The Whole Foods Rebellion | Vision Quest | 1

Summary

Business Wars: The Whole Foods Rebellion | Vision Quest | Episode 1 Summary

Release Date: April 16, 2025
Host: David Brown
Produced by Wondery

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Introduction: Setting the Stage

In the inaugural episode of the "Whole Foods Rebellion" series, Business Wars delves into the tumultuous journey of Whole Foods Market. Hosted by David Brown, the episode paints a vivid picture of the company's origins, challenges, and the internal conflicts that shaped its trajectory. Through engaging storytelling and dramatized reenactments, listeners are taken back to the early 1980s in Austin, Texas, where a group of idealistic entrepreneurs embarked on a mission to transform the American food landscape.

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Founding Whole Foods: Vision and Challenges

The story begins in May 1981 with John Mackey, a 27-year-old visionary, and his girlfriend Renee Lawson navigating the precarious waters of their fledgling business. Their first store, Whole Foods Market, distinguishes itself by exclusively offering organic products, a novel concept at the time. However, the store's location in a flood zone proves disastrous when a once-in-a-century flood hits Austin.

Notable Quote:

"It'll be okay. We built that flood wall, remember? We're good. Unless it's a once in a hundred year flood." – John Mackey [01:17]

Despite Mackey's optimism, the flood causes extensive damage, leaving the business with significant financial strain. The episode highlights the precarious balance between ambition and financial reality that young businesses often face.

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The Crisis and Unexpected Savior

In the aftermath of the flood, the team is confronted with $400,000 in damages, a sum far beyond their salvaged $100,000. Without flood insurance, their options are bleak. Mackey's desperate plea for a bank loan at First City National Bank introduces Mark Monroe, a seemingly indifferent bank representative who ultimately becomes a pivotal figure in Whole Foods' survival.

Notable Quote:

"I'm going to get it. What you're saying is making no sense to me." – Mark Monroe [18:55]

Unknown to the founders, Monroe personally guarantees the loan, ensuring the store can reopen. This act of faith remains undisclosed to the team, emphasizing the importance of unsung heroes in business success.

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Expansion and Internal Conflict

With the store back in operation, Mackey's entrepreneurial spirit drives him to expand rapidly. He envisions Whole Foods as a dominant player in the organic food market, aiming to transcend its hippie roots and appeal to a broader audience. This ambition leads to the acquisition and merger with Clarksville Natural Grocery, rebranding the combined entity as Whole Foods Market in September 1980.

However, rapid expansion introduces friction between Mackey and co-founder Mark Skiles. While Mackey advocates for aggressive growth and visionary projects like the Wildflower Cafe, Skiles emphasizes consolidation and financial stability. This clash of philosophies culminates in Skiles selling his stake, leaving Mackey with predominant control.

Notable Quote:

"You're screwing this business up. Mackey's hackles rise." – Mark Skiles [28:43]

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Securing Venture Capital and Scaling the Business

By 1986, Whole Foods has grown to four stores and is eyeing the lucrative San Francisco Bay Area. Recognizing the need for substantial capital to fuel expansion, Mackey turns to venture capitalists—despite warnings of their short-term focus on profits. Successfully securing $4.5 million from Oak Investment Partners and Texas firms, Mackey oversees the opening of the Palo Alto store and introduces private label products to bolster profits and brand loyalty.

However, the venture capitalists' influence introduces new challenges, including the untimely death of a proposed president from a heart attack, leading Mackey and his father to contemplate an Initial Public Offering (IPO). The episode ends on a cliffhanger, with Mackey facing resistance from the board regarding the IPO strategy, setting the stage for future conflicts and developments.

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Key Themes and Insights

1. Idealism vs. Pragmatism: Mackey's unwavering commitment to organic, natural foods often pits him against more conservative business strategies, highlighting the tension between staying true to one's vision and achieving financial stability.

2. The Role of Mentors and Allies: Figures like Mark Monroe play crucial roles in supporting entrepreneurs, sometimes without seeking recognition, underscoring the importance of trust and belief in business relationships.

3. Navigating Growth: Whole Foods' rapid expansion illustrates the challenges startups face when scaling, including maintaining company culture, managing finances, and aligning leadership visions.

