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Whole Foods

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by

Joe DeBenedetto

on 26 November 2014

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Transcript of Whole Foods

Simple- Whole
Foods,
Whole
People
, Whole
Planet
Communicate mission through Core Values
Core Values make up Company Culture
Mission Statement
Core Values
Selling the highest quality natural and organic products available
Satisfying, delighting and nourishing our customers
Supporting Team Member happiness and excellence
Creating wealth through profits and growth
Core Values Cont.
Serving and supporting our local and global communities
Practicing and advancing our environmental stewardship
Creating ongoing win-win partnerships with our suppliers
Promoting the health of our stakeholders through healthy eating education
Social Responsibility and Business Ethics
Team Environment
Individual stores make decisions independently
Ranked #44 on Fortune Magazine's "100 Best Companies to Work For"
90% of employees say they are happy with their job
They want to surpass 100% customer satisfaction by "delighting" their customers every time
Social Responsibility and Business Ethics
Managers compensated well
"Economic Value Added Bonus"
Opportunity to receive stock options
Whole Foods minimum wage- $13.15
Excellent benefits and health care
Executive pay is capped at 14 times the employee average
Mackey's total 2013 compensation was about $70,000 (CNN)
Average CEO salary in 2013- $12.3 million (CNN)
Not So Socially Responsible?
Statements about helping local organic farmers can be misleading
They do buy from small farmers but...
Many smaller farmers can't achieve quality standards
End up buying majority of product from large farms
Five or six farms in California dominate industry
SWOT

Analysis

Strengths
Leader in Organic/Health Food
Very strong profit margins
Quality Standards
Provide added value through "retail innovation"
Customized stores
Catering
In-store Events
Weaknesses
Organic farmer pipeline is underdeveloped and can't support industry growth
Govt. does not subsidize organic farming
Higher prices than competitors (known as "whole paycheck")
Conservative advertising
Opportunities
Shifting values towards eating:
Healthier
Organic/Natural
Non GMO
Rewards card program
Reward loyal customer base
Encourage new customers
Take-Home boxes
Sponsor healthy community events to build brand awareness
Growth of private labels
Global Expansion
Threats
Increased Competition
New entrants
Old rivalries
Economic downturns have a greater affect on higher priced Whole Foods
http://seekingalpha.com/article/2362295-whole-foods-is-taking-a-beating-but-heres-why-you-should-expect-future-growth
Gross Profit Margin Comparison
WFM-Whole Foods

WMT-Wal-Mart

DG-Dollar General

TGT-Target

KR-Kroger

SWY- Safeway

SFM- Sprouts Farmer's Market

TFM- The Fresh Market
Background
Joint Venture
John Mackey, President and cofounder- “Safer Way”
Craig Weller & Mark Skiles - “Clarksville Natural Grocery”
Joined forces in 1980 in Austin, Tx. - staff of 19
Background Cont.
Whole Foods Transformation
1st certified organic grocer
In 2009:
$8 billion in sales
289 stores
53,500+ team members
ST Objectives
To improve employee morale empowerment & rewards
To improve customer satisfaction
To improve society
ST: Employee Morale
Empowerment
Team based environment allows each store to make independent decisions regarding its operations
Teams consist of up to 11 employees and 1 team leader
ST: Customer Satisfaction
Trained team members
Immaculate stores
In-store chefs
Wine tastings
Food samplings

ST: Society
“Take Action food centers”
Donates 5% after-tax profits to non-profit charities
Animal Treatment Awareness
150 “Let’s Retake Our Plates” screenings

Design Effective Rewards
“store team leader” – compensated by Economic Value Added (EVA) bonus and eligible to receive stock options
Home delivery
Cooking classes
Massages
Valet parking

LT Objectives
Acquisition Create high barriers of entry for potential competitors
Growth Expand into new & existing areas
LT: Acquisition
LT: Growth
Horizontal Acquisition
Eliminate most direct competitor
Purchased Wild Oats in 2007
Vertical Acquisition
Allegro Coffee Company
Pigeon Cove
Produce Field Inspection Office and Select Fish
8 Distribution Centers
7 Regional bake houses
4 Commissaries
Products
Caters to specific locations
Correct “pricey” image after Economic Recession
Private Labels
Accounted for 11% of sales in 2009
Pre-made meals
“4 for $15” deal
Placement
Target Location
40% or more residents with college degrees
Open 17 new stores in 2010
Global European Market
Large Population
“a more sophisticated organic-foods market”
Whole Foods:

Five Force Model

Buyer Power
High
Better educated
Willing to pay
Many sellers
Many options
Organic demand increasing
Supplier Power
Moderate
Limited number of suppliers
Rivalry
High
Natural food stores
Independent supermarkets
Mass merchandisers
Super centers
Wholesale clubs
Local farmers’ markets
Substitutes
High from grocer
Low from restaurants
Increase in pre-made meals
50% decrease in eating out
New Entrants
Moderate to high
High cost of obtaining organic food products
Limited strategic locations
More fragmented market (large number of smaller companies)
Five Force Analysis
Everyone is affected by the recession
Fighting to remain profitable
Narrowing gap between conventional and premium grocers
Key Financials
Forward P/E ratio: 28.3
Dividend Yield: 1%
3-year average revenue growth: 13%
3-year average profit growth: 31%
Total Debt: Less than $100 million
Stock Performance
Steep decline in stock price after quarterly report of increased competition spooked investors
Most recent quarter was viewed as a great success as the
plan to fight competition
is finding success
Nov. 11,2014
https://invest.ameritrade.com/grid/p/site#r=jPage/https://research.ameritrade.com/grid/wwws/stocks/charts/charts.asp?symbol=WFM&c_name=invest_VENDOR
http://performance.morningstar.com/stock/performance-return.action?t=WFM&region=usa&culture=en-US
Industry Analysis
Competitive Analysis
Specialty Organic Stores
Conventional Grocery Stores

