A stone's throw from Hyde Park, hard-hatted construction workers are hard at it 24 hours a day to create the world's biggest organic department store. After 135 years, Barkers of Kensington, west London's oldest and grandest department store, is under new management. John Mackey, a scruffy-haired American vegan, has bought Barkers and is turning it into the first British branch of his store, Whole Foods Market.

Whole Foods may not yet be a household name in Britain but, if Mackey has his way, it soon will be. The supermarket chain is the food-retail phenomenon of the US. While most food giants are piling it high and selling it cheap, Whole Foods is focusing on quality at high prices - and reaping the profits. The firm sells organic and chemical-free food at prices far higher than its rivals, but the speed of its growth has made it America's fourth-largest chain and the world's biggest, and most profitable, organic grocer. Mackey is doing for US supermarkets what Pret A Manger's Julian Metcalfe did for British sandwich bars - mixing natural ingredients and customer service in a way that appeals to consumers who want something better for themselves and the environment and are willing to pay more to get it. Celebrities are regularly spotted browsing the aisles: Angelina Jolie was photographed recently in the New York store; Kirsten Dunst and Jake Gyllenhaal in the Hollywood outlet.

Last month, Mackey, 52, invited Observer Food Monthly to see meet him at the Whole Foods store in Union Square, New York. Whereas many US corporate bosses like to remind journalists how important they are - McDonald's chief executive Jim Skinner has been known to summon reporters to Chicago, only to conduct a telephone interview because he is too busy to leave his office; and it is impossible to get into Coca-Cola's Atlanta headquarters, let alone talk to anyone, without at least four PR minders - John Mackey is down-to-earth and accessible.

Mackey, who always books the cheapest hotel and rents bottom-of-the-range hire cars, is staying today at at the Marriott hotel in mid-town Manhattan. He answers the phone immediately: 'I'll see you in five minutes in the lobby grill.' He's wearing Montrail running shoes, khaki trousers, an out-of-shape polo shirt and a silver Patagonia anorak. He's got no mobile phone, no BlackBerry, not even a pen. His hair is grey, thinning and lank. 'I only got a few hours sleep last night,' he says. 'I was up late with a friend, having dinner, eating and drinking lots of wine.'

As he scans the menu in vain for a vegan muffin, Mackey asks: 'Are you familiar with Abraham Maslow's hierarchy of needs? His theory is that our first and most important needs are physical - food, water, sex. When those needs get met, other needs begin to assert themselves - safety, belonging, having a sense of love and friendship, then self-esteem. Beyond that it is self-actualisation.'

Whole Foods' journey to self-actualisation has taken time - some 25 years so far - and Britain is the company's first overseas investment. Mackey is anticipating a certain amount of scepticism. 'They said our first store in Austin would not work. Then they said it would not work outside Austin, that it would not work outside Texas, that we would never succeed in California or Chicago or New York. People dismissed us sort of a fad, just a bunch of weird food hippies. But we've proved them wrong everywhere we've gone, and we'll carry on.'

Over the last two-and-a-half decades, Mackey has proved almost everyone wrong and, in the process, has turned conventional business wisdom on its head. He has transformed 'hippy business' from a recipe for disaster to a prescription for world-beating - and, perhaps, world-changing - growth. Whole Foods is battling the industrialisation of farming. It sells natural food from reputable, small-scale suppliers. It is also overturning the convention that grocery jobs are 'McJobs'. Staff in Whole Foods' two New York superstores seem genuinely pleased to be working in a supermarket and are happy to show shoppers where to find transfat-free Oreos and to explain that Whole Foods' fresh fish comes from day boats, working out of the firm's own docks in Maine.

Sausages made from humanely treated animals, ice cream without artificial sweeteners and nitrate-free prosciutto do not come cheap, however, and Whole Foods' prices have lent the chain an unflattering nickname in the US: Whole Paycheck. Yet the store is offering more than just food; the 2004 annual report spoke of a 'virtuous circle entwining the food chain, human beings, and the earth; each reliant upon the others through a delicate symbiosis.'