4. Venture Capital Dynamics: The episode sheds light on the double-edged sword of venture capital, providing necessary funds for growth while introducing external pressures and potential loss of control.

Notable Quotes:

"It's only been a few weeks. It's a marathon, not a race." – John Mackey [28:38]

"You don't know if ordinary people are going to embrace natural foods..." – Mark Skiles [15:30]

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Conclusion and Looking Ahead

Episode 1 of "The Whole Foods Rebellion" masterfully sets up the narrative of Whole Foods Market's rise amidst internal and external challenges. As the company stands on the brink of an IPO, listeners are left anticipating how Mackey will navigate the pressures of growth, venture capital influences, and the sustaining of his original vision. The episode promises an intriguing exploration of the delicate balance between passion and profit in the competitive business landscape.

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Credits and Acknowledgments

This episode was crafted using insights from "The Whole Story" by John Mackey. Special thanks to Tristan Donovan of Yellowant for writing, Marino Watson for research, Kyle Randall for sound design, Gabrielle Drollet for fact-checking, Chloe Elmore for voice acting, and the entire production team for their dedication and expertise.

Transcript

[David Brown]

Wondery plus subscribers can binge all episodes of Business Wars, Price wars, the Fall.

[Mark Monroe]

Of Dollar Stores early and ad free right now.

[David Brown]

Join Wondery in the Wondery app or on Apple Podcasts. Austin, Texas May 1981 hey Mackey, it's for you. John Mackey puts down the playing cards in his hand and stands up. He's 27 years old with shaggy hair and a beard, and on this rainy evening, he's relaxing at a friend's house. He strolls over to the phone in the hallway. Outside, the storm's getting worse. Rain pounds the windows. Mackey reaches the phone.

[John Mackey]

It's John.

[David Brown]

He hears his girlfriend, Renee Lawson, on the line.

[Renee Lawson]

John, I'm at the store. The creek's rising fast. Should we be worried?

[David Brown]

The store is Whole Foods Market. Mackey, Lawson and two friends opened it last year. It's a supermarket, but it's unique because unlike every other supermarket in Austin, it mainly stocks organic food. It's also located in a flood zone. Mackey tries to reassure Lawson.

[John Mackey]

It'll be okay. We built that flood wall, remember? We're good. Unless it's a once in a hundred year flood.

[Renee Lawson]

And if it is, it won't be.

[John Mackey]

What are the chances? Our first year in business and a once in every hundred years flood happens? No. No way. If it gets worse, call me.

[David Brown]

Thirty minutes later, Downtown Austin Mackey drives slowly through the waterlogged streets. Outside. It's dark across the city. The power's out and the down getting worse. He stops near Whole Foods at Lamar Intent and steps out into the storm. He raises an arm to shield his face from the rain and pushes through the water towards the store, flashlight in hand.

[John Mackey]

Renee? Renee.

[David Brown]

The flashlight beam catches the figure of a woman ahead. Mackey hurries towards her. It's Lawson and she's soaked from head to toe.

[John Mackey]

Are you okay?

[Renee Lawson]

Yeah. But the store. The flood just smashed through the windows. I had to swim out.

[David Brown]

Mackey hugs her but then pulls back, his eyes widening. The money, the income from Whole Foods weekend sales, is still in the back office. Around $100,000. The floods just ruined the store and everything in it. If Whole Foods is going to survive this, it needs that cash. Mackey dives into the water and swims into the store through a broken window. Inside, apples and oranges bob in the water. He swims on past the submerged bakery counter and to the back office. To his relief, most of the money is still above water. He grabs a grocery bag and stuffs fistfuls of dollars into it. With the money collected, he turns to leave. But when he reaches the office door, he notices a shadow move in the darkness. The shadow turns to him. Hey, buddy, Anything good back there? Mackey tightens his grip on the bag of cash. It's a looter. Mackie shakes his head.

[John Mackey]

No. Nothing here.

