TEA

M
ECO
NOM
IX
MO

EXECUTIVE SUMMARY

INTRODUCTION
Incorporated in 1978, Whole Foods Market (WFM) is a grocer and retailer of natural
and organic foods. With 433 stores across the United States, Canada, and the United
Kingdom as of September 2015, the company has long been considered a synonym for
organic and healthy food in the US. It held the top retailer position in the organic food space
until Costco (COST) took the top spot in 2015.
PROBLEM
WFM announced its intention to penetrate further into Canada markets either by
extend their retail numbers or increase their sales. However, they face many challenges on
potential, intriguing, and unique Canadian market. Problems poised in Canadian markets
comprising from urban development, unique demographic, and business models.
RECOMMENDATIONS
We come with some suggestions to WFM to increase its Canadian markets. First, they
must adapt in the unique Canadian demographic. Where people from Eastern Asia, Southern
Asia, and South East Asia (7.7 million in 2015) and will grow to 9.3 million in 2030. WFM
must learn their cultural preferences in order to fulfill demand.
Second, WFM must be able to find way to efficiently utilize the urban areas and
already established dense population. Where urbanization has witnessed the stronger rise of
urban condos compared to stand-alone houses. They also must find way to find rare cheap
spot for operations and supply chain.
And the third, they must prioritize on cost leadership in order to keep customers. In
current economic downturn worsened by plummeted oil prices, costumers tend to be more
cautious in selecting quality and prices. Smart pricing and usage of price bundle as marketing
tools could be a pivotal role of competitive advantage.

ANALYSIS OF THE PROBLEMS AND SITUATIONS

Whole Foods Market, Inc. (Whole Foods Market), incorporated on August 15, 1980,
is a retailer of natural and organic foods and grocer. The Company has one operating
segment, natural and organic foods supermarkets. As of September 29, 2013, Whole Foods
Market operated 362 stores in the United States, Canada, and the United Kingdom. Whole
Foods Market offers a selection of natural and organic products with an emphasis on
perishable foods.
SWOT ANALYSIS
Strengths
1) Offering numerous product lines
-

Whole Foods has a product selection

with a strong emphasis on perishable
foods.

Weaknesses
1) Product recalls affect brand image
-

Whole Foods Market has recalled several

products owing to contamination, such
recurrent product recalls negatively affect
the brand image of the company.

2) Focused growth strategy

2) Weak international operations
-

Whole Foods Market focuses on

expansion, primarily through new store
openings,
including
international
locations.

3) Strong focus on right sizing of stores

-

Whole Foods Market is focused on the

right sized store for each location.

4) Leading organic food retailer in US

-

Whole Foods still has a strong brand

image, which is a strength that continues
to attract customers to its stores.
Opportunities

1) Increasing demand for organic products

Its operations in UK and Canada are not

large enough to derive economies of
scale in purchasing and distribution,
resulting in relatively high product
prices.

3) Declining same-store sales

-

With the entry of large grocery chains

into the Whole Foods former niche
business, the company has continuously
seen a fall in its same-store sales.

Threats
1) Intense competition may have an adverse

effect on profitability
-

The demand for natural and organic

- Food retailing is a large, intensely
foods has increased over the years due to
competitive industry.
rising awareness about the importance of
natural foods in the diets. This trend is 2) Government s rules and regulations on
going to continue in the future.
the organic food

2) Private label penetration and prepared

- As the company operates in the natural
foods
and organic foods market, its stores and
- Whole Foods (WFM) has maintained a
products are subject to several laws and
strong focus on exclusive brands and
regulations relating to health, sanitation
prepared foods sales.
and food labeling.
3) Trends support increased demand for food
products
3) Changes in Economic Condition
-

Whole Foods has recorded a steady

growth mainly due to consumers
perception of healthy foods.

The economic situation in the United

States can be a threat to the company due
to Americans approach of saving money.

