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Foods Market
Business 304, Fall 2013
Eryn Eledge
Abstract
The purpose of this case study is to analyze Whole Foods Market and the market it is a part of.
This report was compiled with extensive research on the Whole Foods Market company, market,
and competition. First, a history and background of the company will be provided. While
conducting research, a problem with the company arose. In order to solve this problem, three
solutions were drafted and evaluated based on four decision criteria. First, the problem will be
stated along with the possible solutions to the problem. The possible solutions will be
individually ranked based on their impact on the decision criteria. After the evaluation of each
solution is completed, the best solution will be selected. The selection of the best solution will
lead into recommendations on how the company can implement this solution and what pros and
cons will arise in the implementation. Finally, conclusions and recommendations will be
provided for the future actions taken by Whole Foods Market.
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TableofContents
Abstract..........................................................................................................................................ii
ExecutiveSummary.......................................................................................................................4
Introduction................................................................................................................................4
Problem.......................................................................................................................................4
OptionsandCriteria..................................................................................................................4
Recommendations......................................................................................................................5
Conclusion..................................................................................................................................5
BackgroundandHistory...............................................................................................................7
Founding.....................................................................................................................................7
MissionStatement......................................................................................................................7
Overview.........................................................................................................................................8
Structure.....................................................................................................................................8
ProductsandServices................................................................................................................9
TargetMarket..........................................................................................................................10
Competitors..............................................................................................................................10
PlaceinIndustry......................................................................................................................11
Problem.........................................................................................................................................12
IncreasedCompetitionasaProblem.....................................................................................12
ThoseAffectedbytheIncreaseinCompetition....................................................................13
PastAction................................................................................................................................13
OptionsAnalysis..........................................................................................................................14
AddressingtheProblem..........................................................................................................14
DecisionCriteria......................................................................................................................15
Option1:CreationofaRewardsProgram...........................................................................16
Option2:BroadentheTargetAudience...............................................................................19
Option3:ReducePercentageofPerishableProducts..........................................................22
Solution.........................................................................................................................................24
Pros............................................................................................................................................24
Cons...........................................................................................................................................25
ConclusionsandRecommendations...........................................................................................25
References.....................................................................................................................................27
Executive Summary
Introduction
Whole Foods Market is a chain of grocers that offer organic and natural products at high quality.
The grocers offer customers a wide variety of products from organic produce to pet supplies, and
ready-made food items to natural hygiene products. From humble beginnings, Whole Foods
Market has seen large success and growth as it is now known as Americas Healthiest Grocery
Store TM. Whole Foods Market is focused on the sustainability of our resources as a society as
well as the education of the public on healthy eating and sustainable practices.
Problem
Although a leader in the natural foods market, Whole Foods Market is now seeing an increase in
competition in the market for organic and natural products that it must respond to. WFM faces
competition both directly and indirectly. Specialty stores such as Trader Joes, Sprouts Farmers
Market, and Wild Oats Market serve as WFMs main competition as they are retailers who sell
natural and organic products at lower prices. Additionally, WFM sees completion arising from
grocery and convenience stores, like Safeway and Walmart, which have begun offering organic
produce recently.
Profit
XX
XXX
XXX
XX
XXX
XX
XXX
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XX
XXX
Recommendations
The three different solutions were ranked based on how they would affect each criteria. Although
they ranked closely together, the highest ranked solution was the solution that suggested the
broadening of the target audience. Adopting this solution can be made possible by offering low
cost items, offering a wider array of coupons on a more consistent basis, or creating a product
home-delivery service. Broadening its target audience would allow Whole Foods Market to
remain a leader in the health food and organic product market even in the presence of increased
competition.
Conclusion
Whole Foods Markets past success was made possible through its creative business strategy and
leadership in a niche market. As competition in the market increases, WFM must find a way to
remain a leader. In order to stay above its competition, it is recommended that Whole Foods
Market implements a solution that will broaden its target audience and negate its Whole Foods,
Mission Statement
Unlike other companies, Whole Foods Market does not operate on a standard single sentence
mission statement. Instead, the company bases its daily operations on eight fundamental core
values:
Overview
Structure
Similar to all other aspects of the company, Whole Foods Markets organizational structure is
nonconventional. The company is often run as a democracy and although the co-founder, John
Mackey, is still considered the Chief Executive Officer (CEO), he runs the company in a
collective manner with the rest of the Executive Team members:
The behavior of the executive team creates the entire structure that WFM is substantiated by.
John Mackey describes his relationship withothermembersoftheExecutiveTeam[as]oneof
mutualrespect,trust,andequality[...asthe]WholeFoodsExecutiveTeammakes[its]most
importantdecisionsthroughconsensus(Mackey,2010).Withthecommitmenttoincorporating
theideasandopinionsofhisfellowteammembers,JohnMackeycreatesacohesivecorporation
thatservesitscustomerstothebestofitsability.
