Ethan Hirshberg has organics in his blood. The son of Stonyfield Yogurt founder Gary Hirshberg, in 2016 he launched Ethan's, a drinking vinegar company. By the end of that year, he had his first sit-down with Whole Foods. In August, Whole Foods took his shots--in flavors like turmeric-apple and ginger-pineapple--national.
Like many smaller vendors, Hirshberg is dismayed by some of the changes rolled out--clumsily, some agree--after the retailer's acquisition by Amazon. Among the most controversial: the centralization of merchandising, for which vendors selling more than $300,000 through the chain must pay Whole Foods 3 percent to 5 percent of cost of goods delivered, depending on the category. Previously, vendors hired brokers to ensure their brand put its best face forward on the retailer's shelves. Smaller businesses also fret about the pre-acquisition move to centralized buying, which they fear favors larger competitors. (Whole Foods declined to comment for this story.)
On Monday, Whole Foods will convene a vendor summit meant to clarify changes and ease tensions, according to news reports. Given the vocal reactions of many, Whole Foods's supply-chain relations have been characterized in the press as vendors brandishing torches and pitchforks at a wounded organic monster. Certainly there has been anger and confusion.
But it is worth noting there remains considerable good will among vendors for the natural foods chain. Hirshberg worries the shift of merchandising in-house will raise his costs and, potentially, hurt service. He is also unsure whether Whole Foods can execute on its promises. Still, he appreciates what the company does for him, including an unusual semi-national launch of new flavors at 50 percent of stores.
"They are still the leaders in innovation and have shown a capacity to be attentive and flexible with a small national vendor like Ethan's," he says.
The day I got into Whole Foods.
It is difficult to overstate the importance of Whole Foods to a generation of natural food and product startups. In the early 1990s, the retailer was instrumental in transforming a sleepy industry comprising dreary mom-and-pops into a $50-plus billion colossus incorporating eye-pleasing design and head-spinning variety. It also emerged as an essential bridge to the mass market. Ask an organic food entrepreneur about the watershed moment when she knew her business would succeed. More often than not she'll respond: the day I got into Whole Foods.
So for some, the anger over procedural and economic changes is amplified by fear of cultural change. Wendy Strgar, founder of the feminine products company Good Clean Love, says she already detects disregard for sellers--a frequent complaint about Amazon--in her dealings with the natural foods retailer. "I think Whole Foods is not going to be Whole Foods the way we used to think about it," she says.
But others retain faith in a company that has stood by them for decades. Douglas Tomek launched Uncle Dougie's barbecue sauce and marinade business in 1989 out of his farmhouse in Palatine, Illinois. Two years later he met Whole Foods then co-CEO Walter Robb at a fancy food show in San Francisco. ("At that time, fancy food was pretty much hemp," says Tomek.) Robb tasted the sauce, loved the sauce and--after Uncle Dougie passed Whole Foods' rigorous quality tests--Tomek was in. "They just grew and grew and grew, and whenever a store would open the manager would call and we would direct ship," says Tomek.
Tomek believes increased business and improvements driven by the acquisition--about which he is hugely enthusiastic--will eclipse any additional costs or hassles. "Amazon is another customer-service oriented company. And it is geared toward younger people, which is how things should be going in this industry," he says. "My gut feeling is it is a beautiful thing going on."
'Taken aback' by the support.
Lisa Curtis, CEO of Kuli Kuli Foods, might not go so far as that. But "if this really enables them to fully execute promotions then--as a national brand--to us it is worth it," says Curtis, who began making products from the moringa plant while in the Peace Corps. (A Whole Foods employee spotted Kuli Kuli at a farmer's market and directed Curtis toward the retailer's forager program, which scouts local startups.) The same goes for demos, on which Curtis relies and for which she must now pay Whole Foods. If that fee means she can rest easy that there is product on the shelf, a table set up, and all flows smoothly, then she is on board.
There have been some recent bumps. Curtis says Whole Foods delayed--with little communication and at substantial cost to her--the debut of an exclusive new line of smoothies co-developed with the retailer. After meeting with her new buyer, the situation was resolved and the two companies are discussing an additional collaboration. On the whole, Curtis says, "I have been taken aback by the level of support that we are still getting. I thought a lot of that would be gone in the Amazon era. My hope and my sense is that brands like us will still be valued."
Natasha Case speaks fondly about the Whole Foods debut of her super-premium ice cream brand Coolhaus, after graduating from food trucks. "I literally just wandered into our local Glendale store and asked the guy who was stocking the freezer what it would take to get into the store," says Case. Whole Foods helped her with manufacturing, packaging, flavors, and price points. It also created, for free, placards with the founders' photo and story and plastered them on freezers in its Southern Pacific stores.
Case worries about additional costs and the possibility that "bigger brands can totally out-knuckle the smaller ones with dollars instead of with a product that customers want the most." But she is cautiously optimistic. "People complained about how things were decentralized when Whole Foods was the way it was," she says. "Now they are complaining it is going to be overly centralized. You just have to do the best you can as a brand to keep up and really embrace the change."
Still a food-trends bellwether.
Some vendors have found Whole Foods more supportive and innovative since the acquisition. Back to the Roots, which makes organic indoor gardening kits, is collaborating with the chain to create a new indoor gardening section in the stores. A regional buyer in the Northeast spearheaded the retail launch of the small company's single-serving cereals, after seeing them offered in the New York City Public Schools. And in Seattle, the Back to the Roots and Whole Foods are working on a cook-off event with the local school district and celebrity chef Ayesha Curry. (Back to the Roots is also a successful Amazon vendor, appearing on the company's home page earlier this month.)
"This idea that it is going to become a conventional grocery store--the way in which folks are trying to paint it--I think is missing a lot of information," says co-founder Alejandro Velez. "They are forgetting the 20-plus years of the history of Whole Foods. What made them successful, and what made Amazon really excited about them, is the fact that they find trends before anybody does."
And Whole Foods remains a bridge to mass retailers. The chain's product criteria are so rigorous that buyers from other companies view acceptance there as a badge of quality. The pack also looks to Whole Foods for merchandising trends. "In the eight months since we launched, I have sat in maybe 10 natural-channel chain meetings," says Hirshberg. "And they have all asked what Whole Foods is doing with us."
Hirshberg expects under the new regime startups may have a smaller window in which to test and tweak their products before they have to prove themselves or be cut. "But is it a place where a young, innovative company with a market-ready product can have big success without a huge brand or money behind it?" he asks. "I would say yes."
Correction: An earlier version of this story misstated the Coolhaus co-founder's first name. It is Natasha Case.