Meet the Billionaire Who Wants to Crush Whole Foods

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Meet the Billionaire Who Wants to Crush Whole Foods
Duffy-Marie Arnoult/WireImage/Getty ImagesBusiness magnate Ron Burkle.
Who doesn't love a battle royal among titans? Ali vs. Frazier in the Rumble in the Jungle? Hulk Hogan taking "Rowdy" Roddy Piper downtown in the War to Settle the Score? Or Thor using his mighty hammer to smite Radioactive Man, Malekith the Accursed or some other Scandinavian-based super-villain?

But all these conflicts pale in comparison to the war brewing in the world of gluten-free pizza and hibiscus tea –- the organic food industry.

For almost a decade, the de facto leader in this arena has been Whole Foods Market (WFM), a company founded in 1978 by co-CEO John Mackey. His strategy has been to grow the Whole Foods brand by acquiring and "rolling up" smaller players, a task that seemed complete with 2007's purchase of rival Wild Oats.

At the time of the $565 million sale, billionaire Ron Burkle -- famous for friendships with former President Bill Clinton, Sean "P. Diddy" Combs and Leonardo DiCaprio, among others -- was the biggest Wild Oats shareholder. The word on the street is that Burkle is planning to strike back against Whole Foods. Though Whole Foods bought out Wild Oats as a company, it didn't buy the intellectual property or the brand name, which was sold to food distributor Luberski Inc. in 2010. And now after seven years of silence, the Wild Oats brand is being revived with Burkle's help.

The Empire Maker Strikes Back

In 2013, Burkle's investment vehicle, Yucaipa Cos., bought all 150 Fresh & Easy stores in the the U.S. -- a failed experiment by U.K. behemoth Tesco. Wild Oats branded products are being introduced into these Fresh & Easy stores, mostly in the Southwest, and industry experts expect that eventually, the stores themselves will convert over to the Wild Oats name.

Burkle -- currently estimated by Forbes to be worth $3.2 billion -- earlier handled the leveraged buyouts of several supermarket chains, such as Food 4 Less, Ralphs, and Fred Meyer. In 2011, Yucaipa was part of a group that financed Great Atlantic & Pacific Tea Co. to the tune of $490 million, allowing the chain to emerge from Chapter 11 bankruptcy.

Without any serious rivals, Whole Foods has had the luxury of unconstrained pricing power. The emergence of a serious new challenger can only drive prices down for consumers. However, Burkle's strategy is far from clear. The mogul may decide to convert the A&P and Pathmark brands, which he has controlling interests in, to "Whole Foods-style" stores.

"That's Ron Burkle's modus operandi, to combine companies into clusters and brand them under one name," says Sam Hamadeh, head of research firm PrivCo. "It's one plus one equals three, and he's done it over and over again in his career."

But no matter what the plan, there seems to be no doubt that Whole Foods is his target. "I think he is serious about it," says Hamadeh. "These are his roots. Supermarkets are how he made his fortune."

Brian Lund's blog offers more on small business, the stock market, investing and the secret to eternal life.


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