Retailer Energy Alliance Supplier Summit Webinar—Whole Foods Market Presentation (Text Version)

Below is the text version of the Whole Foods Market presentation from the Retailer Energy Alliance (REA) Supplier Summit Webinar, presented on June 5, 2008. Seth Stutzman from Whole Foods Market was the presenter. You can also view the slides for this presentation (PDF 637 KB). Download Adobe Reader.

(Slide 1)

Seth Stutzman

I am very excited to be here today, like the other presenters said. This is a little bit of new territory for me. I have been in the grocery industry for 17 years and I started off as a box boy for Safeway. And I used to clean meat departments and actually cover up produce at night because that is the way they used to keep produce fresh at the time with burlap bags.

And then I just worked my way through the industry. Currently, like I said before, I am a vice president of design and development for Whole Foods Market in the South West region, but I was also a regional vice president of operations for over a year, and a regional vice president of purchasing for a year for Whole Foods as well, and I have been an operator, a store team leader, and I ran 4 Whole Foods Markets, including the one on Lamar, the one in Seattle, the one in Belleview, what's the other one? OK, 3 stores. Anyway, I'm a retailer. I am not an engineer. I don't have a degree in engineering, or anything like that. I am going to tell you a perspective from the store or from our stores anyways, maybe not from some of my other colleagues their stores, but from our stores and what we go through on a consistent basis. And I also want to give you a little history about

(Slide 2)
Whole Food Market. It's a great company. I love it and I believe in it. So we will go that route. The fact is that Whole Foods Market is a mission driven company. We have been a leader in addressing environmental issues, organic farming, sustainable food, and agricultural and animal processing for years and we started off in 1980.

(Slide 3)
That is the first store for Whole Foods Market. It started off as a small little store. Believe it or not Whole Foods Market almost went out of business two years afterward, because in Austin, Texas where the store is located, it is in a little bit of a flood plain and about a year after they opened up, we had a huge rainstorm there and all our refrigerator cases were actually floating out those front doors. So that almost crushed Whole Foods at the time, but thankfully we were able to figure it out.

(Slide 4)
I could not believe it when Jim and Scott were like, Jim was like 300 billion dollars a year. Oh my gosh, that is huge. We're $7 billion, we're tiny.

We've got 270 stores across the country. Recently we've partnered and merged with Wild Oats as some of you may know. Some of you've probably see some of the really nice things the FTC has helped us through and got us through the process of mergers.

We are at $7 billion in annual sales. We have 50,000 plus team members in our stores. We are in 3 countries. Right now we are in the US, Europe, and in Canada.

(Slide 5)
We've broken up our stores based on regions. We have 11 regions in our company. The one in this area right here is where I'm at, in the Southwest, right there in the heart of it, where we also have our global headquarters. And then the other part over here is Europe, where we just recently merged with a small group of stores over there, we've got about 7-8 stores, then we opened up one of our new flagship store, the Kensington Store. I don't know if any of you have been over to London lately, but if you have a chance I would highly recommend you to go see the store. It is an absolutely gorgeous store. It's on 3 floors and we spent a whole lot of money on it.

(Slide 6)
Whole Foods Market is committed to a green and sustainable future. We talk about sustainability a lot in our culture. It is really important to us that we focus on sustainability and the practices of sustainability with anything that we do. We are focused on doing the right thing for the environment and honoring our core values, which have been around since the day we started.

(Slide 7)
The other cool thing that I really love about Whole Foods Market is that we are a decentralized company. Our strength is purely and solely derived from our stores.

The stores are the ones that drive our business. They are the ones that make the decisions. They are the ones that earn the money, more importantly. We don't earn money in our global offices or in our regional offices, it is all done in the store, so it's well known in our company that we serve our stores.

Our stores serve the team members, our store leadership serves the team leaders, the team leaders serve the team members, team members serve the guests. So we are very focused on a service culture at Whole Foods Market.

(Slide 8)
We've had five Core Values for many, many years and we are getting ready to add a sixth one, which is one of the big reasons why I am here today. But we will get the 6th one soon.

(Slide 9)
This is a really cool picture, this is our brand new Sugarland store in Houston, Texas.

The first core value obviously is Selling the Highest Quality Natural and Organic Products Available. We believe this is our number one core value, it is something we have stuck to for years and years. It's always been our big practice, and it is one thing we really stack our claim to.

(Slide 10)
Our second core value is Satisfying and Delighting Our Guests / Our Customers.

