Whole Foods Consultation
Amanda Childress, Samantha Colandrea, Victoria Strahan, Ankiprit Kaur, Stephen Delong
Whole Foods Market is the largest American grocery store specializing in natural and
organic foods. The entity operates in the United States, Canada, and the United Kingdom with
headquarters in Austin, Texas. The stores came into existence in 1980. Like any other company,
Whole Foods Market has had ups and downs that have affected its competitiveness in the market.
Whole Foods Market utilizes differentiation to remain competitive in the industry. Since its
establishment, Whole Foods emphasizes on providing customers with organic products with
minimal or no additives.
Whole Foods has many competitors including Wal-Mart, Kroger, Albertson’s, and a vest
array of other retailers who sell groceries. Whole Foods’ direct competitors are those who sell
high quality organic and all-natural food options. Their major direct competitors are Sprouts
Farmers Market and Trader Joe’s (Hall, 2019). In 2017, Whole Foods captured 1.6% of total
market share, while Trader Joe’s only had 1.3% of the market share (Conway, 2019). Sprouts
Farmers Market had less than 1% of market share in 2017. Wal-Mart, Kroger, and Albertson’s
together held more than 41% of the total market share (Conway, 2019).
Products of Services
Many grocery retailers have their own line of products. Whole Foods have four different
product lines, Whole Trade Guarantee, Engine 2 Plant Strong, Whole Foods Market, and 365
Everyday Value ("Whole Foods", 2020). These product lines consist of organic and natural
products. The products produced by Whole Foods are free from non-genetically modified
organisms. Kroger has store brands as well, such as Simple Truth, Simple Truth Organic, Private
Selection, HemisFares, Comforts, Abound, and Kroger (The Kroger Co., 2020). Trader Joe’s
carries the brand Trader Joe’s and Wal-Mart offers Great Value products. Many stores offer
private label brands as a means to earn brand loyalty and reduce prices. In 2014, private label
sales accounted for 20% of all grocery sales (Bells, 2015). Society today demands products
instantaneously, so through Amazon Prime, Whole Foods now offers free one hour pick-up and
free two hour delivery. Kroger, Wal-Mart and Publix also offer grocery pick-ups, but not within
Strategies and Critical Success Factors in the Industry
Grocery retail is a very competitive industry, so firms need to employ the right business
strategy to gain as much market share as possible. Whole Foods, Trader Joe’s, and Kroger all use
differentiation as their business level strategy (Thompson, 2017). Wal-Mart and Sprouts Farmers
Market both use cost leadership as their strategy (Thompson, 2017). The fact that Whole Foods
do not have any chemicals in their products is one reason why higher prices do not deter their
customers from shopping there.
Effective competition is the main reason why there are so many successful companies.
All firms operating in this industry must embrace the use of generic and intensive growth
strategies. As such, the generic strategy is part of an entire initiative aimed at ensuring that there
is an increase in the competitiveness in the industry. The generic strategy is essential in ensuring
that a firm stands out against its competitors. The best way to overcome this competition is to
embrace the use of intensive growth strategies that are essential in ensuring that the business
development of the company is achieved and that there is an expansion of the business to attract
more customers. Business development is also necessary for companies to remain competitive in
the long-run (Tippens et al., 2019). Effective marketing and product promotion can be used to
enhance competitiveness. The broad differentiation generic strategy will help a company to
separate itself from the competitors through having unique features for the market output.
American grocery retailers are expected to abide by laws and regulations that are
implemented by the government. According to Baourakis (2012), American grocery retailers are
subjected to more stringent regulations through a large number of government agencies that
create policies, monitor the operations of retailers, and pull down the products that they place on
their shelves. Changes in government regimes are often accompanied by changes in these
regulations and policies. In fact, the relevance of politics can be identified in the rising number of
penalties that retailers are receiving from government agencies for violation of policies, which
forces companies such as Whole Foods Market to update their processes regularly.
