Editorial: Growing Pains.

By Len Monheit

This week’s headline story, the impending takeover of Wild Oats by Whole Foods has much of the industry abuzz – as rightly it should. The impact of the deal will reach many, from those employed by the two companies, to those supplying the two and even those analyzing the deal for other business purposes.

The key motivation for the deal, according to Whole Foods, was to allow it to better compete with big box and other stores offering a similar range of products and services. This need to compete at a larger scale would probably be seen as a positive industry bell-weather, were it not for fear of the business tactics and pressures of the larger stores, and the fear of a loss of culture appreciation that comes with ‘going mainstream’. Also a big unknown at this time is the fate of the vendors established within each system.

This deal is a big one for our industry. It’s another sign of growing maturation as this industry too faces real world business issues. It illustrates all too clearly the need for contingency planning, not to detract from the course of normal operations by worrying about every conceivable issue, but to support sound business logic.

In a previous life, the company I worked for manufactured its own brand of business targeted products with a private label business that approached 50 percent of total sales. In particular, one customer on the private label side was 23 percent of all sales, a very unhealthy (read vulnerable) number. Obviously the pressure this vendor could apply was significant, and our exposure became all too clear when this company was purchased by a competitor. Thankfully, the company had put in place a contingency plan several years earlier – one that was just starting to bear fruit, a joint venture for R & D and new product development, combined with an international distribution strategy. Obviously, this approach is not the solution for everyone, but a detailed analysis of business risks and exposure should at least assist the development of a contingency plan.

As we see more consolidation in our ‘space’, truly an ongoing business reality, it is interesting to observe the performance of these larger consolidated organizations. Despite the best of intentions and alignment of philosophies, quite frequently, the envisioned synergies and savings never materialize, and the larger more ponderous company finds it increasingly challenging to execute. Of course, this is not always the case, and frequently we observe merged organizations truly in a ‘1+1=3’ environment. Planning, analysis and commitment to cause obviously drive towards the latter result.

It’s a reality of business (as in many other things) that almost all actions create other actions and activities – many of which themselves are opportunities. Recognizing them and acting appropriately is another one of those huge business differentiators.

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