How Whole Foods went from a hippie natural foods store to Amazon's $13.7 billion grocery weapon

• Whole Foods went through many phases before being acquired by Amazon for $13.7 billion in 2017.
• Before Whole Foods became Amazon's biggest subsidiary, it was a tiny organic grocery store in Austin, Texas.
• This is the story of how it got there.
• Visit Business Insider's homepage for more stories.

Whole Foods has had quite the ride.

Over the course of 39 years, CEO and cofounder John Mackey has taken Whole Foods from a small natural foods store in the hippie haven of Austin, Texas, to an international behemoth.

At the beginning, Whole Foods was only 10,500 square feet and had 19 employees. But the idea of natural food stores was only beginning, and as one of the first in the country, the seed that Mackey planted blossomed over time.

Through acquisitions of natural food stores around the country, the chain became larger and had ambitious growth plans. But it was also humbled a few times in its history — before being purchased by Amazon for $13.7 billion in 2017, Whole Foods weathered a flood, financial downturns, and FTC probes.

Now that it's owned by Amazon, a new chapter is about to begin. Plenty has been said about what might change for the chain now, but it's also important to see what has changed for the chain in the past.

We've put together a timeline with some of the most important moments in Whole Foods' history:

In 1978, John Mackey opened Safer Way Natural Foods in Austin, Texas.

By 1980, it had merged with another local natural food store, Clarksville Natural Grocery, to open the first Whole Foods Market. This original store was destroyed in a flood in 1981, but the community rallied around it, and it ended up only being out of business for 28 days.

Much of Whole Foods' growth was through mergers and acquisitions. It frequently moved into new markets by buying a local chain and converting it into a Whole Foods. By 1984, Whole Foods had expanded to nearby Houston and had 600 employees. In 1988, the chain bought the Whole Food Company in New Orleans for its first expansion outside of Texas.

On January 23, 1992, Whole Foods went public at a price of $2.125 per share. At the time, the chain had 12 stores across Texas, California, North Carolina and Louisiana. That same year, Whole Foods bought Bread and Circus, bringing the chain to the Northeast.

In 1997, Whole Foods' annual revenue passed the $1 billion mark, with 70 stores in 16 states.

Source: New York Times

In 1997, Whole Foods also launched its 365 Everyday Value private-label brand to fight its "Whole Paycheck" image.

In 2002, workers at a Madison, Wisconsin, store voted to unionize, but it was never certified. Mackey told The New York Times that he is anti-union and ignored workers' concerns, which led to the vote.

Source: New York Times

Also in 2002, Whole Foods expanded internationally for the first time with a store in Toronto.

In 2004, Whole Foods built the largest supermarket in Manhattan with its Time Warner Center location. The store measures 58,000 square feet.

In 2005, the company moved into its current global headquarters in Austin. It covers a full block of the city and sits on top of the largest Whole Foods store in the world.

In 2007, a merger with natural food chain Wild Oats was challenged by the Federal Trade Commission, which cited concerns it would be a natural foods monopoly. Whole Foods relinquished control of 13 stores after the FTC found out Mackey was anonymously writing blog posts that were critical of Wild Oats.

Source: Reuters

In 2007, Whole Foods crossed the pond to open a flagship store in London. It first came to the city after buying local chain Fresh & Wild. At the time, investors were concerned that the UK's grocery market was already a crowded space. Whole Foods currently has nine stores in the country after a dramatic, 40-store plan was scaled back.

Whole Foods stumbled a bit in 2008. The stock fell 76% in one year, and Whole Foods sold a 17% stake to private-equity firm Leonard Green & Partners LP. The firm later exited in 2011 to a profit of about $1 billion.

Source: Law360

In 2013, Whole Foods became the first chain to label all foods made with GMOs.

By 2015, Whole Foods hit another hurdle — organic and natural food became more prevalent and cheaper as more and more competitors got in on the game. Walmart became the largest seller of organic food in the country, and investors became worried Whole Foods might get left behind in a segment of the market they had created.

In 2016, Whole Foods opened a new concept store, 365 by Whole Foods. Stocked primarily with Whole Foods' 356 Everyday Value Brand, the stores are meant to be millennial-focused with a focus on value. The first store opened in the Silver Lake section of Los Angeles.

In 2017, an activist hedge fund, Jana Partners, purchased a stake in the chain, shuffled the board, and pushed it to lower prices to better compete with more mainstream chains.

Mackey, in an interview with Texas Monthly, let loose saying, "Yes, we need to evolve."

He added: "We need to get better, and we're doing that. But these guys just want to sell us, because they think they can make forty or fifty percent in a short period of time. They're greedy bastards, and they're putting a bunch of propaganda out there, trying to destroy my reputation and the reputation of Whole Foods, because it's in their self-interest to do so."

Source: Texas Monthly

Two days after that article was published, it was announced that Amazon would buy Whole Foods for $13.7 billion. After the Whole Foods deal closed in August of that year, Amazon immediately cut prices and started selling the Amazon Echo in the produce aisle, as well as Everyday Value items online.

Source: Business Insider

By June 2018, Amazon had fully integrated its Prime membership program into Whole Foods stores, supplanting Whole Foods' other membership programs. It came with members-only discounts and an extra 10% off. Whole Foods also rolled out pickup and delivery services through Prime Now.

Source: Business Insider

Whole Foods said in February 2019 that it would stop opening new 365 format stores, and it will reportedly convert its current 12 locations to be regular Whole Foods stores.

Source: Business Insider, Yahoo Finance

Whole Foods hasn't quit testing new store formats, however. In March, it opened a small convenience store-like outlet next to one of its Manhattan, New York, stores and called it the Whole Foods Market Daily Shop. It emphasizes local vendors and speedy service.

In April, Whole Foods slashed prices across the store and deepened the discounts available for Prime members, further chipping away at its Whole Paycheck image.

Source: Business Insider

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