SincetheirhumblebeginninginAustin,thecompanyhasgrownexponentiallyandcurrentlyhas
362storesglobally.BelowisatableofthecurrentWholeFoodsMarketlocationsfromtheir
2013annualreport:
Source:(WholeFoodsMarketInc.,2013)
In addition to products made available to customers, Whole Foods Market offers high quality
service through consumer education and intelligent staff employed in store. As stated in its core
values listed above, WFM provides their customers with health eating education on the products
that are sold in their stores and how those products will affect the consumers lives. The company
Target Market
The quality of the products available and the standards that are evaluated in the search for these
products results in high prices. The high prices of the products and the emphasis on organics
limits the target audience that Whole Foods Market can cater to. Not only is the target audience
limited to the affluent consumers that can afford the high priced items offered, it is also often
limited to the consumers who implement a healthy lifestyle into their lives. In their industry,
Whole Foods Market is known as an upscale competitor that has gained a reputation of
Whole Foods, Whole Paycheck due to its high prices (Armstrong, G., Kotler, P., 2012).
Competitors
Contrary to when the company was founded, Whole Foods Market is facing increased
competition as their market is transforming from a niche market to a more highly populated
market. The increased competition that WFM is facing can be attributed to the healthy lifestyle
trend that is present in our society today. WFMs main competition come from other markets that
specialize in natural and organic products, such as Sprouts Farmers Market, Wild Oats
Marketplace, and Trader Joes. As opposed to WFM, competing stores do not have the same
whole paycheck reputation, and instead operate with a strong emphasis on creating value for
their customers. The increased emphasis on value and low prices of the competitors acts as a
threat to WFM.
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In addition to direct competition, Whole Foods Market faces indirect competition from wellknown grocery and convenience stores that are integrating natural and organic products into their
repertoire. Organic products can now be found on the aisle of grocery stores like Ralphs and
Safeway, as well as in Walmart stores across the country. A competitor with a large customer
reach, Walmart released a press release in 2008 that explained that The company sells 18
percent of all the groceries bought in the United States, which creates a major threat to WFMs
hold on the market (Philpott, 2012). WFM is facing increased competition from every angle.
Place in Industry
Although Whole Foods Market initially placed itself into a limited niche market industry, the
increased competition thatitisfacingischallengingitsplaceastheindustryleader.Currently,
WFMremainsaleaderbutthecompanyscompetitorshavebeensteadilycreepinginand
stealingmarketinterest.[Forexample],Krogerisaggressivelyexpandingintoorganicand
naturalfoodselectionwhilealsoattemptingtocompeteonprice.(QuandaryFX,2012).
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Problem
With a strong beginning and a possibly brought future, Whole Foods Market must address a
problem that it is currently facing. Once a leader in a niche market, Whole Foods Market must
now find a way to maintain its leader position in a challenging market that is being penetrated by
strong competitors. Belowisachartshowingthemarketshareheldbyspecialtystores,like
WholeFoodsMarket,comparedtothatofitscompetitors(USDA,2013):
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Past Action
As a precaution to the threat of increased competition, Whole Foods Market attempted to widen
their target audience. By offering its 365 Everyday Value brand products, WFM attempted to
change the way [consumers] shop at Whole Foods Market by offering products [that] can fill
[a] pantry without emptying [a] pocketbook (Whole Foods Market, 2013). Although a worthy
attempt at catering to a different market, WFMs 365 Everyday Value brand is still unable to
compete with the low priced items at the competitors like Trader Joes, that offers almost
identical products at noticeably lower prices. The table below lists prices on common 365
Everyday Value product prices versus the prices of the same standardly priced items at Trader
Joes:
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Whole milk
Eggs (12
Sugar (5 lb. bag)
Canned
(gallon)
count carton)
soup
365 Everyday Value (WFM)
$3.49
$2.99
$5.99
$2.99
Trader Joes
$2.99
$1.69
$3.49
$1.99
Source of information: (Craddick, 2013)
It is visibly apparent that Whole Foods Market is seeing a strong competitor in Trader Joes as its
normally priced items easily underbid the value brand that WFM offers to its customers.
Although WFM acknowledged its whole paycheck reputation and tried to find a solution, the
companys competitors still remain the leaders in value-based items.
Options Analysis
As previously stated, Whole Foods Markets leader position is being challenged by the increase
in competitors in the natural and organic food industry. WFM is being pushed into differentiating
themselves from their competition in order to remain the world's largest retailer of natural and
organic foods (Whole Foods Market, 2013).
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Decision Criteria
The previous solutions will be evaluated on four different decision criteria: Profit, Return on
Investment, Competitive Advantage, and Customer Satisfaction. The four criteria will be defined
in terms of how they apply to Whole Foods Market and the solutions that they are being applied
to. Below is a matrix that ranks the solutions to the problem using the criteria:
Solutions
1. Create a Rewards Program
2. Broaden the Target Audience
Profit
XX
XXX
XXX
XX
XXX
XX
XXX
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XXX- Exemplary
Profit
Profit is the monetary benefit that Whole Foods Market will gain with the implementation of the
solution being evaluated. The profit criterion depends upon the expense that is required to
implement the solutions. Profit was chosen due to its determination of a companys position in an
industry and possibility of a future.