  • We believe in Extraordinary customer service
  • We believe in Educating our guests and our customers — letting them know what we're doing, where we're doing it, and why we do it... everything else, and getting them empowered with the knowledge.
  • We believe in Meaningful Value — I think it sometimes, it just depends on your business unit and how you go after it. I think that is how we actually got the tag of Whole Paycheck, because you are not going to find cheap cheese in our stores, but we have some really nice cheese, but it may be an extra 50 cents or dollar more per pound. We believe the quality and the story that goes with it, means a lot.
  • Then also, we also consider ourselves to be somewhat of Retail Innovation / Innovators — With the Lamar store, I don't know if any one has had the opportunity to go to Texas, Austin Texas, and see our Lamar store, it's our flagship store. We've had many visitors. Lots of pictures being taken. Of course we don't allow pictures in our stores. It is a really cool store and there is a lot of cool innovations going on there. As far as the retail focus goes.
  • We also believe in creating a really warm and inviting store environment. A lot of that has to do with lighting, and the way we do concrete floors, and the cases that we select, and everything else.

(Slide 11)
This is what I believe is our number one asset as a company, which is our team members and the people that work in our stores. We have very empowering work environments. We believe in self-responsibility and we have self-directed teams. The teams are actually given labor percentages and sales projections and they're the ones responsible for hitting it. If they come in under budget on labor, then that money is not directed back into the company, it is actually distributed back to the team members based on hours that are worked. We call it labor gainsharing. But it's a really cool program and it gets people invited and engaged. It's something we always do. And another reason why I am here today, is that we are looking for ways to create stronger partnerships with our vendors, with you guys in order to help drive our business to the next level, all of our businesses.

We have open and timely information, we believe in communicating with our team members, even if it is something that we are necessarily not happy about. We make sure we get the information out to them.

Incremental progress is something we celebrate at Whole Foods Market. While we would love the big wins, those are few and far between, so we like to celebrate the incremental process in programs and successes.

We also have shared fate principle, and then I also talked about the gainsharing.

(Slide 12)
Core values, this is our fourth one: Creating Wealth through Profits and Growth

We are NOT a non-profit! Which is sometimes people that shop at the store think we are a non-profit organization... fortunately we are not. We do celebrate the profits when they come in. Then we are also very big on stewardship in our communities and the environments we operate in. We believe in profits like everybody does. We also practice strict disciplines on ROIs or what we call EVA analysis on any stores, or whatever else, which I'll get into in a little bit, but that is based on existing stores and retrofits.

(Slide 13)
Caring about the Community and Environment
This is one of our big ones that we stick to and has been a huge part for us, and I will go into that with more detail, I have some other slides that show into that.

(Slide 14)
Caring about the communities. Whole Foods Market donates 5% of all of our profits after tax to non-profit organizations; last year it was 11 million dollars. And we do that based on stores individually, and we do it on region, and we also do a national one. So there's usually one per quarter that we do, but last year it totaled up to 11 million dollars. On a local basis, we support thousands of local community events, organizations, local producers and products; which is another great thing for us and something we like to celebrate in our stores.

(Slide 15)
Caring about our environment. We strongly support organic, local, and sustainable agriculture. We are members of the National Organic Standards Board. Actually Margaret Windburg was one of the co-founders of that program I believe. We are members of the Marine Stewardship Council, which is a sustainable seafood program. I don't know if you guys are getting the trend, but we are very big into sustainability and long term life on the earth. Animal Welfare — free range and grass-fed is better for the animal, better for the environment, and we believe also better quality products because there is less stress put on the animals when they go through processing. We are committed to recycling and alternative energies.

One side note: Commitment to the recycling and alternative energy. Whole Foods Market in 2005 purchased the largest amount of wind RECs in history, and we are 100% on wind RECs credits in our company. All of our facilities, all of our stores, everybody else is all based on wind RECs. That wasn't the cheapest thing for us to do, but we believed at the time it was the right thing to do. Still doesn't mean we can't really conserve on that because it does cost a little bit more but it is something we really believe in. Whole Foods Market is 100% Wind Energy Credit run.

(Slide 16)
Composting, recycling, big goals. This'll tie into you guys as well because we believe that if we're doing retrofits and stuff I'll get into this. The question is always what'll we do with the cases when we yank them out. And so I think that that's a huge question that I would personally like to see some solutions on.

