Bad Beef at Whole Foods

I am still very optimistic about Whole Foods Market's (Nasdaq: WFMI  ) long-term prognosis. However, I can't say I'm thrilled about the latest bit of bad news to hit the retailer: the recall of ground beef that could possibly be tainted by E. coli.

On the one hand, I can certainly sympathize with Whole Foods' situation, especially since food recalls have become sadly frequent these days. It's not like rivals like Wal-Mart (NYSE: WMT  ) and Safeway (NYSE: SWY  ) , or even funky grocer Trader Joe's, haven't also experienced such situations. Recall the major E. coli scare in 2006, when scores of retailers pulled spinach from their shelves.

Meanwhile, we've recently emerged from an entire summer of salmonella hysteria. Tomatoes were originally thought to be the culprit, a situation that led major companies like McDonald's (NYSE: MCD  ) , Wal-Mart, and Chipotle (NYSE: CMG  ) (NYSE: CMG-B  ) to pull certain types of tomatoes with a "better-safe-than-sorry" outlook.

Of course, it may happen to "everybody," but Whole Foods doesn't position itself as "everybody." A major part of Whole Foods' brand is high quality, and it's been all about such touches as transparency in labeling and accountability as to where products come from. These high standards are part of Whole Foods' competitive advantage.

Whole Foods did the right thing by recalling possibly contaminated beef (and offering customers refunds with receipts), but the fact that it happened at all is dismaying. The obvious question: Why on earth was it doing business with Nebraska Beef? Where's Organic Old McDonald, for goodness' sake?

The Washington Post provided an admirably detailed article revealing that Whole Foods was doing business with Coleman Natural Foods, and didn't realize Coleman's meat was processed by Nebraska Beef, a company with a history of health and safety issues and of sparring with the U.S. Department of Agriculture. (I'll spare you some of the unappetizing details as to why the USDA shut down Nebraska Beef's plants three times between 2002 and 2003.)

Whole Foods' stock hasn't really budged despite this latest crisis in confidence. After all, the share price got beaten to a metaphorical patty last week after the company reported quarterly results.

Such recalls may be unpleasant business that has happened to many retail names, but my big hope is that Whole Foods will find out what went wrong here and apply safeguards to limit such occurrences. After all, having higher standards is a competitive advantage in the grocery business, and Whole Foods can't afford to lose any of that right now.

Did you bring your own bag for some related Foolishness?

• It looks like there may be a half-price sale at Whole Foods.
• Is Whole Foods rotten to the core? The FTC and the U.S. Court of Appeals seem to think so.
• Check out the case for and against Whole Foods.