Whole Foods Market's response to growing organic food demand

Whole Foods Market

The USA food market is currently dynamic and keeps changing on a daily basis. The current occupancy of the shelves that organic foods have taken is quite substantial and this extends to the dairy products category and any other mainstream food retails. It is estimated that the market retail sales of organic foods shot to $21.1 billion in 2008 up from $3.6 billion in 1997 and this has been associated with the marketing boom (United States Department of Agriculture, 2009). The organic industry in the U.S. is evidenced by the increasing private-label product lines and the daily introduction of new product lines.

The organic farms have been struggling to keep pace with the exponential demand of the organic products. Despite the more than doubling of the acreage of the land under organic farming, the supply still cannot match the demand. One of the reasons is because the farmers have not converted their farmlands into organic farmlands fast enough to keep pace with the demand that is experienced. The other factor that could be stalling the matching of the demand and supply is the certifier approval of the farms. This takes three years of dedicated organic farming and the farmer must be able to prove that there were no prohibited substances that were used within or next to the farm. The social pressure against the organic farmers also at times slows the farm conversion to organic farms. This is pressure that comes from the lot that has negative views about the organic farming.

The Whole Foods Market that has been in the business of food for a long time had to stay in touch with the reality of the demand and due to the shifting demand patterns they introduced the organic foods, produce and products into their stores. It is estimated that more than half the American population have tried organic foods. In a research compiled by Organic Consumer Association (2004), it indicates that 58% of the respondents indicated that they believe the organic foods are healthy for the environment hence they buy it, and another 54% saying that they buy the food because it is healthy for them. 57% indicated that they buy the organic foods as a means of supporting the small scale farmers and local farmers. Amazingly some 32% believed that organic foods tasted better and another 42% believed that organic foods are of better quality. This is a variety of reasons with each having a significant percentage as to why they like the organic foods hence cannot be ignored by any serious food retailer like the Whole Foods Market.

Whole Foods Market Porter's analysis

Having been established in 1980, Whole Foods market has grown to be the largest organic and natural foods store in the world. It has been able to survive several market forces due to some aspects that can be highlighted in the Porter's Five Forces analysis (Whole Foods market, 2011).

Buyers

The force from the buyers can be said to be high on the organization as clients are always on the lookout for the bets quality as well as the best prices. It is worth noting that the clients can switch to lower prices like with Wal-Mart or Kroger if their price sensitivity is not handled well. It is however worth noting that the Whole Foods Market clients are not overly price sensitive and they are very loyal.

Suppliers

The threat from this sector on the organization is also noted to be high since the suppliers have a great deal of price volatility. Since the organization is committed to the naturally grown foods and organic foods only, the variety of suppliers is limited hence making it difficult for the organization. The suppliers of organic and naturally grown foods are becoming harder to find as time goes by.

Threat of substitutes

The organization views the threat of there being substitutes to be medium since it offers highly unique products that are of high quality and health products of wide range that are naturally or organically grown.

The substitutes within this bracket are the lower quality products or the inorganic products that are cheaper in price. This is not much of a threat as Whole Foods sets itself apart as the leader of the natural and organic foods.

Threat of new entrants

This threat is categorized as low since the grocery market is predominantly in the hands of major players and large industries that are linked to the supermarkets. The organization has also acquired several smaller groceries hence eliminating the threat of new entrants coming into their field as it operates in the oligopoly system.

SWOT analysis

There are a few factors that makes the Whole Foods be effective in the market and also acts as an impediment to the organization as shown in the SWOT analysis below (Marketing Teacher Ltd. 2012).

Strength

One of the strengths is that it is a large organization with around 53,000 employees with several branches across USA, UK and Canada. It also has a solid financial base with 2008 recording $7,953.9 million which was an increase by 20.7%. Currently they are the organic supermarket Industry leaders with a financial base of $4.7 billion. Whole Foods also offers the wide variety of health foods unlike others who have a very limited range of such foods. Apart from selling, Whole Foods has also opted to offer catering in events so as to give them an upper hand. The other strength is their website which is very informative. The organization is also supported by other complementary business like Health Industry, Health care specialists, health insurance companies, wellness programs as well as fitness centers.

The other strength is the high quality, natural and organic foods which gives absolute satisfaction to the clients who feel they have a solution to their environmental issue with the organization. The fact that they have the widest selection of natural and organic foods enables them to attract more people.

Weaknesses

There is a growing number of organic foods farmers but the sad part is they do not meet the standards of the U.S.A. hence shortage of the organic foods within the Whole Foods stores. Their prices are also viewed as more expensive hence losing some price sensitive clients to the competitors.

Opportunities

The world is slowly becoming aware of importance of eating healthy hence this is an opportunity to the organization to strive to supply the enlightened clients with the healthy foods. Having such a large following, the organization should therefore take it up to issuing free gifts and tokens in order to be able to attract new clients through this.

The organization should also take into sponsoring events in towns as this is an opportunity to increase the brand visibility and clients become more aware of the product range.

Threats

Many supermarkets are rebranding with a target of competing with Whole Foods. The price of food in the U.S. has generally gone high and one may not see the need to buy organic foods if they are such expensive. The possible government change in regulations on organic foods will likely alter the spending trend of the clients.