whole food

CASE STUDY & ANALYSIS: Whole Foods Market in 2010: Vision, Core Values and Strategy

Group MembersAhona Azad Choyti (59)

Ayasha Sultana (62)

Shamroze Nurul Abedin

(68)

Rakshanda Zihan (72)

Raka Tabassum (76)

Anas M.A. Sami (78)

Md. Shabit Shafiullah (80)

Wasiur Rahman (96)

Ashhab Zaman Rafid (97)

Farhan Khaled (109)

Md. Mehedi Hasan (112)

Nabil Ahmed Khan (114)

BBA 19 B-5

Institute of Business Administration, University of Dhaka

INTRODUCTION

Company Overview• Whole Foods Market, Inc. (Whole Foods

Market), incorporated on August 15, 1980, is a retailer of natural and organic foods.

• The Company operates in one segment: natural and organic foods supermarkets.

• It is a leader in this segment with 8 billion USD sales in 2009

• It operates 289 stores in the United States, Canada, and the United Kingdom by 2010

Core Values• Selling the highest quality natural and

organic products available• Satisfying and delighting our customers • Team member happiness & excellence • Creating wealth through Profits &

Growth• Caring about our communities & our

environment • Creating on going win-win partnerships

with our suppliers• Promoting the health of our

stakeholders through healthy eating education

Vision

To set the standard for excellence in food retailing

Mission

“Whole Foods, Whole People, Whole Planet”

Mission & Vision

Core Competencies• Of the resources and capabilities of

Whole Foods, its core competency lies in its dominance of the organic market

• With close to 289 stores, and the ability to target its locations towards smarter, more health conscious consumers.

• The company is better managed and employed to provide the information an organically inclined customer would need as compared to traditional stores carrying only some organic products. 

• Critical factors for Whole Foods' success include its reputation, trust, and friendship among its customers and suppliers,

INDUSTRY ANALYSIS : EXTERNAL

Industry Overview

$4.9 billion

sales in 2008

20% Annual

Growth Rate $52 billion

global sales

13%

increase every year

Industry Overview

9% growth of

the organic Industry

4.1Acres in

2005 17,600 certified farmers

35% more

profitable

Porters Five Forces

Bargaining

Power of

Suppliers

Low to Medium

• Sourcing from local small producers

• Strict quality parameters

• MNCs are gradually buying up the small producers

Porters Five Forces

Bargaining

Power of

Buyers

Medium to High

• Market demand rapidly increasing

• Many sellers but most of the buying happens at recognized chains

• Buyers do not have any switching cost

Porters Five Forces

Rivalry HIGH

• Independent Supermarkets

• Merchandisers Super Centers

• Wholesale Clubs

• Fast food chains

• Natural food stores

Porters Five Forces

Threat of

Substitutes

Medium to Low

• Non Organic Products

• Patronizing local farmer markets

Porters Five Forces

Threat of New Entrant

s

LOW

• High cost low margin nature of the industry

• Big Economies of Scale

• Largest 50 companies responsible for 70 percent of revenue

Opportunities and Threats

O

Opportunities

• Nation wide appeal • Niche market• Niche product• Small number of competitors • Increasing awareness of organic

product• Potential market segments • Leading organic producer • Retail innovation and capitalism • Growth in private label product

Opportunities and Threats

Threats

• Peoples ignorance about organic product

• High profit provokes new entrant

• Competitors• Substitute product • Government takeover• Labeling and other regulations• High bargaining power of

suppliers of natural and organic foods

• Weak economic result

T

COMPANY ANALYSIS : INTERNAL

Strength & Weakness

S

Strength

• Pioneers in natural food supermarket• Sustainable growth over the years• Successful win-win acquisition contracts• Clearly defined motto• Well classified niche market focused

strategies• Wide Range of Products• Smooth Distribution Channels

Strength & Weakness

Weakness

• High Priced Items

• Acquired Debt as a result of acquisition

• Increased store expenses

W

Financial Conditions

$ (‘000) 2009 2008 2007 2006

Sales 8,031,620 7,953,912 6,591,773 5,607,376

Gross Profit 2,754,310 2,706,705 2,296,603 1,959,642

Net Income 146,804 114,524 182,740 203,628

Basic EPS 0.85 0.82 1.30 1.46

Net Worth $ 3,783,388

Financial Conditions

2009 2008 2007 20060

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

Sales Gross Profit

Financial Conditions

2009 2008 2007 20060

50,000

100,000

150,000

200,000

250,000

Net Income

Net Income

2009 2008 2007 20060

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

EPS

EPS

BCG MATRIX

• Product Development

• Market Penetration

• Market Integration

• Product Development

• Divestiture• Market

Integration• Market

Penetration

• Diversification• Product

Development• Divestiture• Retrenchment

• Divestiture• Retrenchment• Liquidation

Market Analysis

Organic; 4%

Non-Organic; 96%

US Grocery Market Size by Sales, 2011

Organic Non-Organic

• Despite only 4%, sales are increasing

• Organic industry summed to a sale of $31.5 billion, resulting in a growth of 9.5%