Legal factors are closely related to political factors. Companies are expected to align their
operations, services, and products with the regulations and policies that are developed by
government agencies. Labor, health, competition, environmental, and trade policies should
always be observed. The legislature and judiciary have been particularly responsive to violations
among companies. In addition, retailers could be subjected to legal battles for raising their prices,
offering substandard products, or suppressing competition. In this case, a legal battle over antitrust issues that followed Whole Foods Market’s acquisition of Wild Oats in 2008 ended with the
sale of the new subsidiary (Fridson, 2015). While retailers have been accustomed to these and
other legal requirements, newer ones are becoming a cause for concern. For instance, while the
Internet has promised to revolutionize the retail sector, it has created new constraints for market
players. In this case, companies can easily be fined for unknowingly violating new privacy
policies, misusing customer data, and exposing data to emerging threats.
The grocery retail sector is an important part of the consumer market. Economic factors
could affect the consumers’ purchasing power and the ability of retailers to operate and should
be studied closely. GDP is an important economic factor. When the GDP growth rate is high,
retailers can comfortably expand their operations in anticipation of the growing market.
Similarly, a rise in inflation and tax rates could also affect the performance and sustainability of
retailers. While governments strive to stabilize their economies, some forces such as market
failures and financial crises are inevitable. For instance, following the infamous Great Recession
that started in the US in the mid and late 2000s, the volume of sales among retailers declined
considerably, while others were forced to close down some of their stores or close down their
operations altogether following unprecedented losses (Anagboso & McLaren, 2009). However, a
major reprieve among grocery retailers is the high potential of the industry, which is
characterized by its positive growth rates. While the grocery industry grew by 5.35% in 2018,
this growth rate is projected to rise consistently to 6.03% in 2022 (O’Connell, 2017). This shows
the high resilience of the industry and the vast opportunities that it offers to retailers. However,
retailers should always evaluate the cost of goods and their leverage against suppliers so as to
ensure that they can offer competitive prices to their consumers.
It is recommended that retailers make use of technologies that enable them to understand
their consumer purchasing behavior and preferences in order to ensure that they streamline their
operations to match the needs of their distinct customers (Akter & Wamba, 2016). Recent studies
show that, unlike the past, when consumers used to make small purchases in order to reduce their
expenses, these consumers have shifted to bulk purchases for purposes of convenience and
reduced prices (Hortaçsu & Syverson, 2015). As such, companies that fail to mass stock their
products or to offer bundled sales could soon lose relevance. In addition, market demographics
change from time to time due to changes in generations, immigration, and multiculturalism. In
addition, awareness and the lifestyles of the consumers also affect the sustainability of the
retailers to succeed. In the recent past, consumers have shifted their focus from processed foods
in favor of healthy/natural products (Martinez, Rodriguez, Mercurio, Bragg & Elbel, 2018).
Similarly, a rise in activisim against genetically modified foods, cloned animals, animal cruelty,
and environmental pollution could have been creating consumer backlash among retailers that
have failed to meet the expected standards.
Technology is quickly becoming an integral factor in every industry. However, its
relevance in the grocery retail sector is even more pronounced. For instance, recent studies show
that e-commerce has been growing at a fast pace than physical stores (Hortaçsu & Syverson,
2015). Despite many big-box retailers having been founded decades ago, e-commerce companies
such as Walmart have outgrown these companies over a short period. Besides, technologies such
as e-commerce enable retailers to lower their operating costs, add value to their services, and
expand their market coverage without a physical presence. In addition, newer technologies have
enabled companies to tailor their services to match the needs of their consumers. For instance,
data mining technologies such as cloud computing, big data analytics, machine learning, and
artificial intelligence have been touted as the future of retail since they enable retailers to
understand consumer behavior/preferences and to align their services with these trends (Akter &
Wamba, 2016). At the same time, artificial intelligence have become increasingly common in the
industry, which have an impact on operations, jobs, and sales.
