Cousin Rob turned me on to Erewhon, albeit mockingly. The grossly overpriced organic food emporium catering to celebrities and L.A.’s most beautiful had just opened its third location in the trendy Abbot Kinney section of Venice. “Who’d pay $38 a pound for a piece of salmon?” he asked in disbelief after visiting the location.
Turns out, a lot of people, including me I’m embarrassed to admit. I skeptically checked out the Venice store when it opened five years ago and took to the place. The prices were obscene, but the quality was exceptional. The store’s prepared foods made Whole Foods’ look like a 7-11, and they offered innovative products like chocolate, vegan, gluten-free Reishi doughnuts, made with tocotrienols, superfoods, and 10 grams of Mattole Valley plant protein. For all I knew tocotrienols cause cancer, but I assumed the ingredients were good for me and regularly forked out $7 for the pricey doughnut, abandoning my normal cheapskate self.
You might have as well, if you tasted an Erewhon Reishi doughnut. They’re so incredibly yummy!
I justified paying the Erewhon’s stratospheric prices on the assumption that organic and presumably healthy ingredients like tocotrienols simply cost more. I was told that Erewhon was locally owned by a couple with roots in Los Angeles, which made me feel good. I like to support local businesses and entrepreneurs who are part of my community.
Erewhon’s prices have been climbing in recent years, but the quality of its customer experience has markedly declined as it continues to expand. When I first shopped at the Venice store, the staff was friendly and so was the clientele. There was a neighborhood feel to the place. I knew the managers and many of the cashiers.
No longer. The Venice store has become impersonal, and the Santa Monica store, which opened three years ago, even more so. The staff at the Erewhon locations I’ve visited strike me as fearful and not loving their jobs. Erewhon also has some quality control issues. The prepared foods section at the Santa Monica store isn’t of the same quality as the more established stores. A container of beef and barley soup I recently purchased didn’t have its normally thick consistency or the usual amount of beef. Clara Peller of Wendy’s fame would have been disappointed.
The declining standards are hardly a surprise. Erewhon once posted a telephone number customers could text that would go directly to the company’s CEO and founder. I once sent a message and the owner responded within minutes. The company has obviously grown too big for him to be concerned about day-to-day activities.
Admittedly, I’m an embittered Erewhon customer. A store manager at the Beverly location in July falsely accused me of stealing. It was a publicly humiliating experience, one that I previously wrote about. I sent an email to the company’s management, which sided with the manager. I’m not a litigious sort, but I briefly pondered exploring a lawsuit because of the embarrassment I suffered. I dropped the idea because I still imagined Erewhon was owned by a well-meaning L.A. couple.
Even before the false shoplifting accusation, Erewhon had destroyed much of the goodwill it once enjoyed with me. During the pandemic, when regulations prohibited customers from reusing their bags, Erewhon leveraged the opportunity by doubling its bag charge to 20 cents. Erewhon cashiers are trained to double bag customer groceries, allowing the store to further profit from the price increase. L.A. law requires a 10-cent bag charge, which is the price that every store in town I frequent levies. As an act of goodwill, many stores dispensed with the 10-cent charge because customers couldn’t bring their own bags, which the levy was intended to encourage.
There is nothing about Erewhon’s bags that I can tell that warrant the 10-cents premium except they say Erewhon on them. Admittedly, for Angelenos willing to pay $150 for Erewhon-branded sweatpants, paying 10 cents extra to showcase you bought your food at Erewhon might be a worthy justification, but I viewed the charge as pure greed — the sort of greed I associate with private equity.
Sure enough, I just discovered, private equity has gotten its greedy tentacles in Erewhon. And the couple running Erewhon don’t strike me as the sorts of business people I like to support.
The L.A. Times on Thursday published a gushing profile of Erewhon that served as another example why it’s a deservedly failing publication. Erewhon already has garnered gushing press in the New York Times, Vanity Fair, and elsewhere. It’s noteworthy that the Times, which is always decrying white privilege and racism, would celebrate a store that is the embodiment of white privilege. All Erewhon stores are in affluent white areas, including Calabasas, whose celebrity residents include the Kardashians.
In the five years I’ve shopped at Erewhon, I’ve rarely encountered a Black person shopping there. Yet, the Times featured a Black person in the photo accompanying its Erewhon puff piece.
