Mike Gilliland jokes that when he began his career in natural foods retailing a quarter century ago, he didn't even know how to spell "balance sheet." Since then, not only has he mastered the fundamentals of accounting, he's launched two multimillion-dollar companies. Gilliland opened his first natural foods store in Boulder, Colo., in 1984, and three years later, he and his then-wife, Libby Cook, founded Wild Oats Markets. By the time Gilliland stepped down as CEO in 2001, Wild Oats had more than 100 stores throughout the U.S. and Canada, nearly $900 million in annual sales, and a troubled bottom line, thanks to an undisciplined, unchecked growth strategy.
Gilliland took a year's sabbatical after he left Wild Oats, but soon found himself missing the day-to-day operations of a natural foods store. Vowing to spend more time behind a cash register and less time behind a desk, he and Cook launched Sunflower Farmers Markets in Albuquerque, N.M., in 2002 with the motto "serious food … silly prices." Gilliland's goal was to pioneer a chain of supermarkets offering natural and organic products at discount prices. Today, Sunflower is a rapidly expanding company with 20 stores in Texas, Utah, New Mexico, Colorado, Nevada and Arizona. We caught up with Gilliland between store openings to discuss his past in natural foods retailing, his vision of the future and the lessons he offers to other store owners.
Q: In your decades of retailing, you've weathered a lot of economic ups and downs. How does this latest financial crisis compare to what you've seen before, especially for natural foods retailers?
A: For us it's kind of good news, bad news. The good news is we're pretty well positioned for the angst that's out there—people who want to shop affordably while shopping naturally are shifting over to us. In the past, the natural foods business has been pretty resilient, although I've never seen [an economic downturn] like this. I think most natural foods customers are pretty committed, but they are more price-conscious these days.
Q: What are the top three things you would recommend that naturals retailers do to keep their businesses healthy?
A: You have to be very value-conscious—not just price, but value, which means different things to different people. Then you have to cut back on the grand schemes, your creativity. For us that means cutting back on ancillary issues like remodels or real estate. And finally, you need to always be very conscious of what the customer is looking for in terms of their shopping baskets.
Q: With food and transportation costs going up, how will you keep Sunflower's prices low?
A: We've succeeded because we distribute produce through our own central distribution center to all our stores, and we try to buy big and buy direct whenever we can. We also try to make ourselves an easy company to deal with in terms of streamlined operations and the layers of people you have to go through. Certainly, we've had to raise our prices, but we always try to be the last guy to do that. We employ two people full-time whose only job is to price check [with our competitors].
Q: What major lessons—good or bad—did you learn from Wild Oats that you've applied at Sunflower?
A: We did spend a fair amount of time thinking about the Wild Oats days and what we did well and what we didn't do well. Some of the big things we learned are:
No. 1: Don't make acquisitions; grow organically.
No. 2: Realize the value of technology. We're a much more precise business than Wild Oats was because now we're trying to make it on fractions of pennies. We get help from things like product-movement technology, and we made a big investment this year in terms of schematic software—how best to set the shelves. We're also just now implementing back-door receiving. We walk a tightrope between margins and sales all the time. For instance, if we give away raspberries, we have to make it up somewhere else, and technology helps us with that. In the good old days, when you needed more margin, you just raised price.
No. 3: Geographic location is important. We service stores from a central hub rather then trying to manage 38 states plus Canada like we did at Oats.
No. 4: We make hard decisions more quickly, and have much more of a culture of accountability in terms of delivering results. We weren't always good at making people accountable at Oats.
Natural Foods Merchandiser volume XXX/number 1/p. 7