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WHOLE FOODS INC.

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by

Holly Marshall

on 29 November 2013

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Transcript of WHOLE FOODS INC.

The End
Introduction
Internal Analysis
External Analysis
Holly Marshall
Charlotte Bornstein
Lindsay Proudfoot
Mitch Gabe

Business-Level Strategy
Recommendations
“Whole Foods, Whole People, Whole Planet”
Response to Changing Industry Dynamics
1. Competition
Consolidation through acquisition
Focused differentiation

2.Corporate Social Responsibility & New Government Regulations
Transparent ingredient labelling
3rd Party Organic Certification

3. Environmental Concerns
Stopped sourcing wild-caught seafood from red-rated fisheries

4. Consumer Preference for Organic Food
Expanding into smaller, suburban areas

5. "Whole Paycheck"
365 Value brand
Comparative analysis of comeptitor's prices
Questions?
POLITICAL
ECONOMICAL
SOCIO-CULTURAL
ENVIRONMENTAL
TECHNOLOGICAL
PESTEL

Reaffirm commitment to core target market
Utilize 365 brand to reach out to price sensitive, health conscious consumers (without diluting reputation)

2. International Market Expansion

- United States accounts for 43.5% of the global organic food market value (299 Whole Foods Stores)

- Europe accounts for 42.7% of the global food market (5 Whole Foods Stores)

- Easily transferrable capabilities of decentralized, local store strategy

"A Healthier You" Government Strategy
Reporting of Organic Prices
Safety Inspection Services
Evaluation:
POSITIVE
Impact
GDP: 3.9% growth
Real Personal Consumption expenditures: increase 3%
Disposable Personal Income: increase 6.1%
US recovery from recession
European Markets: Weak dollar against euro, surging energy prices, increasing interest rates
Evaluation:
MODERATE
Impact
Aging and longer life expectancies
More health conscious population
Social pressures regarding the environment and animal welfare
Trend towards eating out
Greater knowledge of links between health issues and food
Evaluation:
POSITIVE
Impact
<1% of US farmland certified organic in 2004
Environmental concerns
Damaging fishing practices
Rising importance of environmental considerations
Evaluation:
POSITIVE
Impact
Emerging technological capabilities
Improved telecommunications facilities
Modern and advanced technology for goods processing
Evaluation:
WEAK
Impact
LEGAL
Health & Safety LAw
Environmental Law
Organic Food Production Act 1990
Labelling Standards 2002
Evaluation:
MODERATE
Impact
Positive macroenviment
Closely monitor economic indicators (US and International)
Maintain legality
Technological capabilities must be updated/improved
Advocate adherence to environmental issues
Whole Foods Company
Founded in Austin, Texas (1980)

Merger of Safer Way Natural Foods and Clarksville Natural Grocery

Largest retailer of natural and organic foods in the world

"America's Healthiest Grocery Store"

335 retail stores located in the US, Canada, and the UK
322 stores in the US
7 stores in Canada
6 stores in the UK

Issue
How can Whole Foods Company strengthen their high quality brand in an increasingly fragmented and saturated U.S. industry?
Prominent competitor in the U.S. retail grocery business

Highly fragmented industry

Directly competes with members in the strategic group of natural/gourmet food retailers

10% growth in natural food product sales over the past year

The Greater Industry
The US Organic Food Industry

USA is world’s largest economy with highest per capita income

Government focus on developing the industry

Total revenues of $29.2 billion in 2011 (CAGR of 9.4% between 2007 and 2011)

Performance of industry is forecasted to accelerate (anticipated CAGR of 9.7%)

Economic slowdown didn't comparably influence the US organic food industry

Main drivers fuelling positive growth:
Increasing health awareness
Growing population of affluent consumers
Rising average consumer age
Growing concern for food safety and purity
Increasing focus on sustainability and environmental consciousness

Short Term
Medium Term
Focused expansion in U.S
Pursue Canadian Expansion
Long Term
Careful, strategic
European Expansion
Goal: To have 1000 stores in the U.S.



Identify strategic locations with demand or acquisition opportunities

- Don't compromise brand image to cater to price-sensitive consumers

- Identified “Johnnie Foodmaster” as acquisition opportunity in Boston

- Existing experience using acquisitions to enter new markets
- 30% of stores were acquired

CONS:
- 96.9% of business concentrated in the US (vulnerable to local market conditions, limited growth opportunities and benefits of scale economies)
- Approaching saturation of US market within target audience
Goal: To be recognized as an international brand



8% annual same store sales growth

- 7 existing stores concentrated in Ontario and British Columbia

- Considered entering market in Quebec and Alberta

- Existing strategic relationship with UNFI

Challenges:
Higher distribution costs
Border delays
Possible unionization
Competitors (Safeway established in Canada 15% of their sales)


Goal: To be recognized as an international brand


- In-line with long-term growth strategy

- Risk mitigation for inevitable US market saturation

- Positive initial market reaction (increase in stock price) when plans were suggested


CONS:
- Sustained economic weakness in europe post-recession
- Trade barriers & existing regulations
- Evolving industry- growing 12%-15% annually in the U.S.

- Same store sales increasing by 8% annually

- Strong debt position

- Plan to expand to 1,000 stores in states

- Successful acquisition strategy

- U.S Saturation

- Viable Opportunities Elsewhere

1. Refocus Strategy and Core Values
Core Values
Value Chain
Considerations for Recommendations
• Selling the
highest quality
natural and organic products available


Satisfying and delighting
our customers


Supporting team member
happiness and excellence


Creating wealth
through profits and growth

• Caring about our
communities and our environment

• Creating ongoing
win-win partnerships
with our suppliers

• Promoting the
health of our stakeholders
through healthy eating education

Established Reputation

Superior Quality

Superior Employment Practices

Decentralized, local supply chains

Strong supplier relationships

Excellent customer service

Core Competencies
SWOT
Financial Health
Competitors Comparison
Proposed Implementation Strategy:

Agenda
Issue
Introduction
Internal Analysis
External Analysis
Business-Level Strategy
Recommendations
Competitor Comparison
Growth:
- Revenue growth of 10% 1 yr,
- Comparable store sales estimate of 6.5-8.5 % growth

Profitability:

- 2013 return on assets of 10%, return on equity of 14%, increased since 2008 at 3.8 and 7.7 respectively
-Profit margin of 4.27%
- Net income of 542 million
- 2013 Operating margin of 6.35 (increased from 2.9 in 2008)

Liquidity:
- 27 million of debt
- Current ratio 1.82 (increased from 0.93 in 2008/decreased in 2012)

Full transcript