All of which might have remained empty pieties had the young Mackey enjoyed more success sowing his own wild oats. In 1978, Mackey was a philosophy and religion student at Texas University in Austin. He had been single for months and was desperate for a girlfriend. So he gave up T-bone steaks and joined a university vegetarian co-op, thinking he might meet attractive women. 'I was in my early 20s and open to alternative lifestyles. I thought, "I bet you get a lot of attractive, interesting women in a vegetarian co-op".'

He was right. He met Renee Lawson Hardy. They started dating, both dropped out of university and borrowed $10,000 to launch SaferWay, the first vegetarian supermarket in Austin and, indeed, in the state of Texas. There was a store on the first floor, a health-food restaurant on the second, and a bed on the third. The pair had so little money they used a hosepipe at the back of the store for their morning shower. Floods and cash crises nearly finished them off but somehow, every morning, farmers in muddy boots turned up at their back door with tractor-loads of fresh fruit and veg.

After two years SaferWay merged with a local natural-food store to form Whole Foods. Educated consumers - Austin is a university town - flocked to the store. In 1992 the company went public on the Nasdaq, giving it the financial muscle to go on a buying spree. It picked up natural-food chains, including Freshfields and Bread & Circus. During the 1990s, sales grew at a massive 32 per cent a year and earnings by 20 per cent a year.

In the 1990s Whole Foods benefited from the consumer backlash against 'big food'. Exposés of food production and retailing, such as Eric Schlosser's Fast Food Nation and Greg Critser's Fat Land: How Americans became the fattest people in the world, sent consumers rushing to Mackey's stores. Retail analysts Datamonitor say the percentage of natural and organic-food consumers in the US doubled between 1995 and 2000.

'Twenty-five years ago we were very much on the fringe,' Mackey says. 'It has only been in the last few years that we have moved into the mainstream. We have not really changed. What has changed is that the world has begun to move closer to us.' Today, Whole Foods has 180 stores across America and annual sales of $4.7bn. The firm's stock trades at an average of $120 - 20 times its initial listing - valuing the company at almost $5bn. Sales are expected to top $12bn in the US by 2010.

There are dozens of socially responsible retailers around the world who dream of turning the normal rules of business on their head. Most, however, become victims of their own desire to do good, regardless of the cost. From the outset, Mackey has combined his 'yogurt-knitting' values with a ruthless control of production and profits. 'We are Whole Foods, not holy foods,' he says.

Hippy-style management rules mean that staff get to vote on company-wide initiatives; that no worker - not even Mackey - earns more than 14 times the salary of the lowest-paid staff member; and that senior management meetings end with executives 'saying something nice' about each other. Nonetheless, such is the strength of the firm's corporate drive that Whole Foods has earned the not-altogether-complimentary nickname, 'the Wal-Mart of wheatgerm'.

Unlike many ethical bosses, Mackey - in search of 'principles and profits' - is opposed to workers joining unions. Having unions, he once said, is 'like having herpes. It doesn't kill you but it's unpleasant and inconvenient and it stops a lot of people from becoming your lover.' Like its nemesis Wal-Mart, Whole Foods remain un-unionised. But Mackey claims he looks after his workers - and they, in turn, take care of the firm. Most shop-floor Whole Foods staff net around $30,000 a year, plus health insurance - a better package than the US average. Mackey himself earns $400,000 a year but declines to state his overall worth.

Competitiveness extends to the process of staff selection, in an attempt to ensure that Whole Foods retains the kind of workers who offer better customer service than other supermarkets. Mackey divides workers in each store into eight teams in different departments, ranging from cashier to sushi maker. When new employees join the company they are assigned to a team and put on two months' probation. Before they can become permanent staff, they have to be approved by a two-thirds majority of existing team members in a secret ballot. Pay is linked to the performance of the team as a whole.

The more you talk to Mackey the more you spot inconsistencies. He is pro-employee but anti-union; pro-consumer but charges eye-watering prices. He is a vegan but pokes fun at 'crunchy granola types', and celebrates the fact that 'Republicans shop in our stores, upsetting many of our core customers'. But, he argues, this is a strength. 'Why is it important to be monolithically consistent? Who is? Human beings are made up of many different values and sometimes those values are in tension with each other. We want to be loving and yet strong, successful and yet be generous. The trick is to balance them out.'

