Whole Foods Market Case Study By: Dan McLindon Kyle McDaniel Jeremy Smiley Tom Anderson Ray Moorman
Whole Foods Key Question Can Whole Foods remain competitive in face of major changes in the competitive environment?
Porter’s Five Forces Heating Up Cool To Warm
Changes in the Competitive Landscape Should they really welcome competition? • Local, regional, independent, national, and specialty stores are all competitors. • CEO say it is a gateway for customers to try natural/organic foods or opportunity for the competition? Take a look at Store Sales Growth Sales growth has been cut in half since 2004!
Changes in the Competitive Landscape We may be seeing a revolution in the food retailing business. Supercenters – Marketplaces – Wholesale Clubs Will the competition force Whole Foods to rethink their strategy?
What is Whole Foods Strategy? • Marketing • Growth • Operational
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
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
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
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
Growth Strategy • New stores and acquisitions of small owner-managed chains in desirable markets • Ideal store size is 45,000 – 60,000 sq. ft.
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
What are the strengths, weaknesses, opportunities, and threats for Whole Foods?
Future Challenges • Conventional Grocery Stores over saturate Market & offer Organic & Natural Foods • Convince new customers to shop at WF rather than more convenient stores • Pricing – being able to compete against the conventional grocery chains • Getting more people in the store
Recommendations • Lower Price to Compete with Grocery Stores • Add a customer rewards program for frequent buyers • Mail coupons to customers in a targetted marketing effort • Expand Private Label Selection • Lowers mfg costs, could offer discounts to customer for using WF brand products
Recommendations • Personalize Service at WF • 3 days after purchase, email Thank You cards to customers after purchases • 7 days after purchase, email 10% coupon to use on next purchase • Email recipes • Advertise, Advertise, Advertise • Mail fliers to local zip codes – show locally grown foods, classes offered, items on sale, coupons
Recommendations • Catering • Offer catering to local businesses & events • Stop rebranding Wild Oats stores • Halt expansion until WF builds up more cash • Focus on profitable stores and use that philosophy to improve unprofitable stores • Look at option of selling some underperforming Wild Oats stores