For producers of organic and natural food products, getting on to the shelves of Whole Foods’ national chain of stores seems like a dream come true. They can go from small batches to extensive production, gaining assistance and insights from Whole Foods’ buyers and extensive market knowledge.

But that dream also has a cost. In particular, Whole Foods maintains a long list of prohibited ingredients. Thus even if a product is natural in all other respects, if it contains any bleached flour, it will not make the Whole Foods grade. In addition, it requires any companies that claim to be organic to undergo the formal certification process, so that their product packaging may host the organic certification label. Such processes can cost tens of thousands of dollars, depending on the product and practices of the company.

MHHE005215Other changes demanded by the retailer are specific to its interactions with a supplier. For example, it strongly recommended that an ice cream brand change the cursive font on the packaging to block type, warning that millennial consumers would be unable to read cursive writing. It has asked suppliers to develop new versions or flavors of their products, and it has encouraged some small firms to change their names to ensure greater appeal among Whole Foods’ vast market.

Another requirement might create troubling issues over time: Whole Foods often requires suppliers to sign exclusive agreements, such that they promise to sell their products only in its stores. If the products catch on though, other retailers will quickly come calling, hoping to stock some of the popular items in their stores too. The exclusivity agreement then can come to seem limiting, in that the supplier cannot diversify its supply channels. If, following the expiration of these contracts, brands get really big, they also run the risk that Whole Foods will drop them, as insufficiently protective of its differentiated image. That is what happened to Chobani yogurt, which gained great popularity through Whole Foods but then found itself dropped from shelves once it became just another product that consumers could find in virtually any grocery store.

Yet together with these requirements and demands, Whole Foods often provides invaluable support for its small, young suppliers. It offers marketing assistance, facilitates ingredient sourcing, provides sales forecasts, and even issues low interest loans to help the companies scale up their production.

Discussion Questions:

  1. What do some small start-ups have to do to sell to Whole Foods?
  2. Is it worth it?


Source: Annie Gasparro and Leslie Josephs, The Wall Street Journal, May 7, 2015