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20-1
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
I. CASE ABSTRACT
Whole Foods Market® was the world’s leading retailer of natural and
organic foods, with 289 stores (2010) in North America and the United
Kingdom. The supply of natural and organic foods was not keeping up with
Decision Date: 2010 2010 FY Sales: $9,237,794
2010 FY Net Income: $ 245,833
II. CASE SUBJECTS AND ISSUES
Grocery Industry