Whole Foods Market's Growth Strategies and Future Prospects
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Case Code: BSTR244 Case Length: 22 Pages Period: 1978-2006 Pub Date: 2007 Teaching Note: Available |
Price: Rs.400 Organization: Whole Foods Market Industry: Retail Countries: The US Themes: Growth Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Whole Foods Experience
The demand for natural and organic foods had been growing rapidly in the US in the late 1990s and the early 2000s. According to figures released by the Organic Trade Association (OTA) , sales of organic food grew from $3.6 billion in 1997 to $13.8 billion in 2005. Although WFM had been the first retailer to adopt a supermarket format for selling natural and organic products, competition had increased over the years.
In the early 2000s, WFM's biggest competitors in the US were retailers like Wild Oats Market Inc. and Trader Joe's. The company also faced competition from local farmers' markets, which were very popular when in season, for fresh produce.
Another reason for the popularity of the local farmers' markets was that the produce was priced rather reasonably, when compared to retail chains like WFM, which typically charged a premium...
Growth through Differentiation
One of the biggest drivers of WFM's growth in the years since its inception was the company's unique value proposition as a retailer committed to natural and organic foods and environment- friendly operating practices. This differentiated it from regular retailers. In addition, it also set it apart from other natural foods retailers who could not generally match WFM's size and scope. WFM's motto "Whole Foods - Whole People - Whole Planet" reflected its social responsibility and business objectives (Refer to Exhibit VI). On its website the company declared, "We believe in a virtuous circle entwining the food chain, human beings, and Mother Earth: each is reliant upon the others through a beautiful and delicate symbiosis."...
Culture as a Source of Competitive Advantage
WFM was known for its strong employee-oriented work culture, which emphasized teamwork, autonomy, empowerment, and transparency. According to analysts, this culture played an important role in the growth and success of the company, by allowing it to grow without the burden of bureaucratic practices...
The Whole Paycheck?
One of the biggest criticisms against WFM was that the company's high profitability was a result of the premium prices it charged. As WFM charged a premium on most of its products, detractors labeled the company as 'The Whole Paycheck' or as 'Wholesome healthy for the Wholesome wealthy' (Refer to Exhibit VII for a comparison of prices between WFM and some of its competitors). WFM was also criticized on the grounds that it spent a lot on maintaining store ambience, and transferred the costs to the customers. For instance, the rent for WFM's store at the Time Warner Center was reported to be approximately $450 per sq ft, which was quite high...
Emulating Whole Foods
Inspired by WFM's success, several mainstream retailers had announced plans to include more natural and organic foods in their product lines. Several retailers were also redoing their stores to try and create an ambience similar to WFM. In mid-2006, Wal-Mart Stores Inc. (Wal-Mart), the largest retailer in the world with a reputation for low prices, announced that it would increase the range of organic foods in its stores...
Outlook
Notwithstanding Mackey's positive prognosis, analysts said that WFM was not without its share of troubles. Mackey had announced that he expected WFM to become a $10 billion company by 2010, but analysts questioned whether it could grow to that size by maintaining the same business model it had followed since its inception. The impact of the problems facing WFM seemed to have become manifest when the company announced its fourth quarter results for the quarter ended September 2006, in late 2006...
Exhibits
Exhibit I: A Note on Organic Food
Exhibit II: Acquisitions and Subsidiaries of WFM
Exhibit III: Annual Income Statement
Exhibit IV: Whole Foods Market - Regions
Exhibit V: A Snapshot of WFM and Some of its Competitors
Exhibit VI: Whole Foods - Whole People - Whole Planet
Exhibit VII: WFM and its Competitors - A Comparison of the Prices of Some Products
Exhibit VIII: Natural Food Retailers and Traditional Grocers - A Comparison
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