more transitional and titular. Jirka Rysavy is running that company."

On Mr. Mackey's business sense, in November 2005:

"I think Mackey is in the John Maynard Keynes school of logic: 'When the facts change madame, I change my opinions. What do you do?'"

Rahodeb on Whole Foods vs. Wal-Mart

Why the two are so different, in March 2006:

"Most of Whole Foods core customers don't like Wal-Mart. Why not? Too big. Too dirty. Too ugly. Bad service. Lack of knowledge about the products. Underpaid employees resulting in high part-time ratio of unenthusiastic and poorly trained employees. Bad record on social responsibility.

"Wal-Mart, like all retailers, isn't unbeatable. They don't appeal to everyone. They emphasize every day low prices and sacrifice other important values to achieve low prices—quality, selection, service, store ambience and beauty. These sacrificed values are important to Whole Foods core customers. Price isn't the only thing that matters to Whole Foods core customers—perhaps to you, but not to them.

"Wal-Mart is going to ultimately increase the supply of organic foods which will lower the prices of organic foods over the long-term. This increased supply will benefit Whole Foods by helping to lower their prices and therefore increase their sales.

"Wal-Mart will help educate customers to the value of organic foods. As people become better informed about the value of organic foods more and more of them will migrate to Whole Foods for the higher quality, better selection, better service, and better store ambience and experience that Whole Foods provides.

"Wal-Mart is going to help Whole Foods more than it hurts them."

source: 13jul2007