Center for Ethical Organizational Cultures

Auburn University

employees and the community.

responsibly and search for innovative solutions to improve its environmental footprint. The

business. However, despite Whole Foods’ significant accomplishments in business ethics, it has

Next, its mission and values are examined, followed by a look at how the company strives to live

out its values to become a good corporate citizen. We also consider ethical issues Whole Foods

has faced to demonstrate the complexity companies may experience when engaging in ethical

decision making. Finally, we examine some recent challenges Whole Foods is facing as

competition in the healthy food industry continues to increase.

This material was developed by Callie Kyzar, Kelsey Reddick, Casey Caldwell, Erica Lee Turner, Julian Mathias, and Jennifer

Sawayda under the direction of O.C. Ferrell and Linda Ferrell © 2022. This case is intended for classroom discussion rather than

to illustrate effective or ineffective handling of administrative, ethical, or legal decisions by management. All sources for this

case were obtained through publicly available material.

In 1978, two entrepreneurs in their twenties used a $45,000 loan to open a small natural foods

store in Austin, Texas. John Mackey and his then-girlfriend Rene Lawson Hardy wanted to help

people live better. At the time, there were fewer than a dozen natural foods markets in the nation.

The couple named their business SaferWay as a spoof on Safeway. The entrepreneurs had a

rocky start. At one time they used the store as a residence after being kicked out of their

apartment for storing food products. After two years, Mackey and Hardy agreed to merge

SaferWay with Clarksville Natural Grocery, owned by Craig Weller and Mark Skiles. The newly

merged company called itself Whole Foods Market.

flood hit Austin, wiping out the store’s inventory. With no insurance and $400,000 in damages,

the company’s future looked dire. Yet with the help of the community, the store reopened four

weeks after the flood. In 1984, the company expanded into Houston and Dallas. Four years later,

it acquired a store in New Orleans, followed by one in Palo Alto, California, a year later. The

company continued to grow during the 1990s as Whole Foods merged with more than a dozen

smaller natural groceries across the nation. Whole Foods continued to thrive in the early twenty-

products.

its 365 Everyday Value. Its 365 Everyday Value private brand is targeted toward customers who

has adopted a stakeholder orientation to guide its activities. This approach, along with a strong

reputation as a firm committed toward benefiting stakeholders.

MISSION STATEMENT AND CORE VALUES

Whole Foods’ mission is to “nourish people and the planet” by setting the standard for food

retailer excellence and quality. Whole Foods’ core values, described in Table 1, are an outreach

of its mission statement. Whereas the mission statement provides a general direction, Whole

Foods’s values give additional details about how it is turning its mission into a reality. Their

of Interdependence to emphasize how interdependent the company is upon its stakeholders.

TABLE 1 Whole Foods Market’s Core Values

We sell the highest quality natural and organic foods

We satisfy and delight our customers

We promote team member growth and happiness

toward selling the highest quality natural and organic products available as attempts to be buying

agents for customers and not selling agents for manufacturers. Next, Whole Foods turns its

employees creates wealth for shareholders. Communities, the environment, and suppliers are

Whole Foods’s core values that the company strives toward a stakeholder orientation as part of

We satisfy and delight our customers

We practice win win partnerships with our suppliers-

acting as a responsible corporate citizen by benefitting society. This vision turned Whole Foods

into one of the most successful organic grocers in the world. The following section delves further

into how Whole Foods meets the needs of its customers, employees, communities, and the

Whole Foods actively uses Facebook, Twitter, and Instagram accounts to post information on

sales, highlight seasonal product offerings, answer customer concerns, share food preparation

tips, and provide recipes. The company also takes advantage of YouTube to feature 365 by

Whole Foods Market products, give viewers an inside look at the grocery store’s supply chain,

and share information about the Whole Planet Foundation—Whole Foods’s nonprofit arm.

Additionally, the company made its website user friendly with the ability to browse products,

view weekly sales, find a store, and ordering online—from in-store pickup to catering.

consumers become more health-conscious and the trend toward natural and organic food

continues, Whole Foods is well suited to attract this demographic. To reassure consumers its

instance, more than 100 ingredients, such as hydrogenated fats and high-fructose corn syrup, are

banned from Whole Foods. Additionally, all wild-caught seafood carried at the grocery chain is

certified or rated for sustainability while its farmed seafood products are third-party verified has

labeled, the United States required no such labeling for products containing GMOs. However,

was no law requiring it. While the U.S. Department of Agriculture now has disclosure standards

for bioengineered foods, Whole Foods suppliers are also held to additional labeling

modified products from all parts of the supply chain. Although GMO labeling might dissuade

customers from purchasing a particular product, it also gives Whole Foods a competitive

advantage because customers can trust the company to be truthful.

