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Whole Foods' £35m loss as supermarket falls into red
Jonathan Prynn, Consumer Business Editor03.08.09
Its ethical claims may be immaculately green, but the recession has left organic superstore Whole Foods Market languishing ever deeper in the red.
The Kensington emporium, which opened in the former Barkers department store in June 2007, lost an astonishing £35.9million last year, latest accounts have revealed.
It means that its US owners, Whole Foods Market Inc, have already had to write-off close to £50million in their attempt to build an organic bridge-head in London. Two years on from the much-heralded opening there are still no signs of a second large Whole Foods in London. Although the giant three-storey store has proved popular with tourists and celebrities such as Jenson Button, KT Tunstall and Lulu, bosses now admit they made a string of crucial errors in their bid to take on Waitrose and Marks & Spencer.
At 80,000 sq ft they concede that the site in Kensington High Street is too large, according to industry sources.
They also badly underestimated how much British shoppers depend on their cars when they do a big weekly shop. There is no on-site parking at Whole Foods - only an expensive NCP car park nearby.
"They've learned a lot and they are determined that with the next store they are going to get it right," said the source. Other errors include an underused fresh fish counter, which has now been massively reduced in size.
Initially the American owners tried to manage the store from across the Atlantic but have now parachuted in the former North Atlantic region head Jeff Turnas to sort out the losses.
Mr Turnas has already made a series of bold changes to attract more shoppers, including a "wellness centre" and a regular cooking school event.
He has also won long-term backing for the Kensington store from Whole Foods founder John Mackey, despite the scale of the losses, and a commitment to open new branches in London.
The timing of the opening was also unfortunate as it coincided with the start of the credit crisis and the end of Britain's love affair with expensive organic food.
Bryan Roberts, research director at analysts Planet Retail, said: "One of their main problems is the lack of scale within the UK. They are having to import lots of private label stuff from the US to exploit their buying power over there. They are still looking for opportunities but one might have expected them to have been in Westfield or Stratford. If you're worried about your job or are feeling skint then paying over the odds for very attractive produce is just not going to be top of your priorities."
The accounts, which cover the year from 1 October 2007 to 28 September 2008 show that Whole Foods, including its small satellite stores in Camden, Clapham, Soho and Stoke Newington, had a turnover of £48.8million.
In a statement to the Standard, Whole Foods said much of the loss was the result of a £27.1million accounting charge reflecting the lower value of the Kensington flagship.
It said: "The £27.1million impairment charge is simply an accounting measure that does not accurately reflect the progress the company has started to see in the UK. With the current downturn in the global economy, the company evaluated its tangible fixed assets for impairment in accordance with Financial Reporting Standard No11. Over the past year Whole Foods Market has continued to make business decisions that rededicate itself to the UK. To prove its commitment to becoming the leading natural and organic grocer in the UK, Whole Foods Market has taken significant steps to ensure its long-term future. Firstly, it has relocated senior leadership from the US to the UK.
"Whole Foods Market has been making changes and improvements to the Kensington store, and we have been pleased with the positive reactions we have been receiving. We plan to continue to make these types of changes as well as continue to aggressively look for additional store sites in London."
It's good quality, but too expensive for a regular shop during the recession'
Christine Joubert, 40
French teacher, lives in Gloucester Road
“I don't shop here regularly, I probably come about two to three times a month. I like to buy some things here — especially when I have guests.
“The men on the cheese counter really know their products. The fish, cheese and bread here is the best in the area.
“I'm French. I couldn't find la bavette (a cut of beef) anywhere until I came to Whole Foods.”
Conall Macniocaill, 40
University lecturer from Oxford
“They're obviously trying to do the right thing in terms of where they source their food. From an ethical point of view, I guess they're doing the right thing.
“Whole Foods is a good idea and I think it's good that people at least have an interest in where their food's from.
“But I'm not surprised they've lost money, as most people are watching their savings and outgoings at the moment.”
Annette Albert, 62
Community blog founder, lives in West Kensington
“I like it. I like the fruit in particular because it's fresh, but I do find it expensive so I'm careful what I shop for here.
“I buy their special offers on meat and I buy my fruit, veg and bread here. It stands out from other shops because their veg is fresh and local and it's stored in chilled vans. The ethical angle doesn't bother me, but I like the layout of the shop. It's accessible for me because I've got mobility problems.”
