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Rhett Williams
Columbia College
MGMT 479
Whole Foods Market 2
Introduction
Whole Foods Market is the largest natural food supermarket in the United States. The
company has a strong workforce of 32000 employees and runs 172 stores in the United States,
Canada, and the United Kingdom. John Mackey first started the company as a natural grocery
store in 1978. The store failed to meet most wanted results due to its small location, which
facilitated only limited selection. Moreover, the store zeroed in on only vegetarian foods. Later,
he decided to associate with Craig Weller and Mark Skiles to start Whole Foods Market in
Austin, Texas, in 1980. The company purchased Allegro Coffee Company in 1997 and it became
its coffee roasting and distribution centre later on. In 1996, the company purchased Pigeon Cove,
which is the only supermarket in the country own and operate a waterfront seafood facility.
Basically, Whole Foods is specialized in selling of natural food, which is free from growth
hormones and antibiotics and organic food, which confirms to US standards set by the United
States Department of Agriculture. The company was recognized by fortune as one of the 100
Vision of the company is to offer high-quality food and engage in ethical business
practices. Whole Foods firmly believes that the best tasting and nutritious would be preserved if
the food is not added with sweeteners, colorings and preservatives. The company aims to attain
motivational and respectful work environment. To achieve this, the company encourages each
store to make independent decisions with respect to its operations. In addition to this, it aims to
attain more than 100% customer satisfaction. In order to obtain this, Whole Foods intend to
To meet it’s vision of more than 100 percent customer satisfaction, the company
attempted in various ways. It endeavored to influence the customer through various practices,
such as home delivery and cooking classes. In an attempt to get recognition, the company
involved in various charity activities and active to ensure that animals used in their products are
treated humanely.
Low prices and convenience are major factors to lure consumers towards supermarkets.
In order to retain customers, companies need to offer various rewards, which would put more
now days have the practice of accommodating banks, pharmacies and coffee shops inside their
premises. Any effective business model followed by the players in the industry is replicated by
other players without any time delay, leading to severe competition. Moreover, players sometime
SWOT Analysis
Strength:
The company has two procurement centers and several bake houses to distribute the
products to their stores. Whole Foods sources its required products from local suppliers. The
company could bargain for discounts from its suppliers, given the large-scale purchases. By
sourcing products from local suppliers, the company is benefited in the following ways, it is seen
as supporting the community and it is in a better position to handle perishable goods. The
distribution system adopted by the company instigated it to focus more on perishable goods,
where it achieved peak. The company followed the practice of percolating the learning from one
Whole Foods Market 4
store to entire chain. As a result of this practice, the company was able to maximize its
Opportunity:
In contrast to traditional grocery stores, Whole Foods offers various products that suit the
need of people in different geographic regions. With the help of this model, the company
reached various consumers across the country. Basically, Baby Boomers are health conscious
and could afford to pay premium prices for healthy foods. Demand for organic foods, which is
days ahead. Furthermore, demand for natural foods is expected to grow by 8-9% and the
company is likely to tap this successfully. Potential demand for prepared meals from working
families is another area of opportunity for the company. Whole Foods is well equipped to tap
this demand with its products, such as Whole Kitchen. Lack of availability of reputed nutritional
brand in the country provides an opportunity for the company. The company already has three
Weakness:
Whole Foods Market 5
Generally, the larger grocery chains in the country are more flexible in terms of product
offerings and mostly; they intend to promote their products from their sales. Whole Foods never
adopted this strategy and consequently, it would likely to face severe competition from larger
grocery chains. The company spent only 0.5% of their sales on advertisement and largely
Threat:
Availability of prime store locations and supply of organic foods seem to be a major
threat for the company. Mostly, the company aimed to open stores, where customers are well
educated. Because, Whole Foods believes that they may be getting higher salaries and willing to
pay higher prices. Generally, farmers do not farm organic corps, primarily due to strict
government regulations and more effort intensive. Given the increased offerings of organic foods
by conventional super markets, the demand is likely to outstrip the supply in future. As organic
food is one of the major offerings of the company, any contraction in its supply, in the wake of
Competitor analysis
The objective of this analysis is to identify competitor’s strategies, how the competitor
may reach to Whole Foods actions and how the competitor’s behavior would influence Whole
Major strategy adopted by Trader Joe’s is to expand its presence and product offerings
with an intention to maintain high quality with low prices. This low cost strategy of the company
resulted in low cost structure, which enabled the company maintain high margins. Average size
of Trader Joe’s stores was around 10000 square feet. Wild oats is relatively smaller player
compared to Whole Foods and Trader Joe’s. Unlike founders of Whole Foods, Wild Oats’s
Whole Foods Market 6
founders did not have good understanding of the grocery business. They firmly believe in their
employees to understand the business. With the lack of business knowledge of the founders, it
would be difficult for the company to withstand in the long-term as employees would not make
them understand the nitty-gritty of the business. Hence, likelihood of getting effective guidance
When compare the sales of natural and organic foods of the three companies, growth of
Whole Foods and Trader Joes’ witnessed a drop, however, Wild Oats saw a moderate growth.
