Whole Foods Market Strategic Analysis

Whole Food Market Inc. (WFM) is one of America’s largest food products supermarket chain. The company refers to itself as “America’s healthiest grocery store” and submits that its food products are “the finest natural and organic foods available” (WFM, 2017). The foods the company stocks are largely devoid of hydrogenated fats, artificial preservatives, sweeteners, and flavors.

The company’s culture is founded on eight core values. These include:
a. Sale of high quality natural and organic products
b. Satisfaction, delightment, and nourishment of customers
c. Support for team member excellence and happiness
d. Creation of wealth through profits and growth
e. Service and support for the local and global communities
f. Practice and advancement of environmental stewardship
g. Creation of ongoing win-win partnerships with suppliers
h. Promotion of the health of stakeholders through healthy eating education

Over the last five years, the performance of WFM has largely been impressive, with its sales being on an upward trajectory. Figure 1.1 indicates the company’s net sales growth over a five year period.

Figure 1.1
(Sales figures in billions)

Some of the factors that have driven WFM’s sales in the past include, but they are not limited to, the opening of new stores, acquisitions, and enhanced store sales. Last year, the company registered total sales of 16.03 billion. This is a 24 % increase in sales over a five year period. In that regard, therefore, the company’s growth strategy seems to be working.

It is important to note that the company has traditionally utilized a differentiation generic strategy in a bid to both protect and increase its market share. According to Harrison and John (2009), “generic strategies are concerned with how the firm intends to position itself to create value for its customers in ways that are different from those of competitors” (p. 89). In WFM’s case, the company seeks to make use of the natural and organic nature of its products as its primary selling point. In so doing, the company offers for sale products devoid of hydrogenated fats, artificial preservatives, sweeteners, and flavors. Over time, new store establishments have also been set up in new or existing trade locations, with most of the said stores measuring an average of 45,000 sq. feet.

Recently, the company seems to have tweaked its growth strategy so as to remain relevant in an increasingly competitive marketplace. The company’s CEO, John Mackey, stated that WFM was refining its growth strategy by ensuring its efforts were focused on providing the best service to the company’s core customers, while at the same time swiftly moving to ensure that category management was implemented. In the words of the CEO, “evolving our purchasing operating model while developing data-rich, customer-centric category management capabilities is critical to our go-forward merchandising, pricing, marketing and affinity strategies” (Seeking Alpha, 2018). It is important to note that majority of WFM sales comes from loyal customers. In that regard, therefore, the emphasis on category management could be geared towards the need to better serve these constituents. In essence, category management has been successfully utilized before by retailers “as a key component for a disciplined growth and market expansion strategy” (The Partnering Group, 2017).

On this front, WFM seeks to “allocate our paid media and marketing investments among strategic national and regional programs and our individual stores; and we benefit from valuable earned media, social media and word-of-mouth advocacy” (CSI Market, 2018). Currently WFM has numerous social media channels from where a wide range of targeted messages are published on a daily basis. The retailer’s social media presence is spread across various social media platforms which include, but they are not limited to, Pinterest, Facebook, and Twitter. According to Andrews (2014), the relevance of social media marketing in the current day and age cannot be overstated. This, as the author further points out is more so the case given the broad audience social media channels offer to businesses and the cost-effective nature of the same. Further, WFM’s community ties, which happen to be quite deep have been deliberately set up over time so as to enable the company to have a more direct connection with not only the needs but also the tastes of consumers at the local level (WFM, 2018). The table below demonstrates WFM’s social media presence in two of its most popular platforms.
WFM Social Media Presence
Facebook followers
4.29 million
Fans on Twitter
4.85 million

It is important to note that in addition to being large, the food retailing industry also happens to be fiercely competitive. WFM’s competitors, according to Thompson (2017), include “grocery firms and health food stores.” Others include farmers’ markets and specialty supermarkets and restaurants. Some of the key competition areas in this market include, but they are not limited to, store ambiance, price, convenience, as well as quality and customer service. Below, I highlight some of WFM’s key competitors.

Wegmans remains one of the country’s most popular gourmet store chains. With its extensive branch network in a number of States – specifically Massachusetts, Maryland, New York, Virginia, and New Jersey, Wegmans comes across as a worthy competitor to WFM. The company registered 9 billion in sales in its most recent financial statement. It is, however, important to note that unlike WFM, the company does not specialize in niche or organic foods but instead stocks a wide range of food brands.

Kroger’s portfolio is largely diversified, and the company operates in various formats such as supercenters and drug/food stores. In the year 2003, the company, perhaps motivated by the profit potential of the space, launched an organic and natural food products brand called Naturally Preferred. This particular company adopts a low-cost strategy and as Rittenhouse (2017) points out, “to be on equal footing with some of its competitors,” WFM may have to slash its prices going forward.

Over time, the company has adopted a well-planned expansion mode, with its presence now being felt across 32+ states. With an annual sales figure of 1.37 billion, the company does not seem to be a worthy competitor to WFM. However, considering that the company offers some of the very same products offered for at WFM, and taking into consideration Trader Joe’s planned expansion, it is not difficult to see why the latter is a viable competitor.

Subjecting WFM to a SWOT analysis would not only help us to understand the company’s strength and weaknesses, but it would also enable us to identify the threats the company faces and the opportunities it could exploit going forward. In that regard, therefore, SWOT analysis could come in handy as the company seeks to craft a long-term competitive strategy.

a. Broad range of products: The company’s products line spans a wide range of bakery items, poultry and meat, as well as sea food. In that regard, therefore, it is well placed to cater for the needs of various segments of the market.

b. High quality standards: The company is known for the high standards of quality it keeps. In the past, the company has banned numerous components and ingredients found to contravene it’s organic and healthy foods rallying call. Some of the products that the company does not stock include those with hydrogenated fats and artificial sweeteners or flavors. This sets it aside from other retailers and customers may even be prepared to pay premium prices on this very basis.

a. Expensive products, in comparison to similar products offered by competitors: From the pricing of WFM’s products, it is clear that the company does not follow a cost leadership strategy. Its relatively expensive products have, as a matter of fact, earned the company the nickname ‘whole paycheck.’

b. Overdependence on the American Market: Currently, the company derives a significant chunk of its annual sales from the United States market. Downturns in the economy of the country, such as a recession, could deeply hurt the company’s bottom-line.

a. Favorable Industry Trends: It is important to note that over the last two decades, significant awareness has been created on the relevance of eating healthy foods and the benefits the same has on our long-term health and wellbeing. Today, people are more conscious of the kinds of foods they consume on a daily basis. It therefore follows that an entity offering organic as well as natural food options is likely to do fair well going forward.

b. Opportunity for global expansion: Currently, the company has most of its operations in the U.S., Canada, and the U.K. There exists vast and unexploited markets in Africa and China. The company can launch in these markets using its brand’s success in the U.S. as launch pad.

a. Significant Competition: As it has been pointed out elsewhere in this text, the competition in this particular industry happens to be intense. It should be noted that even entities that have traditionally not been in the organic and natural food market have expanded into the same. These include Costco which has been growing its organic counter and Wal-Mart. Continued fierce competition could dent WFM bottom-line.

b. Low-cost competition. The company could lose some of its customers to a retailer like Kroger which is known for its low-cost competition strategy. Attracted by the promising nature of the organic and natural foods space, others could also join the fray and seek to edge WFM out of the market by offering lower prices for products.