Summary of article:
John Mackey started Safer Way in 1978 focused on entirely vegetarian foods. Joined forces with Craig Weller, Mark Skiles who founded Clarksville Natural Grocery Store in 1979. JV took place in Austin, TX with 19 people. Whole Foods also owns and operates several subsidiaries – e.g. Allegro Coffee, Pigion Cove. Company has 8 distribution centers, 7 regional bake houses and 4 commissaries.
Company is highly selective about what they sell – stringent quality, sustainable agriculture.
WF products differ by geographic regions and local farm specialities.
Company tries to instill a sense of purpose among its employees – 100 best companies to work for. 90% enjoy their job.
Treat customers as “lifeblood of their business” and are interdepended on each other.
Competitive Environment
Inception = no competition, population is becoming increasingly concerned about eating habits, natural foods are flourishing. e.g. Trader joes and Wild Oats Market.
Only 3% of US Farmland is organic?
Low price and convenience continue to be the dominant factors driving consumers to supermarkets today. Characterized by Low margins and downward pressure on prices.
A different shopping experience
Setup store is different. Store and products carefully researched to ensure its meeting the demands of local community. In stores chefs to help with recipes, wine and food sampling.
WF uses price as a marketing tool – 365 WF brand names priced less than similar organic products. Does not use price to differentiate from competitors, it focuses on quality and service as the competitive dimensions.
It relies on word of mouth and is promoted in health magazines.
WF is recognized for charitable contributions, 5% of after-tax profits to non-profit charities.
The aging baby boomers
Aging baby boomer generation will expand and the urban singles are focuses for WF due to extra disposable income. Americans spend 7.2% on food. Increase in income and other items has created an expansion in gourmet store market and slowing discount retail market.
“People don’t shop our stores because we have low prices” – Mackey
Growth of natural foods is expected to continue at a rate of 8-10% annually.
Operations
Purchases food from regional and national suppliers. Allows company to leverage size in order to receive deep discounts and favorable terms.
Owns 2 procurement centers and handles majority of procurement and distrubtion itself.
Prepared food sales is a large opportunity.
Code of Conduct
Heavy focus on ethics. Animal rights and opposes animal cruelty. 14 page code of conduct document.
Evaluate Whole Foods’ value chain.
- Strong revenue growth
- Wide range of products and value added services
- Dedicated workforce
Porters 5 forces of competition
Does Whole Foods have a source of competitive advantage?
Although the grocery market is highly competitive, WF’s brand of being sustainable and consumer conscious is a competitive advantage.
What are the major strategic risks facing Whole Foods?
Competitive Dynamics, adoption of very similar practices by other stores.
What strategic options are available for Whole Foods going forward?
Continue with their business-level strategies which allow them to differentiate from others. Focus on their product and service quality dimensions to be competitive in addition to the products.
Consider new strategic alliances with companies and brands which have similar interests, vision and goals.