The environmental protection agency (EPA), other government agencies, and the
community have become increasingly active in raising accountability among retailers and other
companies. In this case, companies in this sector are not only expected to lower their pollution,
but they are also expected to embrace environmentally friendly products. Packaging materials
and energy sources have been the greatest concerns. As Naidoo and Gasparatos (2018) argue, the
ban on many synthetic materials such as plastic packaging materials has considerably raised the
cost of operation among retailers. While embracing green products, environmental conservation,
and the use of renewable energy are vital for legal compliance, they are also an important way
for retailers to improve their corporate social responsibility.
One of the key opportunities that the grocery retail sector offers, is expansion into new
markets. In this case, large companies can use strategies such as the establishment of new
operations or mergers and acquisitions to expand their physical presence. While Whole Foods
Market demonstrated its mastery of mergers and acquisitions in its aggressive expansion in the
1990s and 2000s, Walmart emerges the winner in expansion as it boasts close to 12,000 stores in
27 countries in all continents (Walmart, 2019). However, e-commerce has presented as a great
opportunity for retailers to expand their operations without necessarily establishing a physical
presence. This is an opportunity that has been perfectly utilized by Amazon. As the parent
company of Whole Foods Market, the success that Amazon has achieved and the platform that it
has created present an opportunity for Whole Foods Market to expand its operations.
Personalization of services is a new opportunity in the retail sector. As explained earlier,
technologies such as big data analytics, cloud computing, and data mining enable companies to
collect bulk data from their consumers, process it, and use it to understand their preferences and
behavior. Using results from these technologies could enable companies to offer more relevant
services to their consumers. Walmart is among the few companies that have excelled in this
sector, where the company transmits approximately 2.5 petabytes of consumer data to its data
centers, processes it, and uses it to offer more relevant services (Marr, 2017). Retailers also have
an opportunity to create new market segments and to offer specialized products that align with
emerging trends. This is an area that has been perfected by Whole Foods Market. While other
companies strive to optimize their profits in a highly competitive market, Whole Foods Market
created new market segments by offering healthy and natural products that align with the needs
of new segments based on lifestyle and health (Haddon & Gasparro, 2017). As such, it is clear
that retailers can create more markets rather than being bound by traditions in the industry.
The threat of new entrants in the grocery retail sector is high. While the industry is
promising for companies as a result of its high and consistent growth rates, it has attracted both
small and large companies. Unfortunately, the threats of competition and substitute products are
also high. In this case, many retailers tend to sell the same line of products as their competitors.
Despite companies such as Whole Foods Market innovating by introducing healthy products,
they still face cheaper processed alternatives as well as healthy products from other retailers. At
the same time, the grocery retail industry is characterized by intense competition from both big
box retailers, e-commerce companies, and cheaper substitute products.
Product life cycle and obsolescence are also major concerns among grocery retailers. In
this case, intense competition in the industry has created a wave of change at all levels of the
business. In this case, manufacturers, suppliers, and sellers are becoming more innovative in
order to outdo their rivals. This means that newer products emerge within a short period to rival
their competitors. As such, the life cycle of products sold by grocery retailers and their
obsolescence are considerably short.
Whole Foods Overview
Whole Foods Market is a multinational grocery store chain originally founded in Austin
Texas in 1980 by owners, John Mackey, Renee Lawson Hardy, Craig Weller, and Mark Skiles.
The company is based on the principles of providing individuals with organic and quality food,
“Our purpose is to nourish people and the planet. We’re a purpose-driven company that aims to
set the standards of excellence for food retailers. Quality is a state of mind at Whole Foods
Market.” ("Whole Foods", 2020).
Whole Foods began expanding the company in 1984 by opening more locations across
Texas, the company expanded from Austin to Houston and Dallas (“Whole Foods”, 2020). Soon
after a location was opened in New Orleans, before they made a bigger move to Palo Alto,
California in 1989. During the expansion many mergers and acquisitions took place, and the
company began to acquire other natural food chains across the United States, some of which
include, Wellspring Grocery of North Carolina, Mrs. Gooch’s Natural Food, Markets of Los
Angeles, and Nature’s Heartland of Boston (“Whole Foods”, 2020).
