Industry-leading benefits for its employees is one of the main reasons Whole Foods Market (NASDAQ:WFM) consistently ranks among the best companies to work for. A Forbes list of America's Best Employers ranks Whole Foods 47th out of 503 in a ranking based on employee opinions.
Founder John Mackey started Whole Foods with the mission of creating a high-performing company focused not only on driving profits, but also taking into account all of its stakeholders, including suppliers, customers, and especially employees. (Click here for a video, with transcript, of Mackey talking with Motley Fool co-founder Tom Gardner about the benefits of Conscious Capitalism.) With those values, Whole Foods' business model does not to compete on low prices, but instead gives customers the chance to shop at stores that treat their stakeholders right.
But for that opportunity to shop for quality, natural and organic food at a store that treats its employees so well, consumers have agreed to pay premium prices at Whole Foods. However, what if other grocery stores can also sell natural and organic food, also offer their employees great benefits, and do these things with lower prices for food?
Other grocers doing well by employees
On April 13 of this year, the Louisville, Ky., division of The Kroger Co. (NYSE:KR) introduced higher wages and better health care for those unionized employees. The head of that division said that "We are pleased to reach an agreement that is good for our associates. This new contract provides wage increases, affordable health care and investment in our associates' pension fund to support their retirement." While Kroger's new employee benefits agreement only covers 89 stores, just 14,000 out of a total 400,000 employees, it still shows Kroger's ability to step up to the plate in the realm of employee benefits, where Whole Foods captures lots of good press.
Kroger isn't the only one. Costco Wholesale (NASDAQ:COST) claims to have "one of the most competitive benefits packages in the industry" and it's actually No. 2 on that Forbes list of America's Best Employers. The company provides leading health care and retirement benefits even to part-time and hourly employees, as well as for their spouses, children, and even domestic partners. In fact, President Obama recently called out Costco as a model of how he hopes corporations in America will increase pay and benefits for their employees so that the government won't be under so much pressure to drastically increase minimum wage.
Why what other companies do for their employees matters to Whole Foods investors
Surely John Mackey is happy with companies' moves to increase employee benefits, as it supports his vision for how companies should be doing business, a vision that his company is helping to spread. But that doesn't mean it will benefit Whole Foods investors.
With similar natural food products offered at other stores at lower prices (evidenced by a 2014 study by Bloomberg Industries that found Whole Foods to be one of the most expensive grocery stores), one of Whole Food Markets' defining competitive advantages is that customers will choose Whole Foods because of its commitment to all stakeholders, including its employees. If other companies can do right by their employees in the same way, it could cut into Whole Foods' competitive edge,