Whole Food Market: Whole Foods Pricing Strategy

The organic food industry has seen a huge spike in growth that is expected to continue into the future due to an increase in consumption. This will provide Whole Foods Market with huge opportunities. In addition, a wave of ethical and responsible consumption has swept across America. Whole Foods’ decision to pursue sustainable activities will certainly give consumers an added incentive to purchase its organic products.

I do not believe that Whole Foods can avoid the pricing element of the marketing mix forever, because as it continues to grow, if it wants to maintain the same quality of food that it currently has, it may lead to increase in expenses which could lead to an increase in prices. While consumers may want to shop at a store that it feels is being socially responsible, eventually, the impact on their income may force them to look at other alternatives. The alternatives for consumers could be mainstream grocery stores or other smaller stores that looking to entering the marketing using the blueprint that was created by Whole Foods. In my opinion, I believe that while Whole Foods niche market would avoid Wal-Mart because of the numerous issues that it may have with the store, that same niche market may consider another grocer such as Safeway who may offer products at a lower price.

Sales of organic food have risen steadily over the past couple of years, reaching nearly $30 billion in 2011, or 4.2% of all U.S. food and beverage sales, (Adams). Many people believe that organic foods are ultimately the better choice when it comes to health due to the absence of pesticides and hormones. But other people—especially those whose food budgets may be more defined—wonder if organic food is really worth the inflated price tag. Despite the price, Organic foods are worth producing and consuming rather than conventional foods due to the immense benefits they provide.

Whole Foods was established in 1980 with one store in Austin, Texas. Today, Whole Foods is the world’s largest leader in natural and organic foods. There are over 310 stores in North America and the United Kingdom. Whole Foods is committed to the finest natural and organic foods available, sustainable agriculture and have one of the strictest of quality standards. Whole Foods offers customers a wide variety of products. “Natural” refers to food that is free of growth hormones or antibiotics, where “certificated

On averaged their stores are roughly 38,000 square feet and their locations typically carried 21,000 SKUs. They make two-thirds of its revenue by selling bakery, perishable items, and prepared foods. (Ager & Roberto, 2014). Peoples tend to shop at Whole Food Market because of their high-quality natural and organic food. In today’s world peoples are more concern about health concise and effect of pesticide products, more people choose to have organic fruits and vegetables. Whole Foods get most of their produces from local people which are natural and organic, which will help them gain more customer than other company because of increasing demand of organic food (Whole Foods Market History, n.d). They also have a strong brand image and they were the first supermarket who commit to completely eliminating disposable plastic grocery bags to help protect the environment. They also sell many USDA-certified organic

Whole Foods Market, Inc. has long been admired as an innovative company with quality standards, a devotion to community and environmental responsiveness, a healthy growth model and highly-regarded employment practices. However, the company has faced recent difficulties as a result of the economic recession, increasing competition, and complications from acquisitions. To revitalize the company from historical lows in its toughest year in history, Whole Foods Market must reassess its costs, refocus its expansion strategies, and promote its brand to compete for the diminishing consumer spending dollar.

Consumers view Whole Foods Markets as being very expensive and have given the retailer the nickname “Whole Paycheck”. Whole Foods carries a wider variety of organic foods and healthier brands besides their private brands. Whole Foods is experiencing a decline in sales due to other stores; like Wal-Mart, who are stocking organic foods at much lower prices; which has decreased differentiation (Lutz, 2014). Its decentralized business model decreases efficiency in procurement, distribution, and marketing efforts.

Whole Foods has become the world’s largest retail chain of natural and organic foods supermarkets. Not only is their focus to transform the way consumers look at food and its natural benefits, Whole Foods is looking to make a difference in the world with their products. Whole Foods appears to be in a rapidly growing market. Whole Foods has worked hard to set their products apart from other grocery retail chains and while their prices might still be considered high across the board, their products are geared towards a more health conscious individual who is willing to pay more for a healthier product.

