WFMI’s Resigning President Peter Roy Still Bullish on Industry

AUSTIN, TX—After 24 years in the natural foods business, the last 10 years spent at the nation’s largest natural foods retailer, Whole Foods Market (WFMI), Peter Roy is taking a break.

Roy doesn’t say he’s retiring. But after five years he is resigning from his post as president of WFMI. In an exclusive interview with Natural Business, Roy offers his thoughts about the direction of the natural products industry, the pressures of being a highly visible executive in the industry and about his own future.

Natural Business: After your tenure in this industry, what’s your take on its growth prospects?

Roy: I’m still very bullish on the natural products industry. I think the fundamental trends that have been driving this industry over the last decade are still solidly in place, but I also think there will continue to be emotional swings in the industry’s relationship with the investment community.

The fact is the baby boomers want what we have. As they continue to age, have more and more disposable income, and health becomes more and more of a concern, I think [as a consequence] the outlook for the natural products industry continues to be very strong.

NB: What about WFMI’s growth?

Roy: Whole Foods is going to continue to have very solid growth. There are still a lot of cities—even secondary cities—in the U.S. that Whole Foods could be very successful in and where we now have no presence. I also think the advent of on-line shopping is going to really broaden the reach of the company.

A lot of Whole Foods’ growth in the future is going to come from opening these doors, as opposed to acquiring other companies. There are just not that many more companies out there.

NB: Does that mean WFMI plans to continue its aggressive new-store development?

Roy: Yes.

NB: You just mentioned on-line retailing. How does the Internet fit into WFMI’s

strategy?

Roy: There are a couple of key components that make on-line selling really work. First, more and more of our culture is becoming on-line proficient and willing, even preferring, to do some shopping on-line. There are certain key products and categories at Whole Foods that I think lend themselves pretty well to on-line shopping. Obviously, nutritional supplements. Also, nutraceuticals. And I think coffees and teas are perfect on-line shopping opportunities. I also think gift giving is going to move into the on-line world. Second, there is a huge population of people interested in natural and organic foods that live in small and rural areas and likely are never going to have local access to natural products because the population densities are not there.

NB: What about other distribution channels? How do you see WFMI and the industry at large fitting in with the mass merchants, drugstores and grocery stores that have come up to speed on natural products?

Roy: It’s inevitable that the mass market is going to be procuring more and more of these products. I really don’t believe, however—certainly not from a Whole Foods’ perspective— that this is a major concern. I think that it’s going to help expand the market as much as it is going to make it more competitive. Increased competition is just a reality at this point; it’s not going away.

NB: WFMI Chairman John Mackey estimates that the natural products marketplace is about 10% of the total conventional foods marketplace. Do you agree?

Roy: Right now, yes, 10% probably looks realistic. Maybe five years from now that number looks like 12% to 13%.

NB: How will the increased channels of distribution affect the value of public companies in the industry, including WFMI?

Roy: It’s going to create an updraft for companies that are well managed and delivering consistent results.

NB: Does it put pressure on the president of a publicly traded company when its stock is down?

Roy: It certainly affects more than just the president. We have 3,500 people in the company who are shareholders. The unfortunate reality is that the stock price does have an impact on morale. Part of being a public company is managing expectations and delivering on those expectations. That’s just the nature of the beast.

NB: What do you believe is WFMI’s greatest challenge going forward?

Roy: Just like any other fast-growing company, Whole Foods’ challenge is going to be finding and maintaining people to staff the stores who really want to make natural and organic foods their life’s work. Many of us got started in the ’70s and ’80s. Then you had people with masters degrees and Ph.D.s giving up their careers to come to work in natural foods because they believed in it. That’s not happening anymore. We’re having to draw from the same retail applicant pool that many other retailers are, and it’s becoming increasingly difficult to attract the volume and the quality of people we need to operate these stores at all levels.

NB: Does it concern you that at present there are no dominant branded natural foods on the shelves?

Roy: With my Whole Foods’ hat on, no, it doesn’t concern me. I would argue that Whole Foods has developed a brand. The Whole Foods brand is the most powerful brand we have. It has been a key strategy of ours that has worked very well and will serve the company very well in the future. On the other hand, one of the positives about consolidation on the manufacturing front is getting these companies to a scale where they can really start doing some consumer brand-building. It is not Whole Foods’ intent to be a private-label house.

NB: Over the course of your career, what’s been the most significant change in this industry?

Roy: Without a doubt it is the influence of all the public money. It used to be that the largest challenge we faced in the ’80s was how to raise money. Everybody knew there were more opportunities to expand, but to get financing to build one store required people to put up their houses as collateral.

NB: What were your greatest accomplishments at Whole Foods?

Roy: When I took the president’s job five years ago, there were some very specific things I communicated to the board that I would do. The first was to create a national purchasing program. I’ve felt very successful in that. I also said I could create a very strong private-label program, and clearly that has happened. I committed to improve the company’s internal and external communications, specifically with the investment community. That’s brought a lot of credibility to Whole Foods. I’m proud of that. The last thing I committed to do was to significantly improve the quality of Whole Foods’ perishables. I think a lot of what I said I was going to do has been done, which is why I feel I am at a place where I am ready to move on.

NB: As president of WFMI, do you have any final words for the investment community?

Roy: Yes. This is a huge growth industry and it’s going to continue to be because the fundamental trends driving this industry are not going away. The industry is going to show a very strong performance over the next few decades.

NB: Any parting words for the natural foods industry? Do you see it still as a community?

Roy: I do see it as a community. It’s just like any community, as it grows you don’t end up being connected to everyone. What I think is critically important is to keep the core values that founded this industry alive—even in the midst of the tremendous growth and investment in the industry, and with a number of people entering the industry who haven’t shared those values.

NB: You’ve said you’re leaving Whole Foods for personal reasons. Can you talk about them, and about your future plans?

Roy: I got to a point where I questioned whether it was worth it anymore and what success really means. I don’t want to be the richest guy in the cemetery. There are other things that are very important to me, and they have come to the foreground for me in the last year.

I’m not sure what’s going to be next. I’m going to serve on some company boards and get involved in some other things that I’m very interested in. I really believe this is a positive change in the long term for Whole Foods. A transition in leadership is inevitable, and it’s important for a lot of team members at Whole Foods to recognize that what is special about the company is larger than any one person.

What has been most interesting to me about this whole process is the reaction I’ve gotten from people outside the company. They’re asking the same questions about their own careers. I feel good about that. If I’m helping people examine what is really important to them, that is a good thing.