Return on Investment
Return on investment is defined as the reward that Whole Foods will acquire from investing
money into implementing the solutions. This criterion acts as a justification for Whole Foods
Market to adopt a solution, as the money used will be gained back in the future.
Competitive Advantage
With a problem that focuses largely on WFMs competition, using competitive advantage as a
criterion was necessary. Competitive advantage is defined as the positive impact the solutions
will have on WFM in terms of its competitors success. This criterion measures how each
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Whole Foods Market has a diverse level of competition from specialty natural food stores to
grocery stores and convenience stores that offer natural and organic products. Its direct
competition, Sprouts Farmers Market, Wild Oats, and Trader Joes have not implemented
customer reward or loyalty programs and do not have the intention to do so in the near future. In
contrast, the indirect competition, the grocery stores like Safeway, that offer a selection of
organic and natural products, were some of the leaders in the implementation of loyalty cards.
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environment
Are largely Baby Boomers the largest consumer group in America is getting older and
they are seeking healthy, preservative- and pesticide-free foods to ensure a long and
healthy life (wHealthySolutions, 2012)
With such a narrow target audience, WFM limits its future success and ability to adapt to the
changing economic environment. Its highly priced selection and limited target audience has
given WFM the reputation of being a Whole Foods, Whole Paycheck retailer. Adopting
systems that will create a wider customer base include offering a larger selection of coupons,
providing lower cost items, and implementing a delivery service for grocery items. All three of
the possible implementation tactics will draw in new consumers who desire to eat healthy but
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Solution
In the analysis of options, it is determined that broadening the target audience is the best solution
that Whole Foods Market has to responding to the increased competition that it is facing in
todays expanding natural and organic product market.
Pros
Many pros arise with the broadening of WFMs target audience. Broadening the target audience
diversify the customers that are able to shop at WFM and therefor increase the revenue that the
company can collect. WFM has a reputation of requiring its patrons to spend their entire
paycheck in order to do their weekly shopping at the locations. Adopting the solution that
broadens the target audience will diminish the bad reputation and the negative connotation that
Whole Foods Markets have in the minds of some consumers, which will encourage more people
to go into the stores and see what they have to offer. Also, broadening the target audience will
allow WFM to adapt to changing economic conditions and remain successful in the future as the
customer base will be large enough to support a future.
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Cons
Although the solution to broaden the target audience of Whole Foods Market is the most
appropriate, there are cons that arise from this solution that must be addressed. Broadening the
target audience has the possibility of displeasing the loyal WFM customers who appreciate the
high-end feel they take from shopping at WFM. With this con in mind, it is important that WFM
does not decrease the quality or atmosphere of the stores that the loyal customers value.
Although it will be providing items and services that appeal to a larger target audience, WFM
does not have to stray from its intention of offering high quality natural and organic products in
stores that offer high quality experience and knowledge. Additionally, the initial costs that are
incurred with this solution act as a con for WFM. With a company as profitable as WFM it is
important to focus on the return on investment of ventures. Although the costs may initially be
high, the costs will be counteracted by more customers shopping at WFM which will create
higher revenues in the long run and promote a longer future for the company.
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References
Hoang, A. (2013, November 14). Is Whole Foods facing too much competition? Retrieved from
http://www.fool.com/investing/general/2013/11/14/is-whole-foods-market-facing-toomuch-competition.aspx
Kotler, P., & Armstrong, G. (2012). Principles of marketing. Upper Saddle River, NJ: Pearson.
Mackey, J. (2010, May 12). Keeping our executive team together for 10 more years [Web log
post]. Retrieved from http://www.wholefoodsmarket.com/blog/john-mackeysblog/keeping-our-executive-team-together-10-more-years
Philpott, T. (2012, March). Is Walmart really going organic and local? The New York Times.
Retrieved from http://www.motherjones.com/environment/2012/03/walmart-groceriesorganic-local-food-deserts
Whole Foods Market Inc. (2013) Form 10-K. Retrieved December 7, 2013, from
http://www.wholefoodsmarket.com/sites/default/files/media/Global/Company
%20Info/PDFs/WFM-2013-10-K.pdf
Whole Foods Market IP. L.P. (2013) Whole foods market history | whole foods market. Retrieved
from http://www.wholefoodsmarket.com/company-info/whole-foods-market-history
QuandaryFX. (2012, July 24). The decline of Whole Foods Market [Web log post]. Retrieved
from http://seekingalpha.com/article/743931-the-decline-of-whole-foods-market
USDA. (2013, September 18). Reatiling and wholesaling. Retrieved December 9, 2013, from
http://www.ers.usda.gov/topics/food-markets-prices/retailing-wholesaling/retailtrends.aspx#.UqJ7C5EvrR0
VitalCashFlow. (2012). Gift and loyalty card program. Retrieved from
http://www.vitalcashflow.com/giftCardProgram.html
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