Whole Foods is a supermarket that has successfully become the leader in the organic food segment of the grocery industry. While traditional markets have low brand loyalty and recognition, Whole Foods has focused almost entirely on its brand image, causing their strategy to be one of differentiation over cost leadership. Whole Foods is known as being far more expensive than other chains, due to this brand recognition. In their press release for the Q4 2014 results, they describe their vision and sum up what helps them develop that brand recognition. “We hold the idea of “food” to a higher standard, banning more than 75 ingredients commonly found in other stores, and we believe our unparalleled quality standards

Whole Foods Market is considered the most “green” of companies in supermarket retail by consumers. The supermarket mostly attracts a young, trendy demographic and has started to move into smaller suburban cities. Whole Foods has worked hard to get rid of its nickname “Whole Paycheck” that branded the store as out of price range for most consumers. To oppose claims of being too expensive, Whole Foods Market began offering promotions, discounts, and has a flat prices on groceries despite it costing them more. The idea is for customers to find plenty of deals to make up for certain products price inflation. Expanding the stores appeal to new customers has brought a few setbacks. Loyal customers spend almost three times more than what new customers do. (Gasparro, 2012)

Whole Foods Market was founded 1980 in Austin, Texas by three businessmen who felt that the natural food industry was ready for a supermarket setup. Two separate individual companies, Safer Way Natural Foods and Clarksville Natural Grocery, formed Whole Foods Market. After 27 years of operation, the company has come a long way. Today Whole Foods Market is the leading retailer of natural and organic foods, with 194 stores/locations in the United States, Great Britain, and Canada (wholefoodsmarket.com). The company has been in the Fortune Magazine's "100 Best Companies to Work for" every year since the list was made up in 1998 (2007 ranked 5th). The cofounder and CEO, John

Whole Foods' utilizes a differentiated strategy, focused on organic and natural foods. This distinguishes them from mainstream grocery competitors, and puts them into competition with other specialized grocery outlets (Urani, 2008). This differentiation, combined with more traditional grocery industry size and operations, gives the company an advantage over most of its competitors.

Marketed as ‘America’s healthiest grocery store’ the company has successfully grown to 408 stores across the world with sales of $14 billion in 2014 (Whole Foods Market, 2015). The firm is positioned as an upmarket grocery due to the emphasis on natural, organic origins, and as a result are able to charge a premium for their products. Through efficiently running its operations and stores, Whole Foods are able to maintain healthy 4.02% profit margins (Financial Times, 2015) and operating margins well above the American grocery store industry average at 6.58% (Bloomberg, 2015). Looking at 2015’s quarter 1 figures it is clear to see that Whole Foods have had a hugely successful year with sales of $4.7 billion, up 10% from the same period last year. Furthermore, they opened 9 new stores and have signed a further 11 new leases.

Whole Foods Market has expanded by a mixture of opening its own new stores and acquiring already existing stores. Today WFM does not follow this strategy, instead their motivation is to open its own large stores. This is due to noticeable sales differences in larger stores as opposed to smaller stores. WFM locates these newer stores in upscale areas of urban metropolitan centers and high-traffic shopping locations. Not all WFMs are isolated structures; some are located in strip malls. WFM offers a larger selection of natural and organic foods than any other grocery store. WFMs marketing expenditure is extremely small. They spend a measly 0.5% of their revenues on advertising. Their chief marketing strategy relies on word-of-mouth. WFM strives to meet or exceed customer expectations. This is so customers receive competent, knowledgeable, and friendly service and become advocates of WFM. The employees here have a decentralized team approach for store operations. This is so some personnel, merchandising, and operating

Over the past few decades, the diet and health food industry has become big business. Americans, along with people in many other countries, have become more educated about the benefits of exercising regularly and eating healthy. Whole Foods Market is pursuing a business strategy that strives to offer products that are of the highest quality, least processed, most flavorful and natural foods possible (Whole Foods Market,