Whole Foods' CEO shares company's future under Amazon


Amazon's (NASDAQ: AMZN)purchase of Whole Foods (NASDAQ: WFM) started the way so many marriages do. "How did we meet?" said John Mackey, CEO and founder of the grocery chain. "It was actually mutual friends who set us up on a blind date. [Whole Foods executives] Jason Buechel and Ken Meyer and David Lannon and I flew up to Seattle a little over six weeks ago. And I, we just fell in love. It was truly love at first sight," Mackey said on Friday, according to a transcript.

The Whole Foods CEO, who will keep his position after the deal closes, made those remarks in a "town hall" meeting with employees where he tried to share his enthusiasm for the deal and assuage employee fears. He explained that things came together quickly, with the agreement being announced less than six weeks after the first casual discussion. Mackey tried to make it clear that this is not a marriage of convenience, but a logical long-term opportunity for his company.

"This is not a Tinder relationship," he said, according to a transcript of the meeting filed with the SEC. "I am, like, super excited. And so I also wanna reassure you that we're keeping our corporate headquarters here in Austin. We're not gonna be moving out to Seattle."

RELATED: Get them while you still can! Here are the best things to buy at Whole Foods

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Best things to buy at Whole Foods
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Best things to buy at Whole Foods

Freshly baked bread 

Photo: Getty

365 Everyday Value Greek Yogurt

Photo: Getty

Speciality cheeses

Photo: Getty

Oats, grains and beans in the DIY bulk section

Photo: Getty

Frozen foods, i.e. pizza and turkey burgers 

Photo: Getty

Alternative milk products

Photo credit: Getty

Frozen berries

Photo: Shutterstock

Raisins and dry fruit in the DIY bulk section

Photo: Getty

Spices in the DIY bulk section 

Photo: Getty

365 Everyday Value Olive Oil

Photo: Getty

Freshly baked goods from the bakery section 

Photo: Shutterstock

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Change is coming

Mackey said the sale of the company will bring changes and opportunities. He repeatedly referred to plans he could not talk about until the deal closes, but he did share some specifics.

"I can't say there's not gonna ever be any changes," he said. "Because you already know we're evolving. We are, we've sent out, publicly, we're doing category management... We're gonna take $300 million out of our cost structure."

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To help make that happen, Whole Foods has hired Boston Consulting Group to analyze how it spends money. The goal of that project, according to Mackey, is helping the company lower its costs while also improving its service to customers.

"We do think our partnership with Amazon is gonna help us do that more skillfully and, hopefully, faster," he added.

Amazon can resist investor pressure

Public companies often struggle with balancing a need to hit quarterly numbers with building for longer-term success. That's something Amazon has seemingly not been bothered by, with the company being willing to have a "bad" quarter or even a few if it was in the best interest of the company's long-term thinking.

"They have had the courage that almost no other public company has had the courage to, basically, resist the drumbeat of short-term, quarterly earnings that have had us trapped here for a couple of years, as our same-store sales came down," Mackey said.

Quality stays

Mackey made it very clear that he believes Amazon's ability to innovate can help Whole Foods do much more than keep costs down. He also tried to reassure his employees that saving money would not mean compromising what the brand has represented since its launch.

"Whole Foods Market's quality standards are not gonna change," he said. "We've got a lot invested in our brand. And these guys are really smart people. They're not stupid enough to go change that." He also said the two companies could create formats not labelled with the Whole Foods name.

See how prices at Whole Foods currently compare to competitor Trader Joe's:

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Prices at Whole Foods vs. Trader Joe's
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Prices at Whole Foods vs. Trader Joe's

Red peppers

Trader Joe's: $0.99 each 

Whole Foods: $3.99 per pound

One medium-sized red bell pepper weighed nearly one pound, so peppers were far more expensive at Whole Foods. 

Organic avocados

Trader Joe's: $2.29 each 

Whole Foods: $2.79 each 

Organic strawberries

Trader Joe's: $5.99 for 16 ounces

Whole Foods: $5.99 for 16 ounces

Strawberries were expensive across the board.

Green seedless grapes

Trader Joe's: $3.99 for 20 ounces, or $3.19 for one pound

Whole Foods: $2.99 for one pound (on sale from $3.99 per pound)

Organic bananas

Trader Joe's: $0.29 each

Whole Foods: $0.99 per pound

Three medium-sized bananas weighed around a pound, so this was a close call.

