Unit 5: Whole Foods Market: Will There Be Enough Organic Food to Satisfy the Growing Demand?
Kaplan University
School of Business and Management
MT 460 Management Policy and Strategy
Tosha Collins
Dr. K. Peterson
2/5/12
Introduction
Whole Foods, founded by John Mackey, is one of the largest natural food grocery chains that is trying to bring a more organic and natural way of buying and consuming foods to its consumer base. In order to provide this to consumers, it is important that Whole Foods continues to grow in the organic food market. As they grow, there needs to be continuous supply for the demand for organic food.
Synopsis of the Situation
Whole Foods entered the industry hitting the ground running, making a name for them
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Prime store locations and the supply of organic foods are potential scarce resources (Pearce & Robinson, 2010). Whole Foods other problem comes from the competition of wholesalers. When selling organic natural foods one cannot package it and sell it in bulk.
Define the Problem
John Mackey faces the dilemma of being able to meet the goals that have been set for his grocery business and still supply the consumer with quality organic and natural foods. This must be done without jeopardizing the reputation of Whole Foods while continuing the growth in the different communities and countries. John Mackey is uncertain about how to meet the company’s aggressive growth targets (Pearce & Robinson, 2010).
Alternative Solutions
Mackey knows that in order to keep this company going in the direction he wants, he must continue to provide quality food to his consumers, continue the growth of Whole Foods’, and bring in revenue. The company will need to go after the disposable money and continue to set up stores in the local communities that believe in the mission and vision of Whole Foods.
The disposable money comes from the aging baby boomers, urban singles, and women who work. Baby Boomers are the driving demand for organic food in general because they are health-conscious and can afford to pay higher prices (Pearce & Robinson, 2010). Baby Boomers are many urban singles and women who work and are more focused on a healthy diet, even if it
John Mackey and Renee Lawson Hardy, the co-founders of the current Whole Foods Market, simply wanted to provide quality healthy food to the American consumer. This was about three decades ago when the first store opened. According to Mackey, making money was not the first priory, but helping people to eat better was. Happily for Mackey and Lawson, the residents of Austin Texas were hungry, no pun intended, for just this type of product. At the time, though there were several small independent healthy food stores, there was not a full sized grocery store. This is what set Mackey and Lawson apart from their competitors, their enormous sized health food grocery store was a huge success and now Whole Foods Market (WFM) is not only a
Whole foods strategy consists of high margins on premium and natural foods. They also offer a wide variety of prepared foods for affluent buyers. Managers are given freedom to stock their stores based on local tastes. Mackey also opposed the idea of unions because of their parasitic existence.
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.
One of the biggest external environmental threats against Whole Foods is increases in domestic competition. At its inception Whole Foods was one of the only providers of organic foods. However now there are many rivals who have taken apart of this ever going interest in our society for better living. Stores such as Wal-Mart and Target have joined the bandwagon of providing their customers with organic foods. With many stores now offering organic foods this has put a dent in the availability of organic foods in other words has shorten the supply of organic foods to Whole Foods. Another external environmental threat was the economy. When the economy went down during the recession many people had to make tough choices when it came to their finances and one of the biggest things that were changed was the amount that they spent on groceries. Many people just simply deemed natural organic foods as being expensive and not a necessity. A major opportunity that Whole Foods have embraced was that during the recession Whole Foods recognized that they need to make adjustments decrease the overall prices. Another major opportunity that they need to embrace is marketing the necessity of whole organic foods. Letting people know that eating right is vital to
Whole Foods is a retailer that specializes in organic foods and it has done an excellent job of determining its target market and how to position itself. Instead of going head to head with large food retailers such as Wal-Mart, Whole Foods has found a niche market that works perfectly for itself. This niche market is one that prides itself on being health conscious and environmentally responsible and Whole Foods has done a great job of positioning itself in the same way through its environmentally safe actions and its use of the local community to stock its stores. However, as Whole Foods grows and expands, a person has to wonder if the company will be able to maintain this same position or will have to make
Every retail location carries a variety of products that distinguishes it from other stores in the same chain. Not surprisingly, it is difficult to achieve economies of scale. Supply Chain Mackey describes his consumers as being “part of a cult”. Whole Foods believes that the company’s emphasis on perishables and locally-sourced produce differentiates their stores from run-of-the-mill supermarkets and attracts loyal and devoted customers. However, “fresh produce” is one of the most challenging product categories to operate due to limited product shelf life and high cost of spoilage. Whole Foods has tried to circumvent most of the problems inherent in supplying fresh produce to its stores by sourcing locally and having short and flexible supply chains. In the case of fruits and vegetables, Whole Foods has buying relationships with local farmers who supply the store with seasonal produce. Thus, if one farmer is unable to produce a sufficient amount of yellow corn or heirloom tomatoes, the shortfall can be made up by another farmer. Although challenging to perfect, these short supply chains are agile and difficult for other big retailers to duplicate.
Whole Foods will need to research and figure out marketing strategies to keep the customers loyal to Whole Foods. One of the main reasons customers will go to different supermarkets that have organic foods is because of the different department stores inside the grocery market. For instance, some grocery stores sell organic vegetables, but also have regular vegetables. Some of the larger grocery stores have banks, photo stores, insurance companies that make your stop at the larger grocery store
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
Why is America going organic? Is it because Dr. OZ told them to? Is it because there are promises of losing weight and younger looking skin? What would make a person spend double the price for organic food and turn around a drink a coke? I am not saying organic foods are bad. I am saying unless you are going to be 100% committed, why bother? Organic farming is a $63 billion dollar business and about half of that is from Americans feeling the need to healthier. Everybody is trying to get into the business. Natural products are a $290 billion in the United States. Big chain stores like Wal-Mart even want a piece of the pie, because it is such a lucrative market.
These conflicts exist in the demographics served by Whole Foods – the elite and well to do. If Mackey is a conscious capitalist and servant leader and practices what he preaches he would have stores which are accessible to persons of all demographics. This has been the main complaint against Mackey and the one which the potential to damage his credibility as a servant leader and conscious capitalist and thus the good work of his legacy. Recently Mackey acknowledged the weakness of his legacy this and answered the call to provide good food for people of all incomes be creating Whole Food’s Market 365 stores, which only sell the stores brand. The 365 stores will have price points which are easily affordable to persons of middle and lower income (Kowitt,
Whole Foods Market was founded by John Mackey as a healthy, socially responsible lifestyle that customers can identify with (Pearce & Robinson, 2013, p 29-1). The company differentiated itself from competitors by focusing on quality as excellence and innovation that allows them to charge premium price for premium products (Pearce & Robinson, 2013, p 29-1).
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 needs to increase the number of stores that they have throughout the country and work on expanding their product line to as many natural and organic products as they can manage within their
Whole Foods Market is a chain of organic, natural supermarkets found in USA, Canada and the UK. Initially founded in Austin, Texas in 1980, at a time when there were less than half a dozen natural supermarkets, the company saw rapid growth domestically through expanding across Texas and then into the West Coast of America. This was achieved through growth from the ground up and acquiring smaller natural food companies. Whole Foods Market in the present day is the result of acquiring 14 smaller firms - a key driver in breaking into the UK and Canadian markets.
Does your local grocery store have a section dedicated to natural or organic foods? I bet it does. That probably wasn't the case in 1980, when Whole Foods Market opened their first store in Austin, Texas. In the past 30 years, Whole Foods Market grocery chain has become the worldwide leader in natural and organic foods.