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Outpacing Whole Foods Means Not Charging Whole Paycheck

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Wegmans offers none of the priciness -- just all of the profits.

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The best supermarket chain in the US isn't a public company. It treats its workers well, and has been ranked the top company to work for by Fortune magazine. Among grocery chains and big-box stores, it's the anti-chain chain, a happy outcast. It's sort of like Whole Foods (WFMI) without the pretense.

The company is Wegmans, a family-owned business and one of the largest private companies in the country. This year, it ranked fifth on Fortune's list of the 100 Best Companies to Work For -- a list it's been on every year since the rankings began in 1998. It held the top spot in 2005. Like a high-school sweetheart, I've never heard anything unpleasant said about it.

For contrast, let's take a look at Whole Foods. As Minyanville's Nico Carbellano writes:

"While Whole Foods preaches a gospel of 'self-actualization' for 'team members' -- employees, to call them by their more familiar, if less actualized name -- [it's] passionately opposed to unionization. In fact, its CEO has gone so far as to say having unions is like 'having herpes... It's unpleasant and inconvenient and it stops a lot of people from becoming your lover.' "

[And while it also] "claims to be pro-consumer, its prices have earned it a less-than-groovy nickname: Whole Paycheck."

Wegmans is based in Rochester, New York, and has stores in New York, New Jersey, Pennsylvania, Maryland, and Virginia. Nearly 5 years ago, one opened near the town where I grew up. People greeted it like adoring fans waiting for a pop star, and the shopping experience is almost religious in tone.

The company tries to make its stores resemble a European open-air market: There's fresh produce, artisan breads, fresh baked goods, fresh-caught seafood, meat, deli products, imported cheeses, and international foods. But unlike Whole Foods, it doesn't shun the usual groceries and household items found in other supermarkets (Oreos, anyone?) -- and it doesn't make you feel like you have to instantly recognize authentic Spanish manchego in order to shop there.

Customers of Wegmans feel an extreme loyalty -- one might almost call it an obsession. Wegmans assiduously cultivates this devotion, because shoppers who are emotionally connected to a supermarket tend to spend more -- 46% more, to be exact, according to one Gallup survey.

The company says it receives thousands of letters a year from people who want a Wegmans in their hometown. To cite just one example: In February 2006, dozens of the residents of Prince William County, Virginia, showed up to support a proposed Wegmans location wearing big red "Wegmans Now" buttons. Try to picture that happening to Wal-Mart (WMT) or Kroger's (KR).
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No positions in stocks mentioned.

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