Anyways, Whole Foods Market we achieved our 70 percent composting and recycling goal in 2008 we've got an 80 percent — I believe we're a little bit higher than that right now. And ultimately our goal is to create a zero waste program where we compost or recycle everything that we possibly can and we're doing that through a lot of different avenues at Whole Foods Market and we're very proud of that and very excited about that and we're looking at ways to partner with more people on that.

(Slide 17)
Local driven green mission teams. I'll fly through this a little bit. This is a store based program — each store has a green mission team. Every team — whether it be produce, seafood, prepared foods or whatever else, every team has a team member on there that is a green mission team member. They meet once a month or once every other week to discuss opportunities for recycling, composting, whatever it may be in the store. Ways to help cut down on electricity consumption and different things like that.

We focus on local solutions as well as in the areas and neighborhoods that we operate.

And we also promote, bus passes, carpooling, bicycling, commuting, e-cycling, work schedule modifications.

(Slide 18)
This is kind of the basic, holistic, independence, business model for Whole Foods. As you can see the core values and basic mission is the core business of who we are.

Around the arrows is where our Core Values are and it points out to where these things actually achieve the other things, motivating our team members, increase job satisfaction and giving back to our communities. Corporate citizenship and sponsorship, sales growth, good value, high quality products and innovations in the customer service realm.

(Slide 19)
Whole Planet Foundation. We started a foundation in 2006, I believe the Whole Planet Foundation, is a foundation that gives small business loans to women in independent 3rd world countries. In last year 2007, we loaned out $6.3 million and had a 98% return rate on all those loans that were given out. This year, alone in 2008 in the 1st quarter we already at $4.3 million and we've done loans for people in India, Costa Rica, Guatemala, and Nicaragua, and there's a couple other countries as well.

There is also a local loan program we're helping to promote and support local producers, and products, cases, whatever it may be to help them out with low interest loans to help get their businesses started.

To date, we have loaned out 1.7 million and we've had 100% return rate, and have another 8.3 million to go. We have a $10 million budget for this, as well as an Animal Compassion Foundation, which is basically dedicated to the humane treatment of animals.

(Slide 20)
This is the 6th one:

Creating a strong partnership with our producers and vendors. This is why I am actually here today talking to you, because we're really interested in looking for ways to improve and move forward in the way we do business, and look at how you do business and sync that up in doing business together.

(Slide 21)
I am really excited about the banning of plastic bags on Earth Day.

(Slide 22)
With Whole Foods Market we have made a conscious business decision to not have plastic bags in our stores and by the end of 2008, we'll have kept 1 million bags out of landfills across the globe.

(Slide 23)
Our strategy has been basically this and that has been to conserve on energy through technology as much as possible. We want to do conservation through behavior. We want to know more about what you are doing so that we can communication that to our team members and guests.

(Slide 24)
We are looking for a true partnership. I don't need you to train our team members — we will train our team members — but I need the information in order to train them, and we need that information from you all.

Employee Onsite Energy Distribution:

Combining heating and power and employee onsite renewable resources:
Waste Cooking Oil
Generating Power
Solar
Wind

We also started the UTC program which, it's a fuel cell program, that we did up in one of our stores in New England. It is currently producing about 50% of all the power in consumption — it's a 200 kilo — mega watt, kilowatt — I don't know which one — it's a big one. We're going to be experimenting with this and what's really cool about it that it's a fuel cell program that doesn't take energy off the grid, and we are currently in the Southwest looking at stores dealing with the UTC program, and the other program, but looking at is a very close to being completely off the grid in one the major cities in Texas. And then offset usage with RECs investing in renewable power generation.

(Slide 25)
This is our holistic approach to development and it — basically we are about ready to open a store, and getting more stores ready to go.

(Slide 26)
Whole Foods Markets currently has 20 registered LEED stores, and there's many more in development and we've been working with USGBC pilot program to help understand grocery stores to make a certification process that's less cumbersome. We have actually a program that we will be coming out soon, and we are very excited about it, and I think it's going to help out.

The Southern Pacific region is building — will have stores — will have LEED certification.

(Slide 27)
Energy efficiency initiatives. Developing web based enterprise currently working with design, and engineering teams. To design energy efficient systems and solutions for existing stores.

We have a lot of stores — 270 stores. One of our big things is how do we retrofit our stores, 1 to 3 million in capital investment in to stores and how do we go back into those stores and not crush their bottom lines by retrofitting programs? We soak another million, $2 million, $3 million of capital into a store and we're yanking out a bunch of cases; first of all what do we do with those cases? Second of all, how do we do it so that we don't crush the store's bottom line? I see a great opportunity to engage retrofits for existing cases.