Porters Analysis
Threat of Substitutes - Moderate
There are many substitutes, such as non-organic foods or products that are cheaper than
organic options. However, as consumers shift toward healthier food options, the threat of
shifting to non-organic substitutes might not be very high.
Threat of New Entrants - High
At the same time, there are not many barriers to entry into the organic grocery segment, as it
does not require huge capital or expertise of operation. Even small retailers can compete with
in this industry.
Bargaining Power of Suppliers - Moderate
Whole Foods Market has many suppliers, including local, regional and national wholesalers
and producers. However, United Natural Foods is its largest third-party supplier accounting
for more than 30% of its total purchases. Although Whole Foods purchases from a large
number of suppliers, its dependence on a single supplier for a huge part of purchases leaves
less power in the hands of Whole Foods.
Bargaining Power of Buyers - High

Whole Foods buyers are free to purchase products from other companies. In fact, there has
been a significant shift of Whole Foods consumers to other providers of organic and natural
foods, which has impacted the companys top-line growth.
Degree of Rivalry Within the Industry - High
Competitive rivalry is extremely strong in the organic and natural food industry. More
companies are entering into and expanding their presence in the organic and natural food
business due to customer inclinations toward fresh and organic products.

Problem Definition
WFM announced its intention to penetrate further into Canada markets either by extend their
retail numbers or increase their sales. However, they face many challenges on potential,
intriguing, and unique Canadian market.

SOLUTIONS AND RECOMMENDATIONS

Trend Towards Healthy Eating

Consumers willing to pay more for healthy, local and ethically sourced foods 1
Canadians are paying more attention to the food they are eating, demanding healthier
food options and being increasingly interested in product information, including labelling as
organic, local and non-GMO. The consumption of carbonated beverages, sugary
cereals, and meat particularly beef has been declining in Canada in recent years, while
demand for functional foods (which provide eaters with specific health benefits), fresh fruit
and vegetables, and organic foods has continued to grow. Canadas ageing baby boomer
population is increasingly concerned about the impact of diet on personal health, while
millennials focus on the vitality, freshness and authenticity when buying healthy foods.
Canadians are also demanding to know where their food comes from and how it is produced.
1 Consumer Lifestyles in Canada. Euromonitor International August 2015.
Accessed on March 18th 2016.

Geographical Expansion
According to the data given in Exhibit 1 on the business case, there is a very large
market potential if Whole Foods Market Inc. expands geographically. In the given data, it is
indicated that the rate of growth in the value of retail food industry increase more
significantly in Canada. It is also supported by the data provided by Euromonitor, that we
would show you on the appendix. it can be seen that the growth rate of sales of Whole Foods
Market, Inc. on average is larger in other areas than in the United States, so that the
geographical expansion is essential to be done by this company to achieve optimal growth.
Potential Regions in Canada
Urbanization is highly on the rise in current Canadian lifestyle. 84.8% of the population will
be living in an urban setting by 2030, raised from 81.9% back in the 2015. In order to
penetrate on potential customers, WFM should prioritize on highly growing urban areas.
There are six cities in Canada with populations in excess of one million people in 2015,
which are Toronto, Montreal, Vancouver, Ottawa-Gatineau, Calgary and Edmonton. This will
continue to be the case in 2030. However, Edmonton will be the fastest growing city. It will
expand by 26.3% from 1.0 million people in 2015 to 1.3 million in 2030.
Should It Reproduce Its US Core Strategy or Adapt to Canadian
In a market penetration scheme to Canada, the company must implement adaptive
strategies to manage the market conditions in Canada. It must maintain its strategy to attract
consumers which use IT to create a mobile app in order to reach more consumers and flexible
payment process, which is working with Apple to be able to make payments with Apple Pay.
However, according to a study from Euromonitor, the majority of consumers in
Canada still doubt the usefulness of organic or healthy products, so they are reluctant to pay
more for products offered by this company. What should be done by Whole Foods Market is
formulating a massive campaign to create awareness of the potential customers to consume
products that are organic and do not use ingredients that damage our health. Additionally,
WFM also need to make the consumer experience when visiting its offline stores look very
attractive, so a positive impression can be accepted by consumers and loyalty can grow.
Store and Regional Management
- Macroeconomic Conditions