Specialty vs. Conventional
New Produce Ranking
Embracing Technology
Remodeling Stores
Remodeling plans by end of 2015
70% of stores 10 years or older
Remodels include
Decor updates
Adding and remodeling venues
Full store remodels
New Marketing Campaign
Whole Foods' Brand had been slipping
Originally viewed as healthy
Became known as expensive
"Values Matter" National Brand Campaign began in October
“This campaign will distinguish what makes our brand special, our food different, and our quality superior.”
Jeannine D’Addario, global vice president of communications at Whole Foods
Makes statement that Whole Foods may not be the best price but they offer the most value
Whole Foods' Grand Plan to Fight Competition
Involves 4 major areas
New Produce Ranking
Embracing Technology
Remodeling Stores
New Marketing Campaign
According to a New York Times poll conducted last year:
93% supported GMO labeling
Whole Foods’ new labeling system
Enhances grocer’s reputation
Allows them to increase margins
More informed customers More willing to pay more for quality
Adoption of Apple Pay
Began in October
Use with iPhone 6 and Apple Watch
Quicker more secure way of paying

Partnership with Apple
Partnership with Instacart
Began in September
Available in 15 major US cities
1-hour delivery available
Order through Instacart and pick up in store
Instacart
Updated App
App features over 3000 recipes
Sort recipes by ingredients you already have
Create shopping lists from recipes
Ultimately make planning, shopping, and cooking easier.
Joe DeBenedetto Jacklynne Delconte Kayla Matthews Katherine Carreon Trevor Jackson
Agenda
General Strategies
Created using a Joint Venture Strategy
Implement Focus Differentiation Strategy
Focus is high quality organic and natural foods at a premium price for a niche market
Focus on the product, people, service and environment
Grown over the years through mergers, acquisitions and new store openings
Strategy of expansion and acquisition has fuel growth in net income
Business Strategies
Horizontal Acquisition
Attempted to purchase lead competitor
Wild Oats
Added 70 new stores
Bid drew antitrust investigation from Federal Trade Commission
Dispute was settled in 2009
Whole Foods closed 32 Wild Oats Stores
Agreed to sell Wild Oats Market Brand (Now sold by Wal-Mart)
Differentiation
A key component to Whole foods success is setup of the store
Selling the customer on the entire experience
In-store chefs helping with recipes
Wine tasting and food sampling
“Take Action Food Centers”
Home Delivery
Cooking Classes
Target Market Development
Whole Foods targets their locations specifically by an area of demographics
40% or more have college degrees
In cities with large space and heavy foot traffic
Chosen based on: income levels, education and population density
Products differ by geographic regions and local farms
Found a demographic that appreciates “ trendy “ theme
Customer shop there to fit in
Marketing Strategy
Promoted in several health conscious magazines
The Green Movement
“Let’s Retake Our Plates”
Encouraging and educating customers
Creating Awareness
Growth Strategy
Expand through new stores
Focuses on earning a profit while providing job security
To lay the foundation for future growth
Forecast to open 17 new stores in each of the following two years
Growth and Expansion
Through private labels
365 Everyday Value
Whole Kids Organic
365 Organic Everyday Value
Authentic Food Artisan
Product Development
Product expansion from dry goods to perishable produce
Includes:
Meat
Fish
Prepared foods
Globalization and Expansion
273 stores in 38 States in the U.S
6 Stores in Canada
5 Stores in United Kingdom
Turnaround
During the recession
Entered into the pre-made meals sector
“4 for $15” deal
Staying True to Mission Statement
Offer minimally processed, high quality food
Engage in ethical business practices
Provides motivation, respectful work environment
All products must meet quality standards
Go Green Movement

Voluntary Certification
California Certified Organic Growers
Complying with stricter guidance on federal regulations
Whole foods has gone the extra mile
Following USDA’s organic rule
By opening store to third-party inspectors
Following a strict set of operating procedures

Customer Satisfaction
Realize customers are the:
“ Lifeblood of our business” and they are
“ Interdependent on each other”
Objective goes beyond 100% customer satisfaction
Goal is the “Delight” customers in every interaction
External Analysis
Technology
Organic Farming
Political/ Legal
USDA
Economic
The Recession Effect
Global
North America and Western Europe
Sociological
The
Green
Movement
Eating Healthy
Recommendations
Expand marketing
Loyalty program
More competitive pricing
Increase global growth
Continue improving customer experience
Company Background/History
Whole Foods' Values
Short and long term objectives
Whole Foods strategies
External/Industry analysis
Internal Analysis
Five-Force Model
Case Recommendations
Whole Foods today
Thank you for your time!
We can answer any further questions at this time
Full transcript