[David Brown]

Without a word, the looter vanishes into the dark. Mackey hugs the wet bag of cash. Close. The morning after, Mackey and the rest of the Whole Foods team survey the aftermath. The store is a shambles. Everything's covered in stinky sludge because the sewers overflowed. The windows are broken, shelves damaged, the freezer's beyond repair. They estimate they've suffered $400,000 worth of damage. The cash Mackey rescued from the flood won't be anywhere near enough to get them back in business. One employee tries to look on the bright side as they pick their way through the chaos. At least the insurance will cover it. Mackey hangs his head. To save money, he didn't buy flood insurance. Now everything's ruined. Whole Foods seems doomed, sunk before it can even open a second store. And it will need a miracle to save it from oblivion. You know, managing your workforce can be exhausting. Are you tired of a costly and lengthy hiring process? Well, you can simplify and speed up your recruitment with one connection the experts at Express Employment Professionals reduce time to hire, cut down on interviews and lower your recruitment costs. Just visit expresspros.com today. Express is more efficient than hiring on your own. Check out ExpressPros.com to see how Express Employment Professionals can take care of your hiring.

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[David Brown]

From Wondery I'm David Brown and this is Business Wars. This season we'll tell the story of Whole Foods Market. And for me, well, it's personal. See, I live in Austin, the hometown of this trend setting supermarket chain. And Whole Foods story mirrors that of the city. You know, Austin used to be a medium sized government town where the tallest building was a university tower. Then it became a trippy place where hippies and rednecks joined hands over rounds of nachos And a love of outlaw country music. Today, flashy buildings fill the skyline and locals joke that the official bird is the construction crane. Whole Foods came out of Austin's hippie redneck era, and it too took pride in being anti corporate and outside the mainstream. But like the city itself, Whole Foods has morphed over the years. It's now a multi billion dollar brand. Depending on the ang you're looking at it from, that change could be for the better or for the worse. Maybe this is a happy tale of business success or how an idealistic founder made good on his dream of changing American food culture. Equally, it's a story of what gets lost on the way to the top. At its heart, Whole Food Story is about the conflict between success, ambition and idealism. Lofty goals often wilt in the harsh light of financial reality. What defines success never stops changing, and sometimes ambition threatens that success. But before we get started, I should let you know that both Wondery and Whole Foods are part of Amazon, but are run independently of each other. And with that out of the way, let's get on with the story, shall we? This is episode one, Vision Quest. It's 1977 and Austin's a quirky hippie outpost in the Lone Star State. True, hippies are already a bit retro. Flower power and psychedelia peaked in San Francisco a decade before, but the youth movement still persists here. Long haired folks wearing flared jeans and tie dye shirts are a dye a dozen. Some even live in communes where they share the chores and their possessions. And in one such commune lives John Mackey. He's 24 years old with wild curly hair and a beard to match. He's vegetarian, unapologetically drops acid, reads the Lord of the Rings and is partial to new age mysticism, all of which mom and pop don't get. They live in straight laced Houston and hoped Mackey would turn out well, just like them. Maybe he'd become an attorney, a banker, or even an accountant like his dad. Instead he's a low paid assistant in a natural food store. You know, the kind of place that smells like a hamster cage and lets customers scoop nuts, beans and seeds straight out of the barrels. One evening, Mackey returns to the commune and tells his girlfriend Renee Lawson that he's had a light bulb moment. Running a natural food store seems simple enough so they should open one. Lawson likes the idea. It could also have a vegetarian cafe. That'd be groovy. She suggests naming the store Safer Way. It's a play on the supermarket chain Safeway Mackey likes it too. He thinks people would be healthier if they ate an organic vegetarian diet. To him, the name's not a joke. It's a promise that eating the food they sell is the Safer way. But they need money to start a business. So Mackey walks to the highway and hitchhikes his way to Houston to see his parents. Once there, he asks dad for $10,000 to start safer Way. His dad is skeptical. He doesn't think there's much of a business in selling granola to broke hippies. But this is the first time Mackey's shown any initiative since he quit college. So his dad puts up some of the money, as do some of Mackey and Lawson's friends. Armed with a startup fund of $45,000, Mackey and Lawson rent a cheap Victorian house and start renovating it. Her cafe will be upstairs, his natural food store downstairs. But then a man in a suit appears at the door. He's from city government and wants to see their permit.

[Mark Monroe]

They don't have one.

