John Mackey: Not Your Average Grocer

Can you find virtue in a grocery store? John Mackey, the CEO and founder of Whole Foods Market, is convinced you can.

As correspondent Dan Rather reports, his 184 stores are seen as more than supermarkets — they're hailed as shrines to food that is good for you.

At a time when 60 percent of Americans are overweight, Mackey has tapped into a growing obsession with the old adage you are what you eat. Organic food has become one of the fastest growing parts of the food industry — two thirds of Americans bought organic last year. And as one of its top sellers, Mackey is raking in billions of dollars and discovering that not everyone thinks he's an angel.

All this from a man who dropped out of college — six times — searching, as he puts it, for the meaning of life.

Asked if he ever imagined that he would become a big man on campus in corporate America, Mackey says laughing, "That would be no!"

At the age of 52, John Mackey has become that big man on campus in corporate America, running a Fortune 500 company.

Yet, in one of the most competitive industries, Mackey's unorthodox approach has transformed Whole Foods Market into a business worth about $9 billion. In the last five years alone, the company's stock has grown faster than such powerhouses as eBay, Yahoo and Microsoft. And he has done it by creating a supermarket unlike any other.

"Shopping for groceries for most people is like a chore," says Mackey. "It's like doing the laundry or taking out the garbage. And we strive to make shopping engaging, fun and interactive."

And so, at Whole Foods, chefs can be seen in the aisles whipping up sautéed broccoli with garlic, while customers dine at a sushi bar. There are 600 kinds of cheese, 1,800 wines and six in-store eateries. In one corner of the Austin, Texas, store Rather visited with Mackey, customers could chose from 10 different peanut butters that they can grind themselves. And you can dip anything you want in a chocolate fountain.

All of this decadence comes with an unlikely flourish: it's supposed to be good for you. Virtually all of the food has no artificial preservatives, coloring, sweeteners or trans fats. But not everything is healthy. Mackey's stores sell beer and ice cream.

"'We're not holy foods,' what do you mean by that?" Rather asked, citing one of Mackey's quotes.

"There's always going to be people that don't think you go far enough," Mackey says. "We have certain standards the food has to meet. But then it's up to the customers to make those choices."

"Well, you've been quoted as saying, 'We don't think you'll go to hell if you don't shop at Whole Foods,' " Rather remarks.

"I hope not," Mackey replies.

Still, Mackey is about to take his standards to a whole new level. Appalled by the way animals are often treated at factory farms, he has come up with animal compassion standards. For an added price, shoppers can soon buy beef from cattle that were treated humanely, grazing on grass outdoors, and lobsters whose tanks were kept at the most comfortable temperature.

"In the end, what difference does it make whether you have a happy lobster or not? If the lobster's gonna be eventually dropped into boiling water, he's gonna be a dead lobster and it doesn't much matter," Rather says.

"Oh, Dan, are you gonna die someday?" Mackey replies. "Does the quality of your life not matter then? Since you're gonna eventually die? Get dropped in your own pot? At the end of the day, the quality of life is all we have, and it's just as important to that lobster, the quality of life that it lives — even if it's not as long — as the quality of your life."

"Bound to people who say this animal compassion standards business is a little beyond the pale," Rather says.

"I mean, I say they're entitled to their own opinions," Mackey says. "They should do what they think is right, and I'll do what I think is right."

That approach has infused his business — no matter how unorthodox. He lets his workers vote on whom to hire on their team, share in the profits and know what everyone else is being paid. They spend little on advertising, but give workers at each store $125,000 to spend on ideas to bring in new customers. In the Austin store, someone suggested an ice skating rink on the roof.

"When I would travel around and talk to the team members, they're always asking me, 'You know, John can we have this? Can we have that? What about this? Can we do this?' And I didn't wanna be daddy anymore. And that's kind of how they were, 'Daddy, daddy, daddy. Can we have this? Can we have that?' And I realized, why don't we let them decide for themselves what we'll have?" says Mackey.

But despite all his talk about empowering workers, the one thing he doesn't have in his stores is unions. He's quick to argue that his workers are among the highest paid in the industry and almost 90 percent have full benefits. There's also a salary cap on executives, so Mackey, who's worth at least $30 million, made $430,000 last year. And Mackey insists his company is more socially responsible than most. Whole Foods donates 5 percent of profits to local charities and recently made the largest purchase by a fortune 500 company of wind energy credits to offset the power in its stores.

Mackey acknowledges he's also committed to making a profit and delivering for stockholders but he doesn't see a contradiction.

"Not at all," he says. "The more profit we make, the more stores we can open, the more donations we can make to our community, the more responsible citizens we can be for the environment. It's all interactive. It's all connected together. There's no separation."