Multigrain bread

Trader Joe's: $2.99 for 24 ounces

Whole Foods: $3.49 for 24 ounces

Buying two loaves of bread at Whole Foods would have brought the cost down to a comparable $3 per loaf. 

White bread

Trader Joe's: $2.69 for 24 ounces

Whole Foods: $3.49 for 24 ounces

There was a big difference, though the white bread at Whole Foods was organic.

Ground beef

Trader Joe's: $4.99 per pound

Whole Foods: $9.99 per pound

Again, the cheapest option at Whole Foods was organic. 

Ground turkey

Trader Joe's: $3.99 per pound

Whole Foods: $7.99 per pound

Uncured sliced bacon

Trader Joe's: $5.49 for 12 ounces

Whole Foods: $4.99 for 12 ounces

Whole Foods is the winner here and there was a good selection on sale. 

Organic white potatoes

Trader Joe's: $1.oo per pound

Whole Foods: $1.20 per pound

Organic white tortilla chips

Trader Joe's: $2.69 for 16 ounces

Whole Foods: $2.99 for 16 ounces

Vanilla ice cream

Trader Joe's: $3.99 for 32 fluid ounces

Whole Foods: $4.99 for 32 fluid ounces (organic)

Trader Joe's ice cream was cheaper but the 365 version at Whole Foods was organic. 

Parmesan 

Trader Joe's: $5.38 for one pound

Whole Foods: $12.77 for one pound

Organic mayonnaise

Trader Joe's: $3.69 for 16 ounces

Whole Foods: $3.69 for 16 ounces

A dead heat!

Extra virgin olive oil

Trader Joe's: $6.99 for 33.8 fluid ounces

Whole Foods: $9.99 for 33.8 fluid ounces

Organic marinara sauce

Trader Joe's: $2.49 for 25 ounces

Whole Foods: $2.99 for 25 ounces

Organic spaghetti

Trader Joe's: $1.29 for 16 ounces

Whole Foods: $1.49 for 16 ounces

Chili flakes

Trader Joe's: $1.99 for 1.3 ounces

Whole Foods: $3.99 for 0.99 ounces

Dried basil

Trader Joe's: $1.99 for 0.3 ounces

Whole Foods: $2.99 for 0.53 ounces

Organic crunchy peanut butter

Trader Joe's: $3.49 for 16 ounces

Whole Foods: $3.99 for 16 ounces

Organic milk

Trader Joe's: $3.49 for a half gallon

Whole Foods: $2.39 for a half gallon

The milk at Trader Joe's is organic.

Organic plain yogurt

Trader Joe's: $3.99 for 32 ounces

Whole Foods: $3.39 for 32 ounces

Whoa! A great deal on organic plain yogurt at Whole Foods. 

Frozen peas

Trader Joe's: $1.29 for 16 ounces

Whole Foods: $1.39 for 16 ounces

Almond Breeze almond milk

Trader Joe's: $1.99 for 32.8 ounces

Whole Foods: $2.19 for 32.8 ounces

Both stores stock Almond Breeze almond milk, we did a direct comparison of the product: Trader Joe's was $0.20 cheaper.

Hummus

Trader Joe's: $1.99 for 8 ounces

Whole Foods: $2.19 for 8 ounces

Eggs

Trader Joe's: $2.69 for a dozen cage-free large eggs

Whole Foods: $4.39 for a dozen organic large eggs

Note that Whole Foods' eggs are organic and Trader Joe's are cage free. 

Rolled oats

Trader Joe's: $3.99 for 32 ounces, or $2.00 per pound

Whole Foods: $3.19 for 18 ounces, or $2.84 per pound

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A one-company vision

Mackey said he did not know if Amazon had plans to install someone on his executive leadership team, but he sees a merging of talent.

"In a good marriage, you know, we want Amazon people to be here," he said. "And we want Whole Foods people to be at Amazon. Because at the end of the day, we're all Amazon people."

The best intentions

Most marriages begin hopefully. That early optimism, however, eventually gets replaced by reality. Every relationship has problems and it's how you handle those that determine whether things work out in the long term.

Amazon and Whole Foods appear to be a good match and Mackey seems to be going into the deal understanding that it means change for him as well as his brand. That seems to give the deal a better chance for success than most.

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John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Daniel Kline has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Whole Foods Market. The Motley Fool has a disclosure policy.

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