Mackey's own life is pretty much in balance. During the week, he lives in Austin, from where he runs his business, but on Friday nights he drives 40 miles out into the Texas bush to the 720-acre farm he owns with his wife, Deborah Morin, 45, whom he married 14 years ago after breaking up with his former love, Mary Kay Hagen. The couple do not have children - 'My wife did not really want to have kids, so we did not have them' - but Mackey is still close to Hagen's three daughters, who she had before she and Mackey got together. 'I'm very close to them. The youngest was two when I first got together with Mary Kay, so I helped to raise her up. I got some of the fatherhood stuff that way.'

Mackey is generous with his wealth, giving away up to $1m a year to animal-welfare groups, educational groups, relief-work charities and 'several spiritual movements'. He lectures at university 'on the horrors of factory farming'. Factory farms, he told a recent audience at Princeton University, will be declared illegal within 30 years. It sounds far-fetched. But 30 years ago, so did an organic supermarket in the home of rednecks and red meat.

Creating the world's first organic department store in London might also sound like an idea ahead of its time, but Mackey believes Britons will bite. 'Customers want high-quality food, good service and good store experience, and most retailers fail to deliver on those.' Which might be true in America, but Britain already has established high-quality chains selling organic food. What can a Whole Foods department store offer that a Waitrose or Marks & Spencer supermarket does not? Mackey believes the key will be customer service. 'We'll do things that people have not seen before. People will get excited.'

He has done his homework. In 2004, he spent £21m taking over the Fresh & Wild chain of upmarket organic grocery shops in London. He has spent a lot of time in London shopping in rival stores and eating at his favourite London restaurant, Alan Yau's modern Chinese, Hakkasan, which he describes as 'as good as, if not better than, anywhere I have eaten in the US'.

He won't give away any secrets of the Barkers development, but if the New York stores are anything to go by, we can look forward to the kind of stylish, high-quality in-store restaurants we actually want to eat in. Mackey loves British cheese so much that you can eat Neal's Yard cheddar in the cafe of his Union Square store. Stand by for the wonderful Humboldt Fog goat's cheese from northern California. There will be free cookery classes, a walk-in beer cooler and an organic baby-clothing section. The shelves will be well stocked in the evening, when most British supermarkets only have leftovers on sale.

With high ceilings, natural wood and well-lit, wide aisles, the design will be a cross between M&S Simply Food and Selfridges. Trolley escalators will take shoppers and their carts up and down the three-storey store. Customers will be given a choice of eco-friendly carrier bags. They will even be able to get a massage. Perhaps boldest of all, Mackey wants to teach us a new way to queue. Instead of lining up behind a single till and hoping the queue moves more quickly than the others, Whole Foods' shoppers form four parallel lines and wait for a real-life - not an electronic - queue caller to direct them to the one of a 30-strong bank of cashiers. He claims the new system will serve a shopper every four seconds.

Mackey arrives back in London next month to finalise plans for his organic invasion. He has bad news for Fresh & Wild, however. 'As we open Whole Foods, we want to fold Fresh & Wild into the new stores. There is not much point in having a Fresh & Wild near a Whole Foods.'

Fresh & Wild, though, is a popular chain, and closing it down is a risky way to start a retail revolution. But Mackey is not worried. 'Fresh & Wild is a London thing and we are looking across the UK, to open in Edinburgh, Bristol, Cambridge, Oxford. Whole Foods is unique. Fresh & Wild stores do phenomenally well for their size but when customers see what we are doing in Whole Foods, they won't think twice.' And with that, my time is up. The anti-establishment hero of the health-food movement picks up his anorak, pauses to ask me not to 'use that quote about unions being like herpes. It was a bad joke' - and runs out in his sneakers. Time waits for no entrepreneur, especially one spreading the gospel of peace, love and the bottom line.