Asked what he would say to someone who assumes that, in the end, Mackey is only about the bottom line and making a buck, Mackey says, "I say that he's talking more about himself than he is about me. How does he know who I am? He's wrong. That's not what I'm all about."

What Mackey's all about has its roots in a conventional upbringing in Houston. But he was out to do things his own way from an early age. When his coach cut him from his high school basketball team, he persuaded his parents to send him to another school so he could play.

"They actually moved. We had to move to another place, in order for me to play," he says. "I will say that after basketball season was over, they moved back," he adds, laughing.

After he dropped out of college against his parents wishes, he and his then-girlfriend opened a health food store in Austin called "Safer Way." Determined to merge with a competitor, he soon showed what kind of businessman he could be.

"I'm told that you said to that competitor, 'Either you arrange to join forces with us, or we'll drive you out of business.' True or untrue?" Rather asks.

"Partially true," Mackey admits. "Well, because it's only half true. They were a competitor but they were friends of mine. So I didn't go up there and threaten them and say, 'Join with us. We're gonna drive you out of business.' I went up there and said, 'We gonna open a 10,000-square-foot store about a mile from here. Wouldn't it be a lot more fun to join forces together? Rather than compete? When our store's gonna be four times bigger than yours?' And they saw the logic of that argument."

Mackey admits he has a lot of drive and is a fierce competitor.

And so in 1980, Whole Foods was born. Over 25 years, he gradually expanded the business by acquiring smaller health food stores and tapping into a burgeoning movement that advocated food grown organically on small, local farms without chemicals or pesticides polluting the environment. Some think all that virtue can come at a steep price — the store's earned the nickname "whole paycheck."

But not everything is expensive. There's a substantial selection of competitively priced food. You still pay the usual premium for organic, which Mackey argues costs more to grow.

What does Mackey say to someone who argues that poor people can't afford this food?

"To me, you make a tradeoff," he says. "It might be a little bit more expensive. But you're getting a better tasting, higher quality food that's going to be better for your health and better for the environment."

That kind of marketing has attracted an almost cult following of millions of urban professionals and suburbanites. Now, with 184 stores across the country and soon expanding to Europe, Mackey has had to change the way he does business.

Carol Ann Sayle at Boggy Creek Farm in Austin started selling produce to Whole Foods 15 years ago. She picks 17 heads of lettuce, washes them in a sink, packs the lettuce in the car and delivers it immediately to the local Whole Foods.

Mackey says the company deals with farms of all different sizes, from very small farms to some pretty big ones, noting that there are now some big organic farms.

And, so, while most of us imagine organic to mean small, family run farms like the five-acre Boggy Creek Farm — where lettuce is handpicked — larger farms are the growing reality. Whole Foods also counts on large industrialized organic farms such as the 26,000-acre Earthbound Farm, based in California, where they process 17,000 pounds of lettuce every hour. It still has to be organic, which means they can't use pesticides or synthetic fertilizers. The leaves are pre-washed on conveyor belts, swept into salad spinners the size of washing machines, and packaged on automated assembly lines. Each week, Earthbound ships 22 million servings of salad in refrigerated trucks to stores across the country.

Some of that goes to Whole Foods, which now has regional distribution centers, bake houses, seafood processing facilities, a coffee roasting operation and field buyers who travel the world. And some of the natural food companies that supply Whole Foods are actually owned by such giants as General Mills, Kraft and Coca Cola.

Some critics have said Mackey "sold out," starting with organic food but having gone too corporate. Asked what his reaction to that is, Mackey says: "The first time I heard Whole Foods was getting too corporate, when we opened our second store back in 1982. As a company changes and evolves, some people are gonna always remember the good old days as being better."

Mackey insists he's made no tradeoffs as his business has grown. "America has a romance with small businesses. And it has mistrust of the large businesses," he says. "Whole Foods is out to prove that wrong. I don't see any inherent reason why corporations cannot be just as caring and responsible as small business."

Like his company, Mackey seems to try to strike a balance between a billion-dollar business and the good old days. He took five months off to hike the Appalachian trail, practices yoga and meditates on his ranch where he follows his own kind of animal compassion.

"Chickens are … they're beautiful animals. If you spend some time with chickens, you'll come to admire them. They have their social patterns. They're really interesting," Mackey says.

"There are gonna be people who say 'I'm not sure he's not a little wacky.' Do you get that from people sometimes?" Rather asks.

"You know, I've heard that a good part of my life," Mackey says, laughing. "But I found the more successful I've become, now I'm being interviewed by 60 Minutes.
Produced By Kyra Darnton