The Times glossed over one significant detail that was news to me. In 2019, Erewhon received a significant investment from the New York-based private equity firm Stripes, whose other well-known portfolio companies include Grubhub, Blue Apron, and GoFundMe. Much to my dismay, Stripes has its paws in other brands whose products until now I viewed positively, including Grain Free Tortilla Chips and Stella & Chewy’s, which claims to make all-natural raw pet food and kibble. I say claims because private equity’s involvement in pet care should give dog and cat owners considerable concern. Stripes is also behind Upwork, a freelance-for-hire marketplace I’ve used and don’t recommend.
Stripes, with $7.5 billion under management, has somehow escaped the media limelight, surprising given that it is one of the most successful private equity firms of its kind. Since its launch in 2008, Stripes has generated an aggregate internal rate of return, net of fees, of 46 percent, according to a recent Bloomberg story. Stripes’ fourth fund was running at more than 62 percent as of June 30, which Bloomberg said placed it No. 1 among similar sized and focused funds.
Stripes was founded by Ken Fox, a Philadelphia native who earlier ran Internet Capital Group, a publicly traded tech investment fund that cratered with the dotcom crash. Fox’s corporate bio says Erewhon is among the portfolio companies he’s actively involved in. Mmm. I wonder where the idea of charging 20 cents for a bag in the midst of a pandemic came from?
Fox has an undergraduate degree from Pennsylvania State University, but I couldn’t find much more about the guy except that he fits my stereotype about the kinds of people working in private equity. The New York Post reported in June 2017 that more than 300 neighbors signed a petition urging Southampton zoning officials to reject Fox’s plans to build a McMansion on an environmentally fragile lake. Fox’s lawyer is quoted as saying that Fox “has a right” to build the house.
How ironic that the expansion of the famed organic and sustainable food emporium in one of the most climate conscious states is funded by a company whose CEO wanted to build his estate on an environmentally fragile lake.
Erewhon’s CEO is Tony Antoci; his wife Josephine oversees products. The couple earlier ran a food distribution business, which they sold to Sysco in 2009. Antoci obviously did well for himself because he was only 43 at the time and planned to retire. He became restless after only six months.
Tony and Josephine acquired Erewhon in 2011 when it was a one store business on Beverly Boulevard, according to a profile in Wealth Advisor. In 2019, when Stripes invested in Erewhon, the store’s sq. ft. returns were four times the industry average. And that was before it charged 20 cents a bag.
Antoci told the L.A. Times that he has big plans for Erewhon, planning to expand into other lily-white rich enclaves such Newport Beach, Laguna Beach, and Santa Barbara. Manhattan is “definitely on the plate,” which will be helpful creating buzz for the public offering Stripes likely plans to “unlock” the value of its Erewhon investment.
Notably, Antoci vowed he’d never sell out to Amazon, which acquired Whole Foods four years ago for $13.7 billion.
“My biggest fear is what they’ve done (to Whole Foods),” Antoci said of Amazon. “I would never in a million years want to sell to Amazon. Because I mean, Amazon’s Amazon, they’ll always be there. But we’re unique. We can’t be on that road map — that’s what makes us special — or we’re going to be just like them.”
The Times also took a swipe at Amazon, noting that Whole Foods now offers “10-for-$11 Greek yogurt cups.”
As a big consumer of Greek yogurt, count me among those who appreciate how Amazon significantly reduced prices on Whole Foods products I routinely buy. I’ve easily saved hundreds of dollars a year on my grocery bill because of those reductions. The same artisan bread that Erewhon sales for $8, you can buy at Whole Foods for $1 less. Whole Foods only charges 10 cents a bag to carry your groceries.
To facilitate its expansion, Erewhon just signed a distribution deal with KeHe Distributors, an Illinois-based company that says it is “fueled by an obsession with natural & organic, specialty, and fresh products.” The company’s trademark registered slogan is, “Where KeHe Goes, Goodness Follows.” I was saddened to learn that KeHE is also backed by private equity.
I’d like to trademark this slogan: “Public good rarely results from private equity investment.” Organic and sustainable farming does cost more, but I’m doubtful that farmers and artisan food suppliers will be the ultimate beneficiaries of the “efficiencies” private equity will implement. A food emporium backed by a private equity firm realizing more than 60 percent investment returns will face considerable pressure to cut corners. The organic food industry is rife with big talkers who eventually lost sight of their purported lofty visions as they grew their businesses.
One such company was San Francisco-based Belcampo, which billed itself as a sustainable butcher and farm. Belcampo in October closed its restaurants and stores, including one a stone’s throw away from Erewhon’s Santa Monica location, after it was revealed it was selling meats from other purveyors under its own name, all the while raising its prices.
Erewhon until recently prominently featured Belcampo’s meat products.