'COVID-19 was a tremendous accelerant for online grocery shopping': Whole Foods CEO

John Mackey, Whole Foods CEO and co-author of the new book ‘Conscious Leadership: Elevating Humanity Through Business’, joined The Final Round to discuss his book, COVID-19's impact on grocery shopping, the future of grocery delivery, and his outlook for the rest of 2020.

Video Transcript

MYLES UDLAND: Welcome back to The Final Round here on Yahoo Finance. Myles Udland with you in New York, and we're joined now by John Mackey. He's the CEO and co-founder of Whole Foods. He's also the author of the new book, "Conscious Leadership, Elevating Humanity Through Business." John, thanks so much for joining the show today. So let's start with your business right now, and what the pandemic has been like for Whole Foods. Obviously an amazing surge in demand if we go back to the March and April periods. A little bit of a normalization, I suppose, in some of your supply chains, but I imagine this is still an extraordinary period for the grocery business overall.

JOHN MACKEY: Yeah. I probably speak for a lot of people when I say 2020 is probably the worst year of my life. It's certainly the strangest year of my life. And, gosh, we still have like four months to go, and the next four months could be even worse than the previous eight months because of the election cycle we're in. But it's been very weird for the grocery business.

I'll give you a couple of examples. Once March, middle of March hit and everything started getting locked down, we saw our prepared foods just crash. Whole Foods was operating some of the highest volume restaurants in the United States. But salad bars, hot bars, everything that was self-service closed down. Not to mention offices shut down, so we got no lunch lunchtime traffic. We saw, actually, our prepared foods drop about 75% year over year.

On the other hand, restaurants also closed down so people started cooking at home and our sales went through the roof. And pretty much every category, particularly animal proteins, meat, chicken, and fish. They all exploded as people, I guess, were grilling at home. Toilet paper, we all know that story. We ran out of toilet paper almost instantaneously. And hand sanitizers, and blah, blah, blah. That's all old news now.

But what's happened now is that our sales remain very high. Again, restaurants are still largely closed down, although people are picking up. And they're bored with their own cooking, so they're definitely getting out more, and they're having a lot of delivery occur. And I guess the other news, of course, is we know that online grocery shopping-- COVID was a tremendous accelerant for online grocery shopping. People that had never done it before, did it for the first time.

Our sales were up 300% over a year ago in the last quarter. So that's pretty strong growth, and that was a problem. We couldn't handle that much growth so quickly. And I remember people telling me that they were calling up Whole Foods at 2 o'clock in the morning so they could get a delivery slot scheduled, because there was a while that we could not service the demand that we had. But Amazon threw a lot of resources at it, and pretty soon we were we were clicking. Although, I'm sure for the people that wanted the shopping, it took forever. But relatively speaking, we got we got things under control again.

And I think that's going to continue. I think a lot of people will stay online, even when we get back to post-COVID. But I think most people will go back to normal patterns once people feel safe again. And that might be a while. Be a while before people are shaking hands, giving hugs, even taking their masks off. So we've got a weird transition period ahead of us. But I really do think, everything I've read, I think we're-- some of these countries and some of the cities have already got, I think, a herd immunity. And I think we're-- I really think a year from now we'll be back to many normal patterns.

DAN ROBERTS: John, Dan Roberts here. Let's stick with that about how quickly things will get back to normal. Because the idea of grocery delivery, which you mentioned, that along with the curbside pickup option we've talked a lot about on this show. Not just for grocery, but of course that's where we can get your insights, but for all of brick and mortar retail. We've talked a lot about how companies like Dick's Sporting Goods, Best Buy, a lot of these retailers have had huge, huge surges in BOPIS, right? B,O,P, I, S. Buy online, pickup in-store or curbside.

And I guess the question is, is this only a pandemic thing? It sounds like you think a lot of people will, once we return to normal, not need delivery any more or not need curbside. But others that we've spoken to think that this phenomenon is going to stick around, because the convenience is so great that, even once it's normal and you can go to the store, you'll still want to use it. What do you expect? And what is Whole Foods doing in terms of investments for the future if that feature remains as popular?

JOHN MACKEY: I won't speak about other retail because I'm not an expert there. But in food, some people will opt for convenience. If getting food is merely a transaction for you, then whatever is the most efficient transaction strategy for you and your family, you'll probably do most often. But food is different. Food is sensual. People like to smell it, taste it, touch it. If you're a foodie, you don't want to be just ordering stuff online. You want to go out and have the adventure of shopping for food. And particularly at stores like Whole Foods, where we have a lot of prepared foods and the stores are beautiful and fun.

I do think a lot more people than maybe in other categories of retail will not stay online. Or they will do a hybrid. They'll do a combination. They'll get their commodity items, they'll get that delivered or they'll pick it up. But a lot of the other stuff-- if you're going to shop for fresh produce, and meat, and seafood, a lot of people want to look at-- they want to select it out themselves. So, I mean, time will tell, but that's what I think will happen.

- John, a quick question here. I'm here in Los Angeles. We know Amazon opened its first fresh supermarket in Woodland Hills, the very affluent suburb around here. What is your take here? Because the understanding is Amazon is very heavily investing into this new concept, what's going to happen with the Whole Foods?

JOHN MACKEY: What's going to happen with Whole Foods with Amazon's first store opening up?

- Do you think there'll be continued investment, and revamping, and planning--

JOHN MACKEY: Oh, yeah.

- --as this new category is developed?

JOHN MACKEY: Sure. There's going to be two food brands that Amazon operates. Whole Foods and then they'll have Amazon Fresh. And I think they're going to coexist. There's some product overlap, but Whole Foods is very different. It's going after a different customer base. So I actually think, at the end of the day, Amazon Fresh stores are going to result in a lot more capital investment by Amazon in innovation, and Whole Foods will be a beneficiary of that investment into technology. Amazon very much wants to transform the grocery business. They want to reinvent it. They want to transform it. And Whole Foods is one of the vehicles they'll be trying to execute that transformation with.

So I'm excited about the future. And there's plenty of room. The grocery market's huge. It's a trillion dollar market, so there's room for lots of different kinds of niches, and different kinds of strategies and players. That's, I think, a mistake people make. They always think that, gosh, one thing is just going to change everything, and everybody's going to go out of business. But, in fact, people like different things. I mean, some people are going to like going shopping at Whole Foods. Some are going like going to Trader Joe's. Some like going to Costco. Some are going to like going to Amazon Fresh. Some want delivery. Some wanted to curbside pickup.

You know what it's going to be? Here's what's going to happen in the future. People are going to be able to get whatever food they want, wherever they want it, whenever they want it, at a price that they're willing to pay. That's what's going to happen. And that's going to vary because people have different preferences and different tastes.

MYLES UDLAND: Yeah. And there's four grocery stores in two blocks of me here in New York City, John. There's always a line outside of the Whole Foods. So I think that pretty much speaks to the brand preference that people are going to have now, and certainly in the future. John Mackey, CEO of Whole Foods. Thanks so much for joining the show. New book out called "Conscious Leadership, Elevating Humanity Through Business." John, really appreciate you taking the time today.

JOHN MACKEY: You bet. Thanks. You guys have a good day.