Trader Joe’s reported good sales, however, it was lower than sales growth of Whole Foods.
Being a biggest competitor to Whole Foods, Trader Joe’s sales were close to Whole Foods.
However, over a period of time sales of Whole Foods grew much faster than that of Trader Joe’s.
3500 $mn
3000
2500
2000
1500
1000
500
0
2000 2001 2002 2003
Whole Foods Trader Joe's Wild Oats
Given the relatively small scale of operations, it is unlikely that Whole Foods would face
stiff competition from Wild Oats. Despite there is a close competition between Whole Foods and
Trader Joe’s, Whole Foods is having an edge over Trader Joe’s, given the large size of its stores.
Financials
From 2000 to 2004, sales of the Whole Foods grew by whopping 87%. The company
was able to achieve this tremendous growth despite unfavorable economic conditions. Further,
company’s net income also witnessed significant rise during the same period. This enormous
growth in net income was primarily supported by the company’s expansion and acquisition
strategy. In view of consistent growth in the net income, the company’s retained earnings have
Company’s various strategies to achieve efficiency, such as absorbing the learning from
one store to entire chain and thereby increasing efficiency, started showing good results. It is
evident from its unchanged proportion of operating expenses and cost of revenue to total
revenues.
From 2002 to 2004, the company exhibited strong liquidity position by having around 5
current assets for each current liability. Interest expenses of the company have been declining,
which was mainly due to company’s ability to ask for low interest from the lenders.
Due to lower interest expenses and significant increase in operating income, interest
coverage ratio achieved its peak value in 2004. The company was desirous to tap the capital
market on the back of steep appreciation of its stock prices, which increased by 1000% in 10
year period of time. This intention of the company was clearly evident from the declining debt-
equity ratio.
Whole Foods Market 8
2. Sound financials
3. Prepared meals
4. Private labels
The company follows the policy of procuring foods from local suppliers and this policy
would help the company understand the local trends. Moreover, suppliers are benefited in terms
of large scale business from the company and would be committed to supply the products on
time. Under this practice, Whole Foods is also benefited in terms of more discounts on the
The company reported significant rise in its revenues and is likely to increase further on
the back of upward sales projection for natural products. Expansion and acquisition plans of the
company resulted in strong growth in net income, which led to huge retained earnings. In future,
the company could use these retained earnings to partly finance their expansion plans. Further,
relatively lower debt position of the company would place it in a better position to raise funds to
In view of surge in working women population, the demand for prepared foods has been
increasing. The company could serve this category of customers in the wake of its adaptability in
accordance with changing consumer preferences. Apart from prepared meals, company’s private
Generally, the company highly emphasizes on its quality and services and uses these two
factors as a mean to stand out from its competitors. In recent times, demand for nutritional
products heavily increased due to emergence of more diet plans by the people in the country.
This rise in demand for nutritional products gave great opportunity for the company.
Issues
1. Store locations
Generally, Whole Foods prefer to open its store in prime locations. Because, the company
perceived that major cities may house large number educated people, who would be equipped to
afford higher prices due to their high remuneration. Given the limited number of communities,
where more that 40% of the people had college degrees, it is difficult for the company to adopt
In recent time, mainstream supermarkets also started carrying organic foods in their
premises, which ensued of increased demand for organic foods. People in the country mostly do
not prefer to farm organic foods due to stringent regulations, which have to be adhered to.
Moreover, farming organic crops required more efforts and time consuming. This constrained
supply of the organic products likely to create mismatch between supply and demand. Due to
unavailability of required quantity and strong growth in demand for organic foods, the cost to
acquire these products would go up and this rise in cost would adversely affect the bottom-line of
the company.
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Conclusion
Due to increased diet plans by people and expected surge in Baby Boom population,
availability of brands for nutritional products, Whole Foods should leverage its recognition in the
country to market its private labels, such as 365 Everyday Value, Whole Kids Organic and 365
Organic Everyday Value. Since these products are certified organic, the company should use
these three products to tap the demand for organic foods from health conscious consumers. Due
to its relatively low cost nature, the company could attract consumers who are ready to pay
relatively low cost for organic products and thereby increasing its customer base.
To avoid direct competition from Stop ‘N Shop and Shaw’s, the company should try to
acquire one of them. This acquisition strategy would help the company in long-term as these
large grocery stores market their products from their sales, which Whole Foods never tried.
Whole Foods would not face any difficulties to raise funds to facilitate this acquisition on the
back drop of sound financials. As the larger grocery stores started carrying natural products, this
acquisition strategy would enable the company cater to increasing demand for natural products.
Company’s strong distribution network and expertise to handle perishable goods could be
References:
Wheelen, Thomas and Hunger, David. Strategic Management and Business Policy. Upper Saddle