The Canadian economy shrank in 2015. The outlook for Canada is slow but stable,
with growth averaging 2% per year through to 2020. Retailers in Canada are facing a
relatively low consumer confidence. Discount retailers such as Sobeys and warehouse clubs
such as Costco continued their success in 2014 by offering individuals greater value for
money propositions. Promotions and the use of buy-one-get-one-free are effective tools
employed by these companies. Price differentiation via promotions likely to be great tools for
WFM to penetrate its market in Canada.
- Human Resources
Concerns growing on the availability of knowledge and skills of labors on WFM
business in the long term. Agricultural graduates constituted only 0.7% of total graduates in
the same year, the lowest proportion, given that primary industries play a much smaller part
in a knowledge-based economy, such as Canadas. This country also still lacking of people in
accountancy, construction, insurance, and manufacturing sectors. WFM should keep an eye in
the future government policy regarding education and immigration.
- Physical Landscape
The tendency of urbanization has been on the rise in Canada, just like many other
countries. Urbanization has witnessed the stronger rise of urban condos compared to standalone houses. This created challenges for retailers to enter smaller communities in a way
which will make them accepted by the local population. The other huge challenge is the
struggle to secure prime real estate in a highly developed urban area.
- Business Models Trends
Credit card remains the most common method of payment for both store and online
purchases in Canada. Some retailers in Canada cooperate with banks to launch their own
credit cards, to ensure consumers loyalty. One of the major trends is the increasing use of
modern payment technologies, as Canadians are used to carrying less cash, and expect to
have a cashless option when purchasing. New business model emerges, such as where
customers order products online and pick them up at a nearby store at a prearranged time.
- Diversity
WFM must adapt to highly diversed Canadian demographic. Although they
experienced a diversed market in USA as well, there are different cultural obstacles that will

be faced in Canada. The largest regional groups of foreign born population in 2015 are from
Eastern Asia, Southern Asia, and South East Asia (7.7 million in 2015) and will grow to 9.3
million in 2030. This is a large part of market and WFM should conduct careful research and
approach on their preferences in order to win in Canadian foods market.
- Competitions
Saputo, the leading dairy processors in Canada, ranked first in organic packaged foods
in 2014 with 8% retail value shares. While Dairyland, Olympic Dairy, and Organic Meadow
brands trailing behind Saputo in Canada markets. Within organic breakfast cereals, Natures
Path Foods remained the leader on a value share of 43% at the end of the review period.
What growth mean for unique culture
As noted in Exhibit 7, Whole Foods Market, tend to promote a culture of healthy
living through healthy meals to prospective customers and make a good cooperation with
employees and suppliers available. With the higher growth rate of total sales, it is expected
that employees can enjoy rising income, so that the welfare of employees is also expected to
increase. This is proven by the company's entry Into Whole Foods Market in the list of 100
best companies for the workers quoted by Fortune magazine for 17 consecutive years, which
made it a good place for employees to develop themselves. So, the company growth is very
important to increase the welfare of the society through healthy lifestyle and also the welfare
of the employees by having higher income.
Suppliers
There is an underlying weakness in Canadas organic sector. Canadas organic industry may
not be able to keep up with consumer demand because only a fraction of conventional
producers is converting to organic, despite record prices for organic grains and oilseeds. It is
a huge challenge for industry leaders to persuade conventional growers to give up pesticides,
fertilizer and biotechnology. There are some barriers faced by farmers to convert to organic
way.
Farming organically is quit difficult. Convincing farmers to switch to a complex
production system wont be simple in an age of big acreages, in which producers favor hardy
crops that require inoculants and glyphosate and little else. Conventional farming primarily

follows a prescription model. Farmers who have an issue with soil fertility, disease or weeds
call an input dealer for the appropriate product and the problem usually disappears.
Transition risk also a big barrier for the farmers. Farmers who decide to switch to
organic grain production this spring wont be organic growers until 2018. Farmers tends to be
risk averse in terms of facing uncertain commodity prices.
Conventional farmers still afraid to be associated with organic. Many Canadian
farmers maintain a live and let live attitude when it comes to agricultural practices. If a
neighbor chooses to farm without pesticides, for instance, that is his choice.
If WFM want to increase their organic foods market share in Canada, increase the
suppliers basket also will be their homework. They should provide proper initiative training
and guidance to local farmer to maintain their long-term supplies. They also can arrange
cooperation with farmers to convince them that organic foods will be a promising work for
them in the future.

APPENDICES

Graph 1. Food Expenditure Profile of Canadian, 2000-2020

Source: Euromonitor International from Consumer Lifestyle in Canada

Growth Rate(%)

25
20
15
10
5
0

USA
Other Region

Year

Graph 2. The growth rate of total sales by region, 2009-2012

Graph 3. Majors of Canadian High Education

Source: Euromonitor International from OECD/UNESCO

2 Source: Calculated by author from Euromonitor Datastream

3 Source: Calculated by author from Euromonitor Datastream