Ensuring the safety of the local supply line

Joel Ortiz, R.S.Whole Foods MarketAustin

Small Supplier Support

Who is Whole Foods?

• Started in Austin Texas back in 1980 by folks who had a dream of a natural and organic store to support the community.

How we have grown

• In 2010, WFM was ranked number 18 out of 100, and once again was placed on FORTUNE's "All Star" list of only 13 companies that have been on this prestigious list every year since the “100 Best” list started in 1998

• 2010 marks 30 Years!

30 years later

Whole foods market has expanded• Over 300 stores in 38 States and 3 Countries• Multiple Regional Facilities including

– 9 Bakeries (including dedicated Gluten Free and Organic facilities)

– 5 Commissaries– 10 Distribution Centers– 3 Seafood Processing

• And over 50,000 Team Members

4

Currently Operating in 3 Countries

5

Kensington Store London, U.K. Cambie Store,

Vancouver, B.C. Canada

Columbus Circle Store, New York, NY USA

Decentralized Corporate Structure

• Regional hierarchy– 12 Regions– RP, RVP, Merchandisers, Buyers, Safety

• Store has autonomy in many decisions – Each store has ability to start looking for local

suppliers– Stores have ability to switch many of the store

services providers

• Global Teams operate as a support function

6

Pros and Cons to Decentralization

• Pros– Distinct creativity – willing to try new things– Increased competition between regions/stores– Empowerment at TM level (shared fate)

• Cons– Difficult to standardized programs and systems– Difficult to figure out proper communication

channels– Have to “sell” the program to get “buy in”

7

All have same Core Values

• Selling the highest quality natural and organic products available

• Satisfying and delighting our customers • Supporting team member happiness and excellence • Creating wealth through profits & growth • Caring about our communities & our environment • Creating ongoing win-win partnerships with

our suppliers• Promoting the health of our stakeholders

through healthy eating education

Our Quality Standards• We carefully evaluate each and every product we sell.

• We feature foods that are free of artificial preservatives, colors, flavors, sweeteners, and hydrogenated fats.

• We are passionate about great tasting food and the pleasure of sharing it with others.

• We are committed to foods that are fresh, wholesome and safe to eat.

• We seek out and promote organically grown foods.

• We provide food and nutritional products that support health and well-being.

Unacceptable Ingredients - partial

• artificial colors• artificial flavors• Aspartame• bleached flour• bromated flour• FD & C colors• foie gras• hydrogenated fats• nitrates/nitrites

• partially hydrogenated oil

• saccharin• sorbic acid• Sucralose• Sucroglycerides• sucrose polyester• sulfites (sulfur dioxide

Our Stakeholder Philosophy

Our “bottom line” ultimately depends on our ability to satisfy all of our stakeholders. Our goal is to balance the needs and

desires of our customers, Team Members, shareholders, vendors, communities and the environment while creating

value for all. By growing the collective pie, we create larger slices for all of our stakeholders. Our core values reflect this

sense of collective fate and are the soul of our company.

Small Suppliers - Who are they?

• Visionaries and Entrepreneurs – Start ups• Usually sole proprietors or family partnerships• Usually Fewer than 10 employees• Supply a niche market• Only supply a handful of stores (WFM usually largest

or only customer)• May have an established local following

They all have a dream…

Why they’re important to WFM

• They support our mission and vision• They are good for our customers and our

communities• Local flavor and community presence• Provide means for sustainability and low carbon

footprint• Can provide a higher quality product with a unique

story and niche• Usually tend to support a need like organic, gluten free,

raw, etc

Local Milk

Local Goat Cheese

Local Honey

Local Eggs

Over 40% Local Produce

Why tighten up on Compliance?

• Reduced risk by educating the suppliers• Less opportunity for product recall

– time saved– labor saved– less hassle with merchandising

• Consistent product• Less opportunity for supplier to go “Out of

Business” - non-sellable product

Some disturbing facts

• Businesses with fewer than 20 employees have only a 37% chance of surviving four years (in business) and only a 9% chance of surviving 10 years. Restaurants have the highest failure rate, with only a 20% chance of surviving two years.

• No one starts a business with the intention of failing. Many, however, start a business with the odds greatly stacked against their success.

Using Goldratt’s Thinking Process to Improve the Success Rate of Small Business Start-ups Lloyd J. Taylor, UT Permian Basin

They need our help!

• Everyday race to survive• Focused on production to meet demand• Well intentioned – but not very

knowledgeable about the risks and the regs• Not always up to speed with traceability• Don’t always have the right permits

Local Producer Loan Program

• WFM provides up to $10 million in low-interest loans to small, local producers

• Loans range from $1,000 to $100,000 – Can be for things like purchasing more animals, investing in new

equipment or converting to organic production

• Supporting the local suppliers helps support– Sustainability– Community– Local ethnic foods and flavors

http://www.wholefoodsmarket.com/values/local-producer-loan-program.php

Loans for Equipment Needs

Broken temperature recorder needed replacement

Local Business Sustainability

The Foragers and food safety

• In February of 2008, a newly developed regional foraging team met in Austin and the food safety team was asked to offer them support.

• A voluntary checklist or assessment tool was developed to determine the level of safety and compliance from the local supplier and its impact to the company.

• A resource tool was developed to help the teams and the suppliers while using the checklist and direct them to where they could get further information.