If customers are the highest priority stakeholder at Whole Foods, then employees come as a close

second. At a time when executive pay has been highly criticized in proportion to employee

company foundations. He said he “no longer wanted to work for money, but simply for the joy of

the work itself.”

eligible team members in the United States can convert unused paid time off hours into pay.

As Whole Foods demonstrates with its values, consumers and employees are not the only

stakeholders the firm recognizes as important. Its fourth value includes creating wealth through

profits and growth, which is essential for any organization to survive. The more profit Whole

Foods is able to generate, the better financial return for Whole Foods stockholders and investors.

Whole Foods believes meeting the needs of consumers and employees translates into more

wealth for its investors. Such a stakeholder orientation recognizes the interconnectedness of all

the companies’ stakeholders. Whole Foods demonstrates that a company can succeed with a

socially responsible focus on organic foods and quality standards.

best emphasized through its Whole Planet Foundation established in October 2005. The

countries wanting to start their own small businesses. The company’s first grant in 2006 helped

develop a microfinance program in Costa Rica. Consumers and employees interested in donating

can do so on the foundation’s website. Over the years the foundation has authorized more than

food. Company partnerships include the Salad Bar Grant that provided funds to increase the

healthy and organic foods, Whole Foods has been able to link its philanthropic endeavors to its

value of supporting stakeholder health through healthy eating education.

standards, particularly from organic farmers who engage in sustainable agriculture. To qualify as

local, food products must have traveled less than seven hours by car or truck to the store. Every

one of Whole Foods’s regions has guidelines about how to use the term “local” in their stores,

and some stores have chosen to adopt stricter criteria for local products by lessening the travel

time. Whole Foods believes that sourcing locally grown produce embodies its values of giving

back to the community, contributing to sustainability, and offering consumers a variety of high-

quality product choices. For instance, because there is less of a need to package and transport

products for long distances, local farmers can make more money, which they in turn can use to

stimulate local economies. Additionally, Whole Foods states that support for local farmers

encourages them to diversify, which increases Whole Foods’ product selection and contributes to

biodiversity in the environment. Transporting products shorter distances also reduces the

greenhouse gas emissions released from vehicles. These win-win relationships with farmers help

groups to decide criteria for sourcing its meat products. Many companies pay little attention to

are not necessarily required for the company’s survival. However, Whole Foods realized that

collaborating with special interest groups would not only secure their support but also provide an

ranks produce based on whether pesticides were used by the farmer. A “best” label indicates that

a number of pesticides designated by Whole Foods were not used in the produce cultivation

process. These ranking systems reiterate Whole Foods’ concern for the environment as well as

consumer choice.

Last but not least, Whole Foods is strongly committed to the environment. We have already seen

Whole Foods remains popular among Millennials, it has lost customers from the Baby Boomer

and Gen X generations. It is estimated that within an 18-month period, Whole Foods lost 9–14

million customers to its competitors. Ironically, one reason why Whole Foods has struggled is

close in proximity to each other, leading different stores to compete for the same customers

strategy. For instance, while Whole Foods have long been located in affluent neighborhoods,

the company announced plans to open in more far-flung locations, focusing on areas covered by

some of its standard fare, many say the price cuts have been insufficient. Even if the company

achieves widespread low prices, this strategy is more likely to be a temporary Band-Aid to

Whole Foods’s struggles. Lowering prices too much is likely to compromise the perception of

quality that differentiates Whole Foods and makes it beloved by its loyal customers. Whole

Foods must carefully balance pricing its products more competitively while maintaining the

high-quality image of its products.

Whole Foods previously operated under a regional buying system, where different stores had

different products depending upon the location. Also, regionally Whole Foods touted its sourcing

from local farms. This type of strategy is expensive, and centralizing operations cuts down on

costs. Again, Whole Foods faces a delicate balancing act as centralizing operations too much

could compromise the unique community feel of individual stores. Many were disappointed that

One investor commented on Whole Foods’s ability to create strong emotional connections with

retailers. As a result, many customers are fiercely loyal to Whole Foods. Whole Foods’

customer orientation will be the key in any effort to revitalize the company.

Whole Foods strives to be a profitable company while also maintaining an ethical standpoint

when making decisions related to its customers, employees, and all affected stakeholders. Whole

Foods has demonstrated its commitment toward selling organic food, satisfying customers, and

incorporating quality and sustainability into its products. Whole Foods evaluates all of the

products it sells so it can more effectively educate customers about what they are buying and if it

meets certain quality standards. The company has continually demonstrated its commitment to

the environment and making a beneficial impact within each community it operates in by

demonstrates the difficulties of merging two culturally different companies. Whole Foods must

continue to leverage its strong customer connections—a core strength that other grocery stores

lack—and its stakeholder orientation to overcome the ethical and competitive obstacles it faces.