I am still very optimistic about Whole Foods Market's
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
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
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?
Whole Foods Market is a Motley Fool Stock Advisor recommendation. Chipotle Mexican Grill has been recommended by Motley Fool Hidden Gems and Motley Fool Rule Breakers. Wal-Mart is a Motley Fool Inside Value selection. Try any of our Foolish newsletters today, free for 30 days.