Whole Foods Industry Analysis

1. Despite the overall demand for natural and organic food products, there is a large cloud looming over the Whole Foods business model that “All Natural” equals expensive. This may be a tough reality to shake because, for the most part, it is true. Its large retail

A weakness that Whole Foods have is their reputation. A reputation for a grocer is key to its survival and they have the reputation of being very expensive or some call it “whole paycheck.”

The Whole Foods (WF) annual report for 2010 states “Our growth strategy is to expand primarily through new store openings. We have a disciplined, opportunistic real estate strategy, opening stores in existing trade areas as well as new areas, including international locations. Our new stores typically are located on premium real estate sites and range in size between 35,000 and 50,000 square feet which we believe is appropriate in most circumstances to maximize return on invested capital and Economic Value Added (“EVA®”). Our growth strategy includes opening new stores in existing and new areas and operating those stores successfully.” (Flanagan, G. 2010). This means they are growing and spreading their wings out into a large variety of regions. The report also stated in order to meet those goals “many of our competitors went back and forth on their pricing strategies, we stayed true to our goal of offering a clear value choice in every department through compelling prices on known value items, as well as targeted pricing and promotional strategies” (Flanagan, G. 2010).

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, Inc, is an Austin, Texas based foods grocery that has the finest natural and organic food available, including produce, seafood, grocery, meat and poultry, bakery, prepared foods and catering, beer, wine, cheese; in addition to whole body, floral, pet products, and household products. Whole Foods is among the most profitable health food retailers in the United States. The rapid growth and market success has much to do with having remained a uniquely mission-driven company, highly selective about what they sell, dedicated to their core values, stringent quality standards, and committed to sustainable agriculture.

Competitors are able to offer cheaper items by selling private brands. Whole foods can focus on their private brand

Whole Foods Market first opened on September 20, 1980 in Austin, Texas which is the company headquarters. The founders were John Mackey, Renee Lawson, Craig Weller, and Mark Skiles. These four business people decided that the natural food industry was ready for a supermarket format (Whole Foods Market History, 2015). The current CEO’s are John Mackey and Walter Robb IV. Whole Foods Market stock ticker symbol is WFM and their NACIS code is 445110 (Morningstar). The industry sector the company is listed under is grocery store and retail trade. Whole Foods Market is the eight largest company in the United States with 427 stores located in North America, Canada, and the United Kingdom. The total number of employees is more than 90,000 people. Whole Foods Market has a business to business model where they merged with multiple companies such as Bread of Life, Fresh Fields, Food for Thought, Amrion, Allegro Coffee and other organizations with the concept of expanding their enterprise (Mackey, 2012). Whole Foods Markets purchase inventory from suppliers where consumer can buy fresh organic food online or in stores. Some of the products Whole Foods Market specializes in are seafood, meats, cooked goods, and bakery goods (Whole Foods Market History, 2015).

In order to have certified U. S. Department of Agriculture (USDA) the product must be at least 95% or 100% organic, and at least 70% organic will not have USDA label. The industry also provides their customers with natural foods by not adding these chemical such as: pesticides, antibiotics, hormones, synthetic chemical, artificial fertilizes preservatives, dyes or additives, or genetic engineering. Another company’s key success factor is that they take great care of their employees by provided them with stock option, health insurance, dental & vision plan, and employees will have 50% discount. By taking care of employees, the employees will work harder, focus and employees feel comfortable and enjoyable at their work.

Whole Foods markets their brand of quality of organic and natural foods. To date there are no specific concentration of organic and natural foods. Their brand is unique as other supermarkets it competes against sell a more variety of food and beverage.

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.

Whole Foods’ strategy on pricing is to set competitive prices on their top quality products. Unlike regular grocery stores, Whole Foods’ prices are typically higher but it is a result to Whole Foods growth and how they advertise their organic foods/lifestyle. With the higher prices, one would assume that consumers would stop shopping at Whole Foods but that is not the case. People are still shopping at Whole Foods because the store has a wide selection of goods along with Whole Foods enjoyable shopping

Whole Foods Market (WFM) is struggling to stabilize the natural and organic market share among competitors. One of the major problems is their organic product prices are very high for average consumers and they are using the same food distributor in the U.S. According to the Business Insider report, the WFM brand image is no longer attracted to new customers because they can find alternative organic products with cheaper prices in the competitor stores. And also WFM competitors such as Trader Joe’s and Kroger are maintaining their private-label products to make unique organic products and promote their band image.

Whole Foods takes into account how the economy is doing and adjust their prices accordingly. They offer higher discounts and economy brands or non-name brands. This helps them to remain at the top of their game during hard times.

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

It is also important to know that Whole Foods incomes are flattening and net income is plummeting. And this is all going to create a debt for Whole foods and making such expensive products, they most cut costs to make make the company more proffitable.