WHOLE FOOD MARKETS (2010):
HOW TO GROW IN AN INCREASINGLY COMPETITIVE MARKET?
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CASE ABSTRACT
serious problem for the company. As the industry attracted more
competitors, new prime locations were becoming harder to find.
sustainability targets.
CASE OBJECTIVES
2. To evaluate how a company identifies keys to success within an
competitors.
4. To increase the student’s ability to understand a situation or
marketplace.
5. To increase a student’s ability to evaluate a situation and
the situation.
DISCUSSION QUESTIONS
4. Does Whole Foods have any core competencies? If yes, what are
they?
5. Does Whole Foods have a distinctive competency? If yes, what
is it?
6. What are the keys to success in Whole Foods?
WHOLE FOOD MARKETS (2010):
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8. How can Whole Foods compete with the large national food
chains (Publix, Safeway, Wal–Mart, etc.)?
9. Will customers pay a premium for organic foods?
12. How would you evaluate Whole Foods’ performance over past few
years?
13. Would you buy stock in Whole Foods? If ‘yes’ — why? If ‘no’ —
why??
I. CURRENT SITUATION
A. Performance
1. The total number of stores has increased from 175 at
September 2005 to 289 in January 2010. They managed to
2. Over a period from September 2005 through January 2010,
while total sales of Whole Foods have continued to
3. Whole Food Markets has been working to correct their
B. Strategic Position
1. Mission
II. ‘‘ Whole Foods, Whole People, Whole Planet– emphasizes that
WHOLE FOOD MARKETS (2010):
HOW TO GROW IN AN INCREASINGLY COMPETITIVE MARKET?
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happiness, return on capital investment, improvement in the
state of the environment, and local and larger community
support.”
III. Whole Foods Core Values
Selling the highest quality natural and organic
products available
Satisfying and delighting our customers
2. Objectives
Whole Foods Market commits to reduce our energy
consumption by 25% per square foot by 2015.
To reach $15 billion in revenue with 400+ stores
3. Policies
Maintain high ethical standards in all
interactions with customers, team members,
venders, and other stakeholders in the company.
4. Strategies
WHOLE FOOD MARKETS (2010):
HOW TO GROW IN AN INCREASINGLY COMPETITIVE MARKET?
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Encourage a team based environment allowing each
IV. CORPORATE GOVERNANCE
A. Board of Directors
1. Currently 11 board members.
2. All board members are highly educated and many are
C. Board of Directors
DR. JOHN B. ELSTROTT, Chairman of the Board, has served as
a director of the Company since 1995. Dr. Elstrott is a Clinical
JOHN MACKEY
, co–founder of the Company, has served as
WALTER ROBB
, Co–CEO, joined Whole Foods Market in 1991. He
operated the Mill Valley, CA store until he became president of the
Northern Pacific Region in 1993, where he grew the region from two to
GABRIELLE GREENE
has served as a director of the Company
since 2003. Ms. Greene has served as a Principal of a diversified
HASS HASSAN
has served as a director of the Company since
2005. Mr. Hassan has been a General Partner of Greenmont Capital, an
WHOLE FOOD MARKETS (2010):
HOW TO GROW IN AN INCREASINGLY COMPETITIVE MARKET?
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STEPHANIE KUGELMAN
has served as a director of the Company
since December 2008. She is the recently retired Vice Chairman, Chief
Shopping Network.
JONATHAN A. SEIFFER
has been a Partner of Leonard Green &
Partners, L.P. since 1999 and joined Leonard Green & Partners, L.P. in
1994. Leonard Green & Partners, L.P. is an affiliate of Green Equity
Investors V, L.P.
Chairman from 2000 until retiring in 2002.
JONATHAN D. SOKOLOFF
has been a Managing Partner of
Leonard Green & Partners, L.P. since 1994 and joined Leonard Green &
DR. RALPH Z. SORENSON
has served as a director of the
Company since 1994. Dr. Sorenson is the Managing Partner of the
served in the past on the boards of directors of a number of other
prominent public companies.
WILLIAM A. (KIP) TINDELL, III
has served as a director of
B. Top Management
1. John P. Mackey
Co–founder of the company
from 2001 to 2004
Currently holds 1,061,266 shares of stock (2010)
2. WALTER ROBB, Co–CEO, joined Whole Foods Market in
1991.
3. Top management all have many years of experience in
the food industry
WHOLE FOOD MARKETS (2010):
HOW TO GROW IN AN INCREASINGLY COMPETITIVE MARKET?