[David Brown]

The man tells them they have to stop. They need a building permit to finish their renovations. So Mackey goes to the government office to ask for such a permit, only to be told it'll take months to get one. He protests. They're already paying rent. They need the permit now or they'll run out of cash before Saferway opens. The city official shrugs. That's just how long it takes. Mackey thinks it's all over. But then his landlord points out that city officials clock out after 5pm if they renovate at night, they won't notice you've ignored the order to stop work. So Mackey and Lawson go covert. They work at night to finish the store. Then, with that permit still pending, they open for business. Eventually the permit gets approved, but by then they've got bigger worries. Running a store is fun, but it's also hard. They're working 80 hour weeks. They're too busy to keep up with their chores at the commune. So they move into the store. And since there's no shower, they use the hose from the cafe's dishwasher. Despite the frugal living and long hours, the business struggles. The food store makes thin profits. The cafe loses money. Mackey and Lawson start arguing. They realize they can't keep on living like this. Mackey concludes the problem is Safer Way's too small and niche. They buy too little food to get the best prices from suppliers, so their profit margins are too small. But they don't sell enough volume to turn those small margins into decent profits. That's the thing. And their customer base is limited to the hip. What they need to do is open a large organic supermarket instead. Now, in 1980, this is crazy talk. Few people are interested in organic food and few farmers produce it. It's doubtful they could even stock a whole supermarket with organic produce, let alone attract enough customers to buy it. But see, Mackey is a believer. He has faith that chemical free food will break out of its hippie silo and go mainstream. And he wants his organic supermarket to spread the word by appealing to more than hippies. He wants to get ordinary folks shopping there. And that's why it'll also sell meat. The decision to stock meat is a big one, Mackey. And most Safer way customers are vegetarians. Some of his hippie pals think selling meat is selling out. But Mackey sees it as pragmatic. If his supermarket's going to get more people eating natural foods, well, he has to sell food people want to eat. And most folks eat meat. As it happens, Mackey's willingness to dilute his ideals is right on trend for 1980. The last vestiges of tie dye culture are about to give way to Ronald Reagan's America. Hippies are morphing into yuppies, young urban professionals who wear power suits and drive BMWs. The new age idealism of the 70s is making way for a new culture of business and ambition. But to open his supermarket, Mackey needs new premises and money to pay staff and buy stock. Time to visit dad again. It's 1980, and Mackey's back at his parents home in Houston. In the family kitchen, he's trying to convince his father to invest in his organic supermarket.

[John Mackey]

Safer Way is getting more customers. It started to make a small profit.

[David Brown]

That's because you're only paying yourselves $200 a month. Mackey feels discouraged. But then he remembers Lawson's pep talk. She told him to just be himself and believe. So he takes a deep breath and makes the ask.

[John Mackey]

Dad, we need money to open a bigger store.

[David Brown]

What?

[John Mackey]

Chemical free foods are going mainstream. There's already similar supermarkets elsewhere. Mrs. Gooch's in Los Angeles, Bread and Circus in Boston. Now is the time for us to expand. If we wait, we're gonna fall behind.

[David Brown]

What the hell are you talking about, son? I'm gonna get it. What you're saying is making no sense to me. You don't take a failing business and expand it.

[John Mackey]

We're not failing.

[David Brown]

Yes, you. Okay, okay, you're not failing, but you're still learning. You need to make a success of what you're already doing first.

[John Mackey]

Yes, we do need to do better. But we have to seize this moment. If we don't, we'll miss our shot. In two years, it'll be too late. Our small size is a competitive disadvantage. We need a bigger, better location now.

[David Brown]

Bigger means more overhead.

[John Mackey]

It also means more visibility, better prices from suppliers, and a greater product range for customers. People would be able to get all their groceries from us, not just specialty items.

[David Brown]

You don't know if ordinary people are going to embrace natural foods, and you.

[John Mackey]

Don'T know that they won't. You're not paying attention to the trends. But I am. And what I see is rising demand. We need to be where customers are going to be in two years time, not where they are today.

[David Brown]

Did you read that in one of the management books I lent you?

[John Mackey]

Maybe.

