Natural Foods Merchandiser

Supermarket billionaire Burkle invests in Whole Foods

On Jan. 8, an SEC filing revealed that supermarket billionaire Ron Burkle spent nearly $100 million to acquire a 7 percent share in Whole Foods Markets through his Yucaipa Cos. investment vehicle. After the investment came to light, share prices for WFMI jumped more than 20 percent to close above 12 dollars a share.

That price is up from a 12-month low of $7.04, but still well off the 12-month high price of $42.48. Due to shrinking sales and the general economic climate, Whole Foods shares have fallen more than 70 percent in the past year. While news of the investment pleased shareholders, some question whether its in the best long-term interests of the company and its customers.

"It's entirely possible that Whole Foods is screwed," said Kevin Coupe, pundit for the retail news website, "My guess is that Burkle's investment percentage will grow at some point, and they've got to be concerned about that. At the very least, some elements of the Whole Foods culture would come under attack. But if it changes too much, you begin to dilute the essence of that culture. That's when your customer begins to go somewhere else, and it's really hard to get them back."

Burkle previously owned a majority stake in Wild Oats, put in his own management team and then sold the company. He is rumored to have pushed for increased efficiencies in the form of more part-time employees, higher margins and changes in product quality during his ownership.

Not all observers are convinced the purchase will have an effect. "For customers and employees, I don't think it means much," said John Moore, former Whole Foods director of national marketing and founder of the marketing website, "He'd like to offer ideas on how operations could be fine-tuned and how Whole Foods could improve value, but I'm not sure they want to hear from him. They're confident in their business model. There's no reason they won't be successful when the economy gets more consistent."

Kevin Coupe also noted the positive aspects of the purchase. "I think the fact that Burkle bought 7 percent is a great sign, because he's betting the recession will be over soon and Whole Foods will be worth a lot more," Coupe said. "He may be right that there are efficiencies Whole Foods isn't taking advantage of."

Whole Foods declined to discuss the Yucaipa investment. "We are focused on running our business as usual and creating value for all our stakeholders," the company said in a statement.

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