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Whole Foods Opt 1
Whole Foods Opt 1
By: Dan McLindon Kyle McDaniel Jeremy Smiley Tom Anderson Ray Moorman
Can Whole Foods remain competitive in face of major changes in the competitive environment?
Brand Values
Competitive Position Source of Differentiation Status in 2008
Corporate Objective
Political
Opportunity
1 or 2
Economic Social
Threat
5 4 or 5
Technological
Growth Rate
Key Items Purchased
Growth slowed since 2000 (7-9%) Organic $17bn (1/3 of natural foods)
Fresh fruit &vegetables 73% (largest category) Big growth is processed items
Prices of organic foods likely to decline as competition/supply increases Lack of availability more supply in the future Brand loyalty to natural & organic foods
Suppliers
Competitive Rivalry
Buyers
Substitutes
Description
Easy switch to the conventional retailers. Specialty stores built right in to their strategies. Largest food processors acquiring organic food producers. Only 1% of farmland used for organics.
Conventional Retailers
High
Medium to High
Low
Intensity of Competition
High
Entrants are already there! Their intensity of their pursuit of the natural/organic market is the question.
Low Medium
The Result
Slowing growth since 2000. Struggling to find beef and chicken suppliers.
Intensity of Competition
At will.
Entrants are already there! Their intensity of their pursuit of the natural/organic market is the question.
Already there.
2006
Conventional Retailers Whole Foods
US Grocery Sales
# of Stores
Revenue in Billions $
25%
0.7%
5812
188
$377
$5.6
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?
WEAKNESSES Price up to 75% higher Locations only in affluent areas Advertising Budget very low (WOM approach) Promotional Offers no coupons
THREATS Conventional Supermarkets Bad Economy Local Farmers Markets/Independent Retail Chains
Future Challenges
Conventional Grocery Stores over saturate Market & offer Organic & Natural Foods
Convince new customers to shop at WF rather then 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
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
Recommendations
Catering
Offer catering to local businesses & events