1. Whole Foods Market: Case Study
By: Dan McLindon
Kyle McDaniel
Jeremy Smiley
Tom Anderson
Ray Moorman

2. Whole Foods – Key Question
Can Whole Foods remain competitive in face of major changes in the competitive environment?

3. Overview of Whole Foods
Founded
1980
Vision
Create an international brand , change the whole diet of consumers for the better, pace setter in the industry, be the best in food retail
Brand Values
Natural & Organic Foods
Competitive Position
Premium Products at a Premium Price
Source of Differentiation
Best Quality, least processed, most flavorful, naturally preserved
Status in 2008
275 stores, 3 countries, $6.6bn in revenue
Corporate Objective
400 stores, $12bn in revenue

4. What is changing in the external environment? (PEST Analysis)

5. PEST Analysis for Whole Foods
Category
Issue
Threats/Opportunities
Ranking (1-5)
Political
4 tier class system i.e. Organic Definitions
Opportunity
1 or 2
Economic
2008 Economy Sours
Threat 5
Social
More health & environmentally conscious population.
4 or 5
Technological

6. What are the changes in demand? (Market Overview)

7. Overview of the Market Total Food Retail $850bn
Natural & Organic Retail
$62bn (7.3%) – niche market
Growth Rate
Growth slowed since 2000 (7-9%)
Organic $17bn (1/3 of natural foods)
Key Items Purchased
Fresh fruit &vegetables – 73% (largest category)
Big growth is processed items
3 Key Barriers for Consumers
Prices of organic foods – likely to decline as competition/supply increases
Lack of availability – more supply in the future
Brand loyalty to natural & organic foods

8. What is Whole Foods Strategy?
Marketing
Growth
Operational

9. Marketing Strategy Product
High Quality Natural and Organic Food and nonfood items
Offerings vary based on store size and tastes of local clientele
Exotic offerings and product variety
Ex) Japanese eggplant, 40 cheeses, 20 coffees
Private label products
Emphasis on perishables (fruits/veg., bakery goods, meat, seafood) – 67 % of sales

10. Marketing Strategy Price Goal is competitive price at highest quality
Organic foods are 25 – 75% more costly to grow and market
Price and Quality are competing forces
Whole Foods chooses to focus on Quality, therefore prices are higher than conventional grocers

11. Marketing Strategy Place
No standard store design. Layout customized for site and product mix.
Colorful, inviting, fun
Gathering place to learn, interact, eat, and grocery shop
Presentation
Highly regarded food displays, cleanliness, wide aisles

12. Marketing Strategy Promotion
Primarily rely on word-of-mouth recommendations
0.5% of revenue spent on advertising
Most marketing spend is for in-store signage and events
Store personnel is knowledgeable and personable

13. Growth Strategy
New stores and acquisitions of small owner-managed chains in desirable markets
Ideal store size is 45,000 – 60,000 sq. ft.

14. Operational Strategy Team-based management of store operations
Many personnel, merchandising, and operating decisions made at store level
Buying responsibility at the national and regional levels for volume discounts
Own and operate many distribution centers: 2 for produce, 9 bake houses, 5 commissary kitchens for prepared food, and a central coffee roaster

15. What are the strengths, weaknesses, opportunities, and threats for Whole Foods?

16. SWOT Analysis – Whole Foods
STRENGTHS
Experience in the Industry
Large, customized stores
Huge selection/variety – over 30,000 items
Nationally Known Organic/Natural Foods Seller
WEAKNESSES
Price – up to 75% higher
Locations – only in affluent areas
Advertising Budget very low (WOM approach)
Promotional Offers – no coupons
OPPORTUNITIES
Expand private label selection – lower price for customers
Advertise more, create coupons and promotions to get people in the store
Hype right now is to eat healthier and protect the environment
Rewards program – frequent buyer cards (like Kroger cards)
Back to Basics – buy more local products that people will pay more for
THREATS
Conventional Supermarkets
Bad Economy
Local Farmers’ Markets/Independent Retail Chains

17. What are the future challenges for Whole Foods?

18. Future Challenges
Conventional Grocery Stores over saturate Market & offer Organic & Natural Foods
Convince new customers to shop at WF rather then more convenient stores
Pricing – being able to compete against the conventional grocery chains
Getting more people in the store

19. What is our recommendations for Whole Foods?

20. Recommendations Lower Price to Compete with Grocery Stores
Add a customer rewards program for frequent buyers
Mail coupons to customers
Expand Private Label Selection
Lowers mfg costs, could offer discounts to customer for using WF brand products

21. Recommendations Personalize Service at WF
3 days after purchase, Thank You cards to customers after purchases
7 days after purchase, 10% coupon to use on next purchase
recipes
Advertise, Advertise, Advertise
Mail fliers to local zip codes – show locally grown foods, classes offered, items on sale, coupons

22. Recommendations Catering Do Not Buy Wild Oats
Offer catering to local businesses & events
Do Not Buy Wild Oats
Halt expansion until WF builds up more cash
Focus on profitable stores and use that philosophy to improve unprofitable stores