There are many factors that help Whole Foods decide where they want to open their next
location. Availability, cost of real estate, population density, education, demographics, and
community’s interest in natural and organic foods are all factors that are considered when
making the decision to expand (Kashino, 2020). Keith Sellars, the head of the Washington, DC
Economic Partnership for Whole Foods, stated the factor that plays the heaviest role on
expansion is the level of education. The chain relies heavily on customers that are highly
educated due to their knowledge on the benefits of organic food, which leads them to be more
willing to pay higher prices for their groceries (Kashino, 2020).
Whole Foods has a strong understanding of their target market and understands what
types of customers they have. Recent studies have shown Whole Foods target market consists of
individuals and families who earn an income above the national average. Most customers have
college degrees and live in metropolitan areas (Brandongaille, 2014). Although, Whole Foods
has done a great job understanding their target market and creating brand loyalty, they are
looking to expand to millennials. In 2015, Whole Foods announced their goals to reach out to
more millennials and open more stores that would fit their specific needs, such as healthier living
while being cost efficient. In 2016, the company opened its first stores under the new name 365
by Whole Foods ("Whole Foods Market | History & Facts", 2020). The stores were a way of
reaching out to larger communities, products sold at the 365 markets were considered “store
brand” and were smaller and carried less expensive merchandise ("Whole Foods Market |
History & Facts", 2020). Although, after Amazon's acquisition of Whole Foods in 2018, the 365
Market stores began to close down. Amazon was already working towards lowering the prices of
products sold at Whole Foods which defeated the purpose of the 365 Markets.
A recent research conducted by Statista shows the different age groups of individuals
shopping at whole foods. As shown, 48% of Whole Foods Market customers are between the
ages of 50-64. Since Millennials make up only 20% of Whole Foods customers, this expansion
would be important, since it would ensure brand loyalty with their customers for coming years.
To reach more than one audience, Whole Foods has created four different product lines:
365 Everyday Value, Whole Foods Market, Engine 2 Plant-Strong, and Whole Trade Products.
The 365 Everyday Value product line is considered to be more affordable for consumers while
still ensuring quality food. The Engine 2 Plant -Strong products were founded by Rip Esselstyn,
and are plant-based and healthy products consisting of, fruits, vegetables, whole grains, beans,
nuts and seeds ("Whole Foods", 2020). Whole Foods Market products are their name brand and
original products, which are considered unique, natural, and organic. Customers also have the
option of buying the Whole Trade Products, which allows customers to take part in helping
Whole Foods Market give back to the communities around the world. By purchasing products
from the Whole Trade line customers are actively using their buying power to create new
economic opportunities for workers in the developing world (“Whole Foods”, 2020).
Whole Foods organizational culture plays a major role in the success of their company.
Some of the most important characteristics of their culture are: having a focus on team,
participation, semi-formal interactions, and transparency (Rowland, 2020). Whole Foods six core
values are aligned with delivering quality service and ensuring a strong bond with the
employees, which reduces the employee turnover rate. The company has reached a large amount
of success and growth and these core values have been attracting millions to apply each year.
The company originally consisted of a staff of 19 members and has grown to 91,000 and over
500 stores today open across the United States, Canada, and the United Kingdom (Redman,
Strengths and Weaknesses
Whole Foods, like any other business, has strengths and weaknesses. Some of the
strengths include: high quality products, brand loyalty, Prime discounts, Prime delivery,
environmental work, humanitarian work, and strong social media presence. Weaknesses include:
high prices, incorrect pricing in the past, lack of foundation marketing, bulk options aren’t
advertised, and uneasy employees. Additional details on these points are provided below.
Whole Foods has many strengths. Their web ...
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