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Whole Foods' purchase of Wild Oats sours again

The front of Whole Foods on Dale Mabry Highway in Tampa has a new sign to reflect the takeover, but the old Wild Oats title is still visible on the building and on umbrellas outside. The Federal Trade Commission is investigating the purchase again.

BRIAN CASSELLA | Times

The front of Whole Foods on Dale Mabry Highway in Tampa has a new sign to reflect the takeover, but the old Wild Oats title is still visible on the building and on umbrellas outside. The Federal Trade Commission is investigating the purchase again.

A year after Whole Foods Natural Markets bought rival Wild Oats, the Tampa store still has a split personality.

The groceries and perishables are mostly switched to the Whole Foods brands. Employees wear Whole Foods uniforms. But recently, signs outside still identified the store as Wild Oats. And a kitchen big enough to cook the bigger, sumptuous spread of Whole Foods meals-to-go is only a plan.

Perhaps that's a good thing, because the Federal Trade Commission still wants to unravel the whole $565-million deal in one of the stranger antitrust cases in years. The sale of Wild Oats closed after Whole Foods won in court. But an appeals panel ruled the FTC deserves another whack proving the combination of the two biggest natural food retailers is anticompetitive. The commission restarts the process Sept. 8 to see if it can unscramble the eggs.

Good luck. Whole Foods sold 35 Wild Oats, closed 12 and most of the rest are works in progress like Tampa's.

The FTC's argument has haunted retail mergers for years.

Whole Foods would control too much of the organic and natural foods supermarket industry. Well, not all of it. Just chains defined as big stores stocked with pricey, high-quality perishables, attentive service and a lot of gourmet foods. It's a position that ignores that most grocers are selling more organics and natural products. And so are plenty of independent natural foods markets fighting grocery chains elbowing into their territory, not just Whole Foods.

Let's see: 270 Whole Foods vs. 34,000 supermarkets. This isn't big-time trust busting.

The finer point the FTC now argues is: Okay, many Wild Oats shoppers do switch to traditional supermarkets or gourmet stores like Fresh Market once Whole Foods arrives. But a smaller group that shares organic/natural "core values" that won't switch will be stuck with higher prices.

Never mind that Wild Oats was marginally profitable and studies found the same prices where the two did not compete.

It's more likely the FTC wants Whole Foods twisting in the wind for the bizarre behavior of its chief executive, John Mackey. Using a fake name to tout the deal on a shareholder Web site, he made dubious claims that buying Wild Oats would end "price wars" in 18 places where the two went head-to-head and keep all competitors at bay.

Much has changed since the FTC intervened. The silent hand of competition and a stagnant economy altered food-buying habits. That blunted a high-flying chain critics called Whole Paycheck.

To shed the nickname, Whole Foods cut most produce and meat prices closer to those at Publix. Sales in stores open more than a year rose 2.3 percent this summer, the worst in company history. Layoffs hit headquarters. A stock that fetched $52 in October now trades under $18.

Worse, in trendy Manhattan, Whole Foods lost its cachet among the cognoscenti to Trader Joe's, a budget-priced, eclectic rival looking for sites in South Florida. Meanwhile, supermarket giants like Publix with its GreenWise Markets are testing carbon copies of Whole Foods that the FTC ignores in its antitrust review of the natural foods market.

Indeed, what really slowed the transformation of the Tampa store wasn't the FTC. It was the lack of space for a bigger kitchen/service bar and Whole Foods cutting capital spending in half in 2009.

Mark Albright can be reached at albright@sptimes.com or (727) 893-8252.

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What's next

An appeals panel ruled the Federal Trade Commission deserves another whack proving the combination of Whole Foods and Wild Oats is anticompetitive. The commission restarts the process Sept. 8 to see if it can unscramble the merger.

Whole Foods' purchase of Wild Oats sours again 08/25/08 [Last modified: Tuesday, August 26, 2008 11:40am]

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