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V. EXTERNAL ENVIRONMENT
A. Societal Environment
1. Economy
Changing economy–more competitive(O)
Market for organic foods increased 80.5% from 2001 to
2004 (O/T)
National Nutritional Foods Association estimates
(O)
Targets new locations based on 40% college education
2. Technology
legislation involving food and environment (O)
Some stores offer: home delivery, cooking classes,
Utilizes price marketing tool in select areas by
(O)
1. 365 Everyday Value – meets whole foods standards
3. Socio– Cultural
Minimally processed, high quality food favored by
WHOLE FOOD MARKETS (2010):
HOW TO GROW IN AN INCREASINGLY COMPETITIVE MARKET?
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Excellent diets using healthy foods promote longer
Consumption of fresh fruits and vegetables, pasta
and other grain based products.
Appeals to growing percentage of working women who
Sales of ready to eat meals/prepared foods tasting
like restaurant quality
Recent surge in health consciousness promoted by
Television commercials on new food group pyramid
4. Political–Legal
Whole Foods saves considerably on advertising by
Gain recognition by social awareness(O)
Charitable contributors (5% of after tax profits
B. Task Environment
1. Threat of new entrants: HIGH
Natural and Organic food markets expected to
continue:
With health conscious population increasing
10%
2. Bargaining power of buyer: HIGH
Buyers dictate the existence of Whole Foods
Woodland Hills, CA Whole Foods Market redesigned
due to 40% growth.
3. Threats of Substitutes products: MEDIUM
WHOLE FOOD MARKETS (2010):
HOW TO GROW IN AN INCREASINGLY COMPETITIVE MARKET?
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High inflation or deep recession would force
4. Bargaining Power of Suppliers: MODERATE
Purchases most of products from regional and
national suppliers.
Allows company to receive deep discounts and
favorable terms from vendors.
5. Rivalry among competing firms: HIGH
quality at low prices
Located primarily on west and east coasts of
Privately held company
6. Power of other stockholders: HIGH
Strict government requirements must be satisfied
to be classified as organically grown. (time
foods.
VI. INTERNAL ENVIRONMENT
A. Corporate Structure
1. Started with entrepreneur John Mackey
B. Corporate Culture
animals humanely.
WHOLE FOOD MARKETS (2010):
HOW TO GROW IN AN INCREASINGLY COMPETITIVE MARKET?
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5. Concern for employees
6. Ranked #18 Top 100 Best Companies to Work For (2010)
7. Heavy focus on ethics
8. Strong business philosophy
C. Corporate Resources
1. Marketing
to their abundance of disposable income.
becoming more health–conscious.
Main competitor is Trader Joe’s
have a college degree.
2. Finance
Focuses on earning a profit while providing job
security to its workforce.
non–profit organizations.
Stock prices increased from under $10 per share to a
Market valuation of $10.5 billion (2010).
of 8–10% percent of year.
3. Research and Development
accounting for 3% of US farmland usage
Strict government requirements must be met, which is
Demand for such organic products could out reach the
Whole Foods acquired a waterfront seafood facility,
these.
Has grown through the years through mergers,
4. Operations and Logistics
WHOLE FOOD MARKETS (2010):
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In response to a 40% growth in prepared food sales,
Whole Foods redesigned its prepared foods section
material”
Meat and poultry products must adhere to a higher
Three private label products and a forth program
5. Human Resources Management
Have never had any lay–offs
6. Information Systems
Not mentioned
A. Review of Mission and Objectives
Current Mission appears to be very appropriate.
VI. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY
A. Strategic Alternatives
1. Growth: Grow into the European Market
domination of organic markets
2. Retrenchment: Can divest stores in UK to focus on
growing their market share in US.
in US.
stupid.
3. Stability: Whole Foods can stay as is and focus on
growing their existing stores.
already in existence.
B. RECOMMENDATIONS
WHOLE FOOD MARKETS (2010):
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1. We recommend the stability strategy, at least for a few
years, so that Whole Foods can gauge the European market
2. Whole Foods quality and reputation must be maintained and a
3. The Euro is strong right now, but it is very new and is
2010
GROWTH RATES %
Whole Food
Markets
Sales (Qtr vs year ago qtr)
13.80
Net Income (YTD vs YTD)
78.60
Net Income (Qtr vs year ago qtr)
78.60
Sales (5–Year Annual Avg.)
13.88
Net Income (5–Year Annual Avg.)
12.01
Dividends (5–Year Annual Avg.)
NA
FINANCIAL CONDITION
Debt/Equity Ratio
0.16
Current Ratio
1.6
Quick Ratio
1.2
Interest Coverage
28.3
Leverage Ratio
1.6
Book Value/Share
14.49
PROFIT MARGINS %
Gross Margin
34.9
WHOLE FOOD MARKETS (2010):
HOW TO GROW IN AN INCREASINGLY COMPETITIVE MARKET?
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Pre–Tax Margin
5.0
Net Profit Margin
3.0
5Yr Gross Margin (5–Year Avg.)
34.6
5Yr PreTax Margin (5–Year Avg.)
4.1
5Yr Net Profit Margin (5–Year Avg.)
2.4