Whole Foods market strategy and competitive positioning analysis

Whole Foods Case Study

Whole Foods was founded in 1980 and by 2014 was a major national grocery retailer, and the number one organic and premium grocer in America, with international outlets in Canada and the UK as well. The premium grocery industry is driven by social trends towards organic and healthy eating, greater diversity of food items, and economic trends towards higher disposal incomes for people who are relatively successful. The legal and political environment is questionable in the sense that the US lacks a firm commitment to clear organic labeling. That said, the lack of desire by US lawmakers to legislate GMO-based foods also creates a market for a company that specializes in selling organic, given the rising (if relatively minor) social trend towards anti-GMO sentiment. Whole Foods has the objective of being the top grocer in the areas in which it locates, and in doing so promote both the health of humanity and the health of the planet. This is part of the company\\\\\\\'s ethos, one supported by a large number of the company\\\\\\\'s clients. The mission statement Whole Foods, Whole People, Whole Planet encapsulates this ethos. The company\\\\\\\'s strategy is to focus on high end food, sold with a high end retailing experience. So Whole Foods sources not only organic items, but high end food items of all types. Its stores offer a more pleasant in-store experience than other grocery stores, with a fresh food bar, baked goods, high end fish and meat counters, coffee shops, and take-out food. Where allowed, some even have craft beer bars. This high end focus targets customers who are less price-sensitive than most, and willing to spend more to eat healthier, better food. Choosing the right locations is therefore critical for Whole Foods, to ensure that its stores are located where its core demographic lives. Whole Foods has a number of strengths. An obvious strength is its brand, which is strong, easily identifiable and ultimately is a brand trusted by consumers. It has great locations – Whole Foods stores are typically crowded and profitable, because they are in the right places. Furthermore, Whole Foods is a company that has a strong mission and ethos, things that bind the company, its employees and its customers. The mission resonates with people. There are a few weaknesses, but not many. First, the CEO Mackey has had some ethical issues which have resulted in negative publicity for the company. Second, Whole Foods has a reputation for being too expensive, and that reputation has at times hurt it. There are still organic growth opportunities for Whole Foods. For one, the company can continue to grow in the United States, and of course there are entire cities in Canada and the UK that do not have a Whole Foods (or three) but could. Plus other international markets. There are also opportunities to increase same store sales as well. Further, Whole Foods can grow through acquisition, online sales or other new means of generating revenue. There are many threats. Wal-Mart and other competitors are clearly threats, as mainstream grocers and food producers move into the organic market. The economy represents another threat – recessions are associated with people scaling back on discretionary spending. While this only affects a small number of Whole Foods customers, the reality is that it still affects some and the company\\\\\\\'s revenues will take a hit during a recession. The chief elements of the Whole Foods strategy are in store location, product selection, merchandising, marketing and market segmentation. There are a few different alternatives that Whole Foods can pursue in order to address some of the conditions in their market. The first is to stay the course. The company is performing well, has a loyal customer base, and should be able to remain profitable despite the threats. The second option is to diversify geographically. It has been able to succeed in Canada and the UK, and there is considerable room for expansion in those countries, or also into other parts of the US where it does not currently have a store. A third option is to look at the competition and strike a stronger differentiation strategy. While already differentiated, there are ways, such as diversifying the product line further, that Whole Foods can defend against the various competitive threats it faces. It might even consider more dramatic tactics like buying a smaller competitors, or starting a different brand that has a different store format than the one that Whole Foods currently uses. The advantages of staying the course are that the company knows this approach is successful, but this strategy has the disadvantage of standing still in changing times; Whole Foods might not be prepared for the next evolution in the business if it stands still. Geographic expansion means millions more potential customers, and some insulation from volatility in the American market. That said, international operations increase the complexity for Whole Foods. It might be able to expand incrementally in those countries but international expansion on a scale big enough to influence its overall performance might take a lot more work than Whole Foods is capable of right now. The third option, seeking either major new revenue channels or expanding via acquisition, is definitely a viable strategy. The upside is that if you find something, you\\\\\\\'ll accelerate the company\\\\\\\'s growth. The downside is that finding a great new revenue opportunity is not as easy as wanting to find one; there is the risk that the entire approach to expanding the business this way fails because of lack of opportunity, or lack of creative thinking to find an opportunity. It is recommended, though, that Whole Foods seeks new revenue opportunities to leverage its existing stores and its existing brand power. The company can explore online retailing, for example, something that Wal-Mart has become successful with. Or there might be opportunities with other concepts. There are retailers that have been able to move into urban areas with smaller stores, and been successful, so that is a possibility. To execute, Whole Foods needs to set specific ROI and revenue targets for each venture. It needs to be willing to walk away from any strategy that ends up falling short of these targets. It will be essential for Whole Foods to try a few things, but be able to move on from the ones that do not work, as this is the best way to find out if an idea is viable or not. That ability to walk away is part of the company\\\\\\\'s control.