Whole Foods Market Strategic Analysis and Recommendations

Introduction

Whole Foods Market Inc. (WFM) is one of America's largest supermarket chains specializing in food products. The company refers to itself as "America's healthiest grocery store" and maintains that its 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.

Current Strategic Position

The company's culture is founded on eight core values:

a. Sale of high-quality natural and organic products
b. Satisfaction, delight, 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 local and global communities
f. Practice and advancement of environmental stewardship
g. Creation of ongoing win-win partnerships with suppliers
h. Promotion of stakeholder health through healthy eating education

Over the last five years, WFM's performance has been largely impressive, with sales on an upward trajectory. The company's net sales growth over this period reflects a sustained positive trend in consumer demand for natural and organic products.

Among the factors that have driven WFM's sales are the opening of new stores, acquisitions, and enhanced in-store sales. In the most recent reporting period, the company registered total sales of $16.03 billion — a 24% increase over five years — suggesting that its growth strategy has been effective.

The company has traditionally employed a differentiation generic strategy to protect and grow 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 uses the natural and organic nature of its products as its primary selling point, offering items free of hydrogenated fats, artificial preservatives, sweeteners, and flavors. New store establishments have been set up in new or existing trade locations, with most stores averaging approximately 45,000 square feet.

More recently, the company refined its growth strategy to remain competitive in an increasingly crowded marketplace. CEO John Mackey stated that WFM was focusing on providing the best service to its core customers while swiftly implementing category management. In his words, "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). Because the majority of WFM's sales come from loyal customers, the emphasis on category management is logically aimed at better serving this constituency. Category management has been successfully used by retailers "as a key component for a disciplined growth and market expansion strategy" (The Partnering Group, 2017).

On the marketing 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). The retailer maintains a presence across multiple social media platforms, including Pinterest, Facebook, and Twitter, through which a wide range of targeted messages are published daily. According to Andrews (2014), the relevance of social media marketing in the current environment cannot be overstated, given the broad audiences these channels provide and the cost-effective nature of digital outreach. WFM's deep community ties have also been deliberately cultivated over time to give the company a more direct connection with the needs and tastes of consumers at the local level (WFM, 2018).

The table below illustrates WFM's social media presence on two of its most popular platforms:

WFM Social Media Presence
Facebook followers: 4.29 million
Twitter followers: 4.85 million

Competitive Environment

In addition to being large, the food retailing industry is fiercely competitive. WFM's competitors include grocery firms and health food stores, farmers' markets, specialty supermarkets, and restaurants (Thompson, 2017). Key competitive dimensions include store ambiance, price, convenience, product quality, and customer service. The following subsections highlight some of WFM's principal competitors.

Wegmans remains one of the country's most popular gourmet supermarket chains. With an extensive branch network across Massachusetts, Maryland, New York, Virginia, and New Jersey, Wegmans is a worthy competitor to WFM. The company reported $9 billion in sales in its most recent financial statement. Unlike WFM, however, Wegmans does not specialize in niche or organic foods but instead stocks a broad range of food brands.

Kroger operates a diversified portfolio across various formats, including supercenters and drug/food combination stores. In 2003, perhaps motivated by the profit potential of the organic segment, the company launched a natural and organic food brand called Naturally Preferred. Kroger adopts a low-cost strategy, and as Rittenhouse (2017) notes, "to be on equal footing with some of its competitors," WFM may need to reduce its prices going forward.

Trader Joe's has pursued a well-planned expansion, with its presence now extending across more than 32 states. Although its annual sales figure of approximately $1.37 billion makes it a smaller player relative to WFM, the company offers many of the same product categories. Given Trader Joe's planned expansion, it represents a viable and growing competitive threat.