[David Brown]

Okay, son. Well, tell you what. Here's what I'll do. If you can find another major investor willing to share the risk, I'll put in more. How's that? A few weeks later, Mackey persuades a wealthy, safer way customer to invest $50,000. Mackey's dad makes good on his promise. Armed with the new investment, Mackey leases a former nightclub in downtown Austin. But managing a 10,500 square foot supermarket is a big step. So he invites the owners of Clarksville Natural Grocery to come in on the venture. Clarksville is another of Austin's natural food stores. Mackey admires its owners, Mark Skiles and Craig Weller. Skiles has a knack for customer service. Weller has a sharp eye for detail. Their skills will be a big help, as will the addition of Clarksville's capital and customers. Skiles and Weller agree to come in and merge Clarksville with Saferway. But now the business needs a new name. Clarksville won't work because the new supermarket won't be in that part of Austin. But Skiles and Weller don't like Safer Way. Eventually, Mackey, Lawson, Skiles and Weller settle on something completely different. Whole foods market. In September 1980, Whole Foods opens, offering the biggest selection of organic food in Austin by far. Even so, the limited supply of organic food is evident. Many of the shelves are filled with cartons of apple juice because it was the only organic product available in large enough quantities to fill the shelves. But the shoppers don't seem disappointed. From day one, Austin's hippies flocked to Whole Foods. They're thrilled at being able to meet all their natural food needs in a single shop. The Store's downtown location also draws customers who are new to the natural food scene. In smaller stores. These people were put off by the dingy decor, clicky vibe and unfamiliar foods. But Whole Foods resembles a regular supermarket. There's even an information desk where they can ask what tofu is without being made to feel stupid. Within six months, Whole Foods is ringing up sales of $200,000 a week. Mackey, Lawson, Skiles and Weller have struck gold. But then eight months in the once in a hundred year flood strikes. The store is left ruined after being submerged under 8ft of water. The company has to fix $300,000 of damage and it doesn't have anywhere near that much money. And it has no insurance either. There's just one option left. To go to the bank and beg for a huge loan. But they doubt they'll get it. Because what kind of bank would loan a small fortune to a gang of hippie kids running a kooky supermarket?

[Mark Monroe]

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[David Brown]

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[Mark Monroe]

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[David Brown]

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[Mark Monroe]

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[David Brown]

1981 Austin, Texas John Mackey feels conspicuous in his suit and tie. He's more of a jeans and flannel shirt guy, but today he's doing his best to look like a regular businessman. Whole Foods Market is ruined and there's not enough money to reopen it. So Mackey's come to First City national bank seeking a loan of $100,000. He walks bank representative Mark Monroe through the accounts. He stresses how well things were going before the flood. He points out how customers love Whole Foods so much they're volunteering to help the team clean the place up. Munro nods politely and offers sympathy, but remains non committal. He just promises the bank will carefully consider Whole Foods loan application. Mackey isn't surprised banks expect loans to be repaid on schedule. They're often wary of novel, unproven businesses like Whole Foods. Sure, the store's been doing well, but this is 1981 and no one knows whether the interest in organic food's gonna last. Could be just a passing trend. So Mackey's shocked when, soon after, the bank approves the loan. And it's a lifesaver. The store can now reopen. Mackey thinks he must have made a convincing case. But actually, he didn't. Years later, the truth would come out. The bank rejected the loan. Under normal circumstances, Whole Foods story would have ended there. But then a guardian angel came to the rescue. Unknown to Mackey and Whole Foods, other co founders, the banker Mark Monroe himself intervened. He actually believed in Mackey and trusted him to repay the loan no matter what. So Monroe told his bosses he would personally guarantee the loan to Whole Foods. He put himself on the line to save their business. And he didn't do it for the glory either. He never even told Mackey or the other Whole Foods co founders what he did. Mackey only learned what happened years later after Monroe died. He was the man who saved Whole Foods, and Whole Foods didn't even know it. Folks like Monroe are rare. But for the record, he's not the only one. There are entrepreneurial guardian angels who still float among us. And I've actually met a few. It's a few months later and at Whole Foods, Mackey leads Mary towards the bakery counter. Mary's a new employee and Mackey's showing her the ropes. Nearby, another employee's putting that morning's delivery of blueberry muffins on display. Mackey points at them.

[John Mackey]

Our customers go wild for these. They're made by a local baker called Barbara. People line up to get them whenever we have them. Here. Try one.

[David Brown]

The new employee smiles as she takes a bite of the muffin. Her excited expression turns to puzzlement. She chews slowly, then raises an eyebrow.

[Renee Lawson]

That's a Sara Lee muffin.

