Whole Foods Charity Scam

I have always admired Google’s corporate slogan, ‘Don’t Be Evil’.  It’s such a great core value to have permeate through everything you do, and during the relatively short time I got to spend at Google, I really felt that it was built into the fabric of the company.

Fast forward to a Friday night in San Francisco.  For me that involved going to Whole Foods to get some groceries.  Whole Foods is such a feel good place.  They make you feel great about the local, organic products you are buying.   They even ask you if you want to do something good for the community every time you swipe your credit card:

Your total is $49.35.  Would you like to round that up to an even $50 and give that to your local charity?

Nothing says feeling good like giving back.

Except tonight, with my mind unusually clear, it hit me like a ton of bricks: Whole Foods is running a brilliant, legal, and FUCKING LAME charity scam.  Yes, they give that extra 65 cents to charity.  And then they use that 65 cents as a sweet tax break to offset other income.

Quick math: Whole Foods had $12bn in top line revenues last year.  Let’s assume that the average bill is $50, and all WF stores have this charity program, with 20% of transactions participating ( I see it happen all the time ), and the average round up figure being 50 cents.  They can offset $24 million dollars in income.  Assuming a tax rate of roughly 33%, Whole Foods gets $8 million additional cash for you being so charitable. In the grocery business, where margins suck, an additional $8mm in free cash flow is a big deal.

To add insult to this, in San Francisco you are charged for bags now, so most people bring their own when shopping.  When you do, Whole Foods gives you a small credit (5 cents per bag):

I see you brought 3 bags – would you like the credit or would you like to have us donate it to charity?

Sigh.

Whole Foods boasts an incredible culture and set of core values.  Sometimes realizing what is actually going on behind the happy smiles makes me sad.  Not sure it makes them evil, but it’s pretty weak sauce.