Teachable Moment: Whole Foods Wants to Sell to Poor People

The fact that Whole Foods wants to expand their market into poorer neighborhoods like Englewood in Chicago should tell you something about how businesses work.

whole foods

There are statements made in this marvelous story in the Washington Post’s Wonkblog that make me uneasy. The shameful presence of food stamps is one thing. I also don’t like the fact that an area with an Aldi in it got labeled a “food desert.” That seems like a snobbish designation more than an identification of a real problem. I also wonder what kind of “incentives” the city gave to Whole Foods. Are taxpayers who work at Aldi being forced to subsidize their competition? I hope not.

But, even with such uneasy worries, this is still an amazing story that shows the lie of how Leftists view capitalism (the real kind, not crony) and the markets. Whole Foods is desperate to sell to middle and lower classes.

As an inner-city outlier for the company, even the Detroit store does not quite approximate Englewood. But it was the first test of a larger plan for the company, within which Englewood represents the next move. Whole Foods has 402 stores. But it’s aiming for 1,200, an impossible number if the company targets only the high-income markets it’s already entered. Whole Foods also can’t get to 1,200 stores by only talking about the quality of food without addressing the price of it.

Let that sink in. Whole Foods has moved to an inner-city neighborhood in Detroit and is now doing something different but similar in the Englewood neighborhood in Chicago. And why are they doing it? To make money. And how are they going to do it if they succeed? By lowering their prices.

Lower prices are how businesses grow and expand.

Thus, selling exclusively to the rich is a self-limiting business model. You will run out of customers and out of growth if you don’t expand your market beyond the wealthy.

That’s why we should all be suspicious that (to name one example) there was political and regulatory interference in the healthcare industry long before Obamcare made it much worse. Normal business life drives prices downward as much as possible. When that doesn’t happen we need to scrutinize the role that government is playing in the industry.

But even so, Whole Foods will have to sell products that are more expensive than those at Aldi. They make demands on their producers (cage-free chickens etc) that drive up costs. So how can they hope to compete?

The answers can be called salesmanship, or teaching, or propaganda, or recruitment. But the bottom line is that Whole Foods believes that it is selling more nutritious, healthier food, that will result in healthier people. So they tell them what they believe and try to change their values and priorities with new information.

Whole Foods is planning to use Washburne [a local culinary school] and its vast classroom kitchens to hold classes — in cooking, nutrition, and shopping on a budget — it plans to start a year out from the store’s opening.

This, too, will be a delicate exercise (Whole Foods teaches people how to shop at Whole Foods!). But it’s quite likely the store won’t succeed if all it does is open its doors with no outreach. Education without access won’t do anyone any good — if you learn how to cook an eggplant but can’t buy one. The inverse is true, too.

So while Michelle Obama tries to force students to eat food they don’t like (and that isn’t really healthier, just less satisfying), this corporation will only succeed if it truly changes hearts and minds.

Is this a process that deserves to be derided as “driven by greed” with a sneer as if it has no social value? Should we all be taught to assume that Whole Foods and other companies are out to hurt us so that our only salvation is found in politicians who are willing to regulate and run them?

The most telling feature in all this is that Whole Foods believes that lower income people are just as capable of running their own lives and providing for themselves as their wealthier customers. They know that they can afford to shop in their stores.

“Price point was the Number One, the earliest, the strongest and the longest-lasting argument,” he [a local pastor] says of wary residents. “And when you started contextualizing what price point meant in comparison to a $450 hair weave, or $120 sneakers, or $60 for a fifth of alcohol, then price point is not as strong of an argument as it initially was.”

(Sixty bucks for a fifth? Really? Is that a Chicago “sin tax” thing?)

So even when you are poor, that doesn’t typically mean you can’t afford anything. It means you can’t afford as much. So it comes down to priorities. Once you come to believe that spending on other items is wrecking you or your family’s health, you can afford more than you realized.

Whole Foods has faith in lower income people as potential customers. I doubt you will ever catch a CEO of a real business laughing about the “stupidity” of voters/customers, like Jonathan Gruber did.