[John Mackey]

What? No. Barbara bakes everything herself.

[Renee Lawson]

I'm telling you, these are Sara Lee muffins.

[John Mackey]

No way. Barbara's supplied natural food stores in the city for some time. Maybe they're just as good as Sara Lee ones.

[Renee Lawson]

Fine, I'll prove it.

[David Brown]

Mary marches out of the store. Five minutes later, she returns carrying a box of Sara Lee muffins. She puts it on the bakery counter.

[Renee Lawson]

Go on, do a taste test.

[David Brown]

Mackey isn't keen on eating a mass produced muffin, but takes a bite anyway. He then tries one of Barbara's. Same texture, same taste, same size. The next day, Mackey makes an unannounced visit to Barbara's bakery. Inside, he finds a big stack of empty Sara Lee boxes. Barbara's busted for Whole Foods. Barbara's repackaged muffins were a wake up call. Barbara's con could have torched Whole Foods reputation. If customers learned Whole Foods was selling repackaged Sara Lee muffins, it would destroy trust in everything the store sells. And it wouldn't matter one bit that Whole Foods got conned too, because customers expect stores to know what they're putting on their shelves. So after Barbara's deception, Whole Foods introduces regular checks on its suppliers to ensure everything's as it should be. But for the most part, the months after Whole Foods reopening go smoothly. Sales rebound fast and keep on rising. But soon, Mackey gets itchy feet. He's not a business as usual guy. Far from it. He's already thinking about what to do next, both in his personal as well as his professional life. He stuns Lawson by suddenly declaring he loves her, but since they're still young, he wants to date other people. A few days later, Mackey decides he's made a huge mistake. But it's too late. Soon after Lawson leaves Whole Foods, Mackey distracts himself by masterminding a plan to open a second store. And he wants this one to be in a suburban shopping mall in North Austin. The remaining co founders, Mark Skiles and Craig Weller, aren't sure about this plan. They think people who live in the suburbs are far less alternative than those downtown. But as Mackey sees it, if they build it, people will come. What's fascinating here is Mackey's commitment to his own idealism. Cynics would call it hypocrisy because he's growing his business. Is this really people over profit? But Mackey's driving goal at this point is to convert more people to eating natural foods. That goal has become his anchor. But while an anchor is great when you need to weather a storm, it can also hold you back. It's fall 1982, and in his backyard, Mackey's drinking beer and playing ping pong with Whole Foods co founder Mark Skiles. Mackey lunges to hit the ball. His paddle connects, but too hard. The ball shoots off, missing the table.

[John Mackey]

Darn it.

[David Brown]

Again, Skiles recovers the ball and fixes Mackie with a hard stare. Sure. You ready?

[John Mackey]

Yep.

[David Brown]

Skiles slams the ball hard into the table. The ball bounces up and almost hits Mackie in the face.

[John Mackey]

Whoa. What's gotten into you?

[David Brown]

Skiles takes a slug of his beer before replying. I checked the new store's sales figures last night. They were ugly. Mackey gulps. The second Whole Foods opened a few weeks ago and it's kind of quiet.

[John Mackey]

We all knew North Austin would be a harder market to crack.

[David Brown]

The sales per transaction aren't good. People are just buying a few specialty items, getting the rest of their groceries elsewhere. We need them filling carts.

[John Mackey]

It's only been a few weeks. It's a marathon, not a race.

[David Brown]

Sales are down at the downtown store, too.

[John Mackey]

Oh, they are?

[David Brown]

The downtown store was still growing until we opened the second one. Mackey, we had a good thing going. We could retire on what the original store's making. You're screwing this business up. Mackey's hackles rise.

[John Mackey]

I am not. But I want Whole Foods to be a great company, not just a great store. It could become massive. We could have stores all over Texas. We could change the way people eat in Texas, maybe nationwide.

[David Brown]

Skiles checks his watch. Look, I gotta go. All I'm saying, Mackie, is I don't want your grand visions running us off a cliff. All right? Mackie watches Skiles leave. Lawson's already gone. Now cracks are appearing in his relationship with Skiles. Skiles wants to consolidate their gains, but Mackey wants more. He's already thinking of a third store, of expansion beyond Texas, of making Whole Foods the happiest place to work in the world. And it's becoming clear that this ambition is about to put him on a collision course with Skiles.

