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Whole Foods founder on future of retail

TAMPA, FL -- When he opened the first Whole Foods store 40 years ago in Austin, TX, John Mackey said organic produce was almost non-existent and the little that might have been available was unsubstantiated, as suppliers were prone to passing off conventional product as organic.amc

How things have changed.

Sales of organic fruits and vegetables were just under $5 billion in 2017 and continue to trend upward, as millenials are placing more value in what they perceive as healthier produce options, with an eye toward social responsibility and environmental stewardship, and more baby boomers are looking to improve their health.

Mackey, who is now co-chief executive officer of Whole Foods following Amazon's acquisition of the chain last year, gave a wide-ranging interview about supermarkets and produce retailing during the keynote luncheon March 3, here, at the Southeast Produce Council's Southern Exposure.

Responding to questions posed by Alison Kosik, a business and general assignments correspondent for CNN, Mackey first addressed questions about organic produce supplies and whether the industry would be able to keep up with demand.

"Organic produce is demand-based, so if consumers want it, farmers will grow it," he said.

Asked by Kosik if organic produce is recession-proof in the eyes of consumers, Mackey said, "Good question. I think core organic consumers will not change their buying habits because the economy is down, but marginal customers will likely cut back if the economy is not good."

He added that there are essentially 330 million consumers in the United States and all have different preferences. Some prefer organic, some look toward products that are sustainable and others gravitate toward locally grown items.

"Honestly, most couldn't care less about organic, sustainable or local and are simply looking for the cheapest price," he said. "But those that do have a preference are passionate about it. So at Whole Foods, we are held to a higher standard than our competitors."

Touching on the acquisition by Amazon, which promised lower prices, Mackey said, "The merger is going great despite what you might be hearing. We love Amazon. The people there are super smart and take the long view of things. Whole Foods has bought 25 companies through the years, so I know a thing or two about mergers and acquisitions, and I will say that this one is going very well.

"We will become more price-competitive in time, but it is more expensive to grow organic," he added. "You don't get the same productivity as you do when growing conventional. The gap will never be eliminated completely, though it has closed since the beginning."

Kosik then asked about Whole Foods' treatment of its employees, specifically about the higher wage scale than other supermarket retailers.

"We traditionally pay our associates more than our competitors," said Mackey. "As a result, we have low turnover rates and we are consistently ranked as one of the best places to work. We don't want to be like everyone else, we want to stand on our own. We have people that love us and people that hate us. We are not for everybody."

Mackey then addressed the rising popularity of delivery services and their potential effect on traditional retailers.

"The truth is, no one knows," he said. "Google started 20 years ago and since then business has changed in ways we could never have imagined. We (Whole Foods and Amazon) are trying to reinvent the entire grocery experience. Eventually, any food you want will be available any time you want it through some means. It's about what consumers want and consumers want different things. The industry will evolve to achieve that."

Asked by Kosik what keeps him up at night, Mackey said, "When Whole Foods was a public company, there was a lot of strife with activist board members. I sleep a lot better now. If anything keeps me up, it's probably red wine."

Mackey said that unlike many corporations today, Whole Foods doesn't feel the need to take a political position to demonstrate social responsibility. Instead, it has three main foundations that are at the core of its philosophy: Whole Planet, Whole Kids and Whole Cities.

The Whole Planet Foundation is a private nonprofit dedicated to poverty alleviation and empowering the world's poorest people with microcredit in places where Whole Foods sources product.

The Whole Kids Foundation is a charitable organization that looks to provide children with access to healthy food choices to support childhood health and wellness and end childhood obesity.

The Whole Cities Foundation seeks to improve individual and community health through collaborative partnerships, education and broader access to nutritious food in the communities it serves.

"It really comes down to the fact that we should practice generosity and compassion," said Mackey.

Mackey said that to increase produce sales, the industry needs to get behind the science of why produce is so healthy.

"Produce is by far the healthiest food in the world," he said. "The health crisis in the United States basically comes down to not eating enough fresh produce. The industry needs to wrap itself in the science of what makes produce so healthy. It's the real McCoy, and you need to do a better job of telling that story."

Finally, in closing, Kosik asked Mackey to predict what a supermarket will look like 20 years from now.

"It will be much different, but it has not been invented yet," he said. "The way technology is moving, people will be able to get whatever they want whenever they want at a price they are willing to pay."