Market Analysis

Whole Foods Market Map

• Present widely in USA

• Presence in certain states of Canada and UK

Customer Analysis

Higher the earning, lower the unemployment rate

Customer Analysis

According to Great Gatsby Curve, USA is especially unequal and has low mobility

CURRENT STRATEGIC POSITION

• Value-added pricing strategy

• Delighting customers with service they cannot get anywhere else

• “A narrow market niche where buyers needs and preferences are distinctively different”

• “Features and attributes tailored to the tastes and requirements of niche members”

General Strategy

• Expansion and Acquisition e.g. Purchased the struggling Wild Oats Markets, their biggest competitors

• Creating Barriers for entry• Expansion into new and existing

areas. Opening new stores in upscale areas and suburbs of major metropolitan areas and also to acquire existing stores

• Expanding into International market• Relocating smaller stores to larger

sites with more visibility and parking.

Operations Strategy

• Stock repurchase of up to 200 million USD over 4 years

• Very strong cash flows from operations prior to wild oats acquisition making new stores possible without any substantial long term debts

Financing Strategy

• Advertising o Word of Moutho TVCo Print, online, billboard, in-store

ads

• Websiteo E-newsletter o Cooking tips, company blogs,

store locatoro Facebook/Twitter Page

Promotional Strategy

• Product and brand selection does vary from store to store

• Large scale stores include around 30,000 natural, organic, and gourmet food and nonfood items

Product Line Variety

EVALUATION OF CURRENT STRATEGY

FIT TEST

• Growth strategy complements industry’s exponential growth

• Caters to the ‘go green’ and ‘healthy eating’ trends

• Motto of Whole Foods backed up by actionso Whole Foods – best quality natural

produceo Whole People – customer and

employee satisfactiono Whole Planet – community

development

How Sound is the Strategy?

COMPETITIVE ADVANTAGE TEST

• Number 1 player in the natural and organic foods market

• Specializes in providing a different “lifestyle” and making it appealing

o Customers are in for a healthy experience – groceries along with restaurants, educational classes, juice bars, etc.

o Giving customers what they want – varied product line and merchandising options

o Employee empowerment – transparency and decision making

How Sound is the Strategy?

PERFORMANCE TEST

• Delivering on each promiseo Selling highest quality food at

competitive prices o Touching the lives of customers and

employeeso Team member happiness o Helping the environmento Profitable return on investment

How Sound is the Strategy?

How Sound is the Strategy?

FIT TESTCOMPETITIVE ADVANTAGE

TEST

PERFORMANCE TEST

“Well Matched, Winning

Strategy”

Key Strategic Question

How can Whole Foods Market remain successful by

• increasing their customer base – attracting nonorganic buyers?

• drawing away customers from competitors?

• increasing purchase volume and frequency?

Strategic Problems

• Economic downturn in the US

• Increasing competition – saturation of conventional, lower priced grocery chains

• Rising demand for high quality low priced foods

• Scarce supply of naturally grown food

• Uncertainty about the future of organic market

New Strategic Issues

ALTERNATIVES & EVALUATION

CONS

• Increased advertising cost

• Increased employee involvement in marketing and promotional activities- tying up human resources

PROS

• Increase in market size.

• Increased brand awareness.

• Improved public relation leading to customer acceptance and employee attraction.

Emphasize on Marketing Strategies

CONS

• Reduction of growth

• Possible reduction in store size

PROS

• Efficient Use of Buying Power

• Possible deflation of prices

• Increasing customer base

Increasing Profit & Cutting Costs

CONS

• Reduced profit due to reinvestment of internal cash flows

• Market analysis may prove to be costly

• Inventory will be limited.

PROS

• Steady growth maintained

• Economically suitable for smaller places

• Allows expansion without increasing long term debt

Building on smaller store strategy

CONS

• Increased complexity of management

• More employees required

• Production will be seasonal

• Increased storage and inventory cost

PROS

• Absence of middle man

• Lower cost products

• Creation of employment opportunities

Vertical Integration of Supply Chain

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