• The food safety team offered support to the foragers as needed and participated on conference calls.

What’s in it for the Local Supplier?

• Basic compliance guidelines• Access to information• A guide to brand protection• Reduced risk and associated liability• Increases their opportunity for long term

success• Reduced cost assessments by 3rd party

company

The WFM Compliance Document

• 4 Sections– Section 1 – Quality Standards, Capabilities,

Processes– Section 2 – Food Safety and Legal Compliance– Section 3 – Labeling Compliance– Section 4 - Elevated Risk Level

The Compliance Checklist

Live Hyperlinks

Section 1 – Quality Standards

• WFM Quality Standards - Ingredients• Analytical Reports (Shelf Life, Micro Testing)• Food Safe Systems• Distribution Chain• Production Capabilities

Section 2 – Food Safety / Legal

• Types of operation – Who is accountable? Owner, Co-packer

• Recall capabilities– Lot number identification/labeling

• Process and Procedures (GMPS and GAPS)• Employee Training / Illness Policy• 3rd party auditing• Registration, Permits, Regulatory

Section 3 – Labeling Compliance

• Ingredients, Nutrition and Food Allergen Labeling• Consumer Advisory

• Raw Products, Un-Pasteurized Juice• Disclosing other hazards (pits, stones, etc.)• Organic claims – Icons, • Refrigeration and Handling• Use of WFM label - perception and liability• Code Dating

Section 4 - Elevated Risk Level• Un-Pasteurized Juices, Raw Food, Sprouted Seeds,

Smoked or Cured Seafood, Baby Food, Allergen-Free declarations, ROP, Extended Shelf life

• Any supplier implicated in a food related illness or injury case

• Any supplier with history of recalls• A supplier that supplies more than 5 stores

Local Raw and Vegan Foods

Local Sprouts

Next logical evolution of Program

• Early last year, the WFM Global food safety support (GFFS) team came together with the Southern Pacific region to review the local supplier assessment tools and amend for their needs.

• GFFS provided classroom and field training to the regional buyers and foragers on how to administer the documents to determine what level of action or auditing may be needed.

• As part of this exercise, GFFS reviewed auditing companies to evaluate a 3rd party option

Testing the 3rd Party Option

• In Summer of 2009, Whole Foods partnered with several auditing companies to determine if they could administer the assessment document and conduct on-site visits of the facilities to capture data that could be easily retrieved.

• The proposal for developing and picking up this work would require the auditing companies to keep the cost of the visit and data collection to a reasonable amount (under $400.00).

• The companies were asked to offer the Small Supplier low cost support on those areas found deficient during the visit and document review. (i.e. Training, HACCP, Sanitation, GMPs, SSOPs)

Implementing the program

• Process– Pre-notify and prepare for visit– Send cover letter along with Compliance checklist– Conduct on site Assessment of facility– Follow up with corrective actions and further

communication– Offer additional support either through local loan program

or third party support

We visited several small suppliers

Local Bakery being assessed

How did the exercise turn out?

• The third party assessments proved to be very insightful. • Proved that there is a need for more support and

communication with the small supplier.• Suppliers need support in basic food safety foundations.• Suppliers don’t know what they don’t know and are usually

willing to come into compliance once educated.• Suppliers looking for support from community.

Findings to date

Where they need assistance– Training on basic requirements

• Permits, registration, traceability and recall procedures• Food Safety training, GMPs and Employee illness policies

– Documentation of process and procedures• Recipe documentation,• Labeling review and validation

– Creating and implementing foundational programs• SSOPS, GMPs, GAPs

– HACCP plan development and management including allergen controls

Feedback from a Small Supplier

A Drink Manufacturer in Los Angeles• Product: Various chlorophyll-based drinks• # Employees - 2

Their Feedback On The Program• The Whole Foods program was extremely helpful...

and has given us a tremendous amount of confidence and growth. We wouldn’t have the opportunities we have today without this program.

• We talked to 10-15 independent consultants, but no one gave us the clear guidance on what we needed to do to grow that this program did.

• Thanks to this program, now we are looking at going for national distribution of our product.

• This has been a great bridge for us to move to the next level.

Feedback from a Small Supplier

Pastry shop in Los Angeles• Product: Cookies, cakes, other pastries• Number of Employees: Originally 2, now 5

Their Feedback On The Program• We didn’t know what we didn’t know.• We’ve become more efficient and more educated

on what we need to do be better.• We’ve added a second shift and nearly doubled

our sales since the compliance assessment, just four months ago (July 2009).

• Small Food Supplier Assessments– Basic Business Information and

Documentation– Food Safety Practices– Product Labeling and Conformance– Quality Standards, Practices and

Processes

• Follow Up Services– Onsite Food safety training– HACCP Consulting– Low Cost Label review– Assistance with SSOPs– Assistance with Lab testing– Monthly Food Safety Newsletter

Services offered by 3rd Party

The regional “buy in”

• So far, more than half of the regions have adopted the compliance documents

• It is now incorporated into our corporate regional and small supplier vendor packet.

• Some regions are using 100% 3rd party assistance and others are trialing this model

• Other regions have implemented systems and dedicated labor to review and collect all documentation

Thank You

Joel OrtizCell: (512) 965-0589Joel.Ortiz@wholefoods.com

Questions?