Jim Morrall, 23
Marketing and sales for Kashmir carpet company, lives in Brick Lane
“Whole Foods is all right. I used to live in New York and it doesn't translate that well over here.
“If you go to Tesco or M&S you get really good quality food for less. I'm only shopping at Whole Foods today because it's on petty cash from work.
“It's expensive, especially during recession.
“I walked here because I work around the corner. I suppose parking could be a problem.”
Lindsey Bass, 20
Drama student at Goldsmiths college, lives in Lewisham
“I only shop here if I'm in Kensington High Street anyway, but I like the stuff they sell, even if it is a bit expensive.
“It's good quality and it's laid out well, but too expensive for a regular shop. People want to shop at cheaper places at the moment.
“If I lived closer and it was cheaper I'd come here more often. I got the Tube, but if I drove I wouldn't shop here as it takes time and it's difficult to park.”
Reader views (9)
This store is just ridiculous !! First we have the announcement that they have lost £50.00 MM since opening then we have their CE saying he sells junk food.. God talk about a Ratner !
Was there last week when Security came rushing out stopping a group of three, Microphones headsets etc accused them of leaving without paying. Produced their receipts Oh ok sorry !! They did not leave it like that. Marched in to find the person who accused them and were rightly p....off. Can you imagine the cost of all these Security Guards who patrol the store not to mention the back ups with Cameras etc as if it was Graf jewellery.
Their weekly bill must amount to a heck of a lot of potatoes...doesnt make sense...the whole place does not make sense. Its empty all week. Spoke to member of staff who told me they wanted to lose £50.MM as they could recoup on tax loss ! never heard of a business setting out to make a loss of that amount !
- Cameron, london
The organic food market is dead in the water, and will go into further decline as it has all been built up on hype. It is not an economically viable means of producing enough food for the 60 million inhabitants of this country and its environmental credentials and dietary benefits are questionable. Planet Organic London has marooned itself miles from its home base in this declining organic sector. There is no hope, it will sink without trace.
- C Jones, UK
There does not seem to be enough organic or health foods to fill there shelves at the huge Kensington Whole Foods, so lots of the food is not organic or natural or even healthy. There is a proper health food shop, Luscious Organic, down the road and there I can get everything I need without walking for miles, giving me the time to relax with a fresh juice and a healthy meal. Its even cheaper.
I also resent the way organic and non organic foods are mixed up in Whole Foods in a way that is confusing. Put all the organic food in one place or just go to Luscious Organic where everything is organic and healthy.
- G Brown, London
They are not local. They are not small. They are not independent. They are not what UK consumers who have a full understanding of green issues and new economics want.
And ethical? No, just more good marketing. How can it be ethical to throw away over £40,000 worth of food in the first two weeks of opening just to make your stupid, useless, over-sized store look good?
- Dominic, London, innit
What this article doesn't mention is the huge amounts of money that are paid to the American leadership teams to keep them in the UK. This includes a living-away-from-home-allowance, rent and bills.
There are UK employees within the company who successfully managed a good turnover at stores which have since been closed down to develop this money eating beast.
It was a clear case of the american leadership thinking they knew the uk market better. They did not listen.
I am neither american or english so this response comes from a neutral country base....but I *do* know the runnings of that business inside-out.
- Tabi, London
Having spent a lifetime in the fresh produce industry at both wholesale and retail levels, I could hardly believe my eyes and saw how high they were stacking produce.
Tomatoes for example were in layers 8 or 10 high with other fruit such as peaches and nectarines given the same treatment.
It was an interesting store with many excellent commodities on offer, but my goodness, the wastage levelsmust be sky high.
- Scotty, Cambridge UK
The revelation that their health benefits rationale for existence was a crock couldn't have had anything to do with this, could it? Paying more for no benefit? Even the "organic fashionistas" would question such expenditure in today's more fiscally aware world.
- Rogan, Irving
What do you expect with such ludicrous prices.No need to send executives from head office-cut the costs and be realistic.
- Guy, london
"Bosses now admit they made a string of crucial errors in their bid to take on Waitrose and Marks & Spencer."
The error is more basic than the ones listed. The US is where Europeans turn to for their technology: Microsoft, Apple, Google, NASA; and entertainment: Hollywood, Disney. But not for good food: McDonalds, Coca Cola, Starbucks, genetic modification, obesity. A proposition so internally contradictory has no chance of succeeding this side of the Atlantic, whatever parking or other changes the owners make.
- David C, London