[Mark Skiles]

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[Renee Lawson]

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[Unknown]

Of December 4, 2024, CEO Brian Thompson stepped out onto the streets of Midtown Manhattan.

[Renee Lawson]

This assailant pulls out a weapon and.

[David Brown]

Starts firing at him.

[Unknown]

We're talking about the CEO of the biggest private health insurance corporation in the.

[David Brown]

World and the suspect he has been identified as Luigi. Nicholas Mangione became one of the most.

[Unknown]

Divisive figures in modern criminal history.

[John Mackey]

I was targeted, premeditated and meant to sow terror.

[Unknown]

I'm Jesse Weber, host of Luigi Produced by Law and Crime and Twist. This is more than a true crime investigation. We explore a uniquely American moment that could change the country forever.

[Renee Lawson]

He's awoken the people to a true issue. Finally, maybe this would lead rich and powerful people to acknowledge the barbaric nature of our health care system.

[Unknown]

Listen to Law & Crime's Luigi exclusively on Wondery Plus. You can join Wondery plus, the Wondery app, Spotify or Apple Podcasts.

[David Brown]

1985 Austin, Texas in Whole Foods head office, Mackey and Skiles are staring each other out. Since their ping pong match four years earlier, their relationships continue to source. Mackey spent that time pushing the company into opening new stores. The company's annual sales have now hit about $20 million a year. There are now four Whole Foods stores, three in Austin and one in Houston. And a few months ago, it also opened a natural foods restaurant called the Wildflower Cafe. Mackey thought the cafe would take Austin by storm. Instead, the company lost almost $90,000. Meanwhile, Skiles has been trying to block Mackey's hunger for expansion. He doesn't buy into Mackey's talk of creating a workplace based on love and changing people's diets. He's happy owning a business that makes him good money, but right now, Mackey's screwing that up. Skiles glares at Mackey. The new store in south Austin's taken 20% of the downtown store sales overnight. We're losing money for the first time since the flood. Mackey pushes back as the rest of the Whole Foods board members sink lower in their chairs.

[John Mackey]

The new stores need time to build up. It's clear that the big sales from day one we got at our first store were a one off. It's normal for stores to build up sales and customers over time. Look at the North Austin store. It's breaking even now after four years.

[David Brown]

Mackey this is a disaster. We should never have opened these new stores. You keep talking about creating the happiest workforce in the world. Well, the way it's going, we won't even have a workforce. And it's all because you think it's more fun to start new things.

[John Mackey]

What you're missing is the stores are growing. You need patience.

[David Brown]

No one but you got us into this mess. Mackey look, it's on you, Mark.

[John Mackey]

I get it. I'm not happy with the financial results either.

[David Brown]