(Slide 28)
Current energy proposed programs, capital improvements, permanent peak load reduction, lighting, motors, cases, commissioning and re-commissioning of equipment, which I talked about. Metering and sub-metering, tracking and benchmarking and reporting. I'm definitely gonna talk to Scott and Jim because it seems like they're all over that one so I need to learn a little bit more about that.

Load profile analysis and modification demand response and ongoing energy reduction identification programs.

(Slide 29)
Lighting is next in LED innovations. We're touching base with LED as well, I think the costs are starting to come down, and I think there are a lot of cool new innovations that are coming out there, so we're excited about that.

I think the color spectrums are starting to get better, they weren't very good at first, and we're throwing off a lot of shadows that we were not putting in our stores because they didn't look good in the cases. It needs to be clean to the environment, it needs to be sleek.

(Slide 30)
HVAC. We've seen some improvements but we're still looking forward to more in the next level of energy efficiency. I think Scott and Jim covered it great. I clearly did not — do not have the detail that they do [chuckling] on that but they did a great job. So just take whatever they said and go with that. Okay. [Laughing]

HVAC and dehumidification combo units, and again I know it's been talked about, this whole communication thing, you guys need to talk amongst yourselves, so that we can get our equipment working together on it.

Being a store team leader and having run stores I can tell you there's nothing that drives me more crazy than finding out that because some kind of a maintenance program wasn't followed or whatever else by a company or whatever that now I've got $50,000 or $100,000 in spoilage because of something silly that could have been done.

So I just — I ask that you guys continue to look to evolve these maintenance programs — look for ways to make it simple for the stores. As retailers we have a whole lot of stuff going on on the floor — we're making sure we're driving sales, we're making sure team members and teams are happy. That's the last thing we really need to worry about and quite honestly that's what we pay big dollars for is that stuff is easy to maintain. And maintenance programs for us — maybe combo programs. Easy, low cost retro opportunities for existing stores. Refrigeration — still need energy improvements here.

(Slide 31)
What's the next level in glycol? I know there's a lot of glycol talk out there. I still think that there's some improvement that needs to happen on there. Monitoring systems and how we can save energy.

(Slide 32)
Green building, green resources — how we're using green resources, sustainable building materials, refurbished cases like I said — with warranties of course.

Solar how that's going to play out — fuel cell. General building practices, sizing systems and we're oversizing in a lot of ways and I know that comes from us but because we don't have a team of engineers on staff we need partnership with you guys to help us decide what that sizing's going to look like, glazing, gliding, HVAC. Walk the talk. This is — this would have been a cool one too because these things actually rotate — it's really neat.

(Slide 33)
Anyways — so tell us what you're doing. Let us know where you guys are at and what you guys are doing in your own plants or in your own programs or your own processes. We'll be more than happy to be your champions in the stores.

(Slide 34)
We want partners that are doing extra stuff and I'm speaking for Whole Foods specifically here. But we want to know what you're doing so that we can start educating that. I think that's a huge thing for us all to ban together and tell the consumers, "Look this is the extra levels that we're going to. We want to partner with you on this stuff."

(Slide 35)
And this is how it can work. You guys bring us the information — you bring the information to the guests and retailers and it works out great.

(Slide 36)
Currently we have great relationships with ENERGY STAR Climate Leaders, Green Chill, Green Power Partner. We're very excited about this relationship with the Retailer Energy Alliance. Got great relationships or another great relationship with Commercial Energy and low energy.

(Slide 37)
And so in closing, we believe that by partnering with the REA and suppliers we can work together with other retailers and suppliers to help provide a better environment for our future. And just a quick closing statement because that's the way I am about stuff. I just want to throw it out there like this is a great opportunity. This has never been done before. And like Jim said earlier, we've never met as a retailer group — I mean Walmart, Whole Foods Market, Target — you've got all these retailers that are banding together. And I know that there's a lot of walls that are up there, but if we don't start breaking those down there's no way we're going to get to that next level. This isn't just a problem that we're having in the industry — it's a problem that we're having in the whole world in this country. And we have to work together to be able to come up with these solutions. That's the only way it's going to happen. That's why Jim and I are hanging out. I mean we may go hiking in a couple weeks, right? We're going — if I can keep up with Jim.

So anyways, I just want to leave you with that. Make a conscious choice to make a change today. All right?

[End of Audio]