But we're a terrible CEO. Mackey blinks in shock. The other board members sink even lower in their chairs. Mackey feels his anger rising. As far as he's concerned, Skiles has crossed a line. It's now clear that his and Skiles contrasting visions of where the business goes next are incompatible. And unless they can reconcile those differences, one of them will have to go. Skiles and Mackey's differences aren't unusual. There's no guarantee that people who start a business together will stay in sync as it grows. When they first joined forces, Skiles and Mackey were as one. But now that they're five years in and have had some success behind them, well, their goals are no longer perfectly aligned. Mackey wants Whole Foods to change the world, and the bigger it gets, the more likely it is to achieve that. That's how he sees it. But Skiles wants a company, not a cult. He wants it to fund a decent Now. And if Mackey wasn't trying to expand the business all the time, it would be there's no right or wrong here. It's a question of what do the owners want their company to do for them. The problem is it can't do both. Something's gotta give, and that's what happened. Over the next six months, Skiles and Mackey try to find a way forward without success. So Skiles sells his stake in Whole foods for around $300,000. With Skiles now gone, Mackey owns the majority of the shares. He's finally free to run Whole Foods his way. He steps up the expansion. In 1986, Whole Foods buys Bluebonnet, an organic supermarket in Dallas it was losing money at. But within six months, Whole Foods steers it into profit by lowering overhead and ironing out its supply chain issues. The move also ensures Whole Foods is the dominant natural food supermarket in all of Texas. Then Mackey turns his attention to the San Francisco Bay Area. The hippie trend might have started there, but in 1986, it still lacked a big organic supermarket. Instead, the Bay Area's hippies have held fast to the 60s ideal of small natural food stores run by non profit cooperatives. Mackey realizes that if Whole Foods moves in quick, it could capture the Bay Area market. And given the city's high concentration of natural food fans, it could form a powerful base for further expansion. But to open multiple stores there would cost millions of dollars. Whole Foods doesn't have that kind of cash lying around, and it's too small a business to get a bank loan that big. So there's only one option left. Venture capital. That's right. Kind of investors you see on tv. Shark tank. Venture capitalists are a vital source of funding for young companies. They invest in businesses with high growth potential, and in return, they take a stake in those businesses and get actively involved in the running of that business. See where this is headed? Their goal is to get businesses to a stage where they can be sold or floated on the stock exchange so they can exit the business with a huge profit. It's a bit like a farmer fattening up a cow to sell at the market, you know, for slaughter. Before Mackey left for California, his dad warned him he can't trust venture capitalists because they only care about the exit. But they both know there's no alternative. If Whole Foods is to expand fast, it needs money and therefore it needs venture capital. So in 1988, Mackey heads to Palo Alto, California and makes his way to Sandhill Road, the Street that most Silicon Valley venture capitalists call home. The reception is cool to icy. The Sand Hill Road crowd is pumping money into personal computers, microprocessors and online networks. A chain of granola grocers seems small in comparison. They all pass. But he does meet the folks at Oak Investment Partners, who put him in touch with their retail investment division in Minneapolis. Eventually, Mackey gets $4.5 million of venture capital from Oak and two Texas firms. It's enough to make his move on the bay area. In 1989, Whole Foods begins its Californian expansion by opening a store in Palo Alto. The following year, the company adds private label products to his shelves, starting with Whole Foods natural apple juice. It's the same juice the company's already been selling, only now it's got a Whole Foods label on it. But that repackaging boosts profits first. It gives Whole Foods more influence over the production process, potentially reducing costs and increasing profit margins. It also entrenches customer loyalty because shoppers can't buy Whole Foods apple juice just anywhere else. It also uses its own brand products to promote its brand message that Whole Foods is all about additive free foods. Within weeks of adding its apple juice to stores, Whole Foods is selling private label yogurts, tortillas and maple syrup. But it doesn't take long before Mackey's father's warnings about venture capitalists starts to come true. They push Whole Foods into hiring a new president, an outsider who previously ran a supermarket chain in Phoenix. But on the day the guy was supposed to start work, he dies from a heart attack. Attack. In the aftermath, Mackey and his dad reassess the situation. They suspect the venture capitalists hope their man would replace Mackey as CEO. They also notice that their first store in California is already outperforming expectations. So Mackey's dad suggests they use this quick success to push for an early initial public offering or an IPO on the stock market. An IPO would give Whole Foods the funds it needs to keep expanding. And it would also give the venture capitalists the payday they crave without Mackey losing control of the business. At Whole Foods next board meeting, Mackey proposes they go straight to ipo. The venture capitalists object. They want the company to go through another round of financing first. But that extra round of investment would dilute Mackey's stake in the business to less than half. And if that happens, well, he'd no longer be in control. So the moment the rest of the board leaves the room and the door shuts behind them. Mackey's dad turns to him, son, we gotta get those Fs out of this company before they take over. On the next episode, Whole Foods learns through acquisition. Mackey battles unions and activists, and a rival on the inside moves to seize control of the business from wondering this is episode one of the Whole Foods Rebellion for Business Wars. We've used many sources for this season, including the whole story by John Mackey. A quick note about recreations you've been hearing. In most cases, we can't know exactly what was said. Those scenes are dramatization, but they're based on historical research. I'm your host David Brown. Tristan Donovan of Yellowant wrote this story, researched by Marino Watson. Sound design by Kyle Randall Fact checking by Gabrielle Drollet Voice acting by Chloe Elmore Produced by Tristan Donovan of Yellow Ant. Our managing producer is Desi Blaylock. Our senior managing producer is Callum Plews. Our senior producers are Emily Frost and Dave Schilling. Karen Lowe is our producer emeritus. Our executive producers are Jenny Lauer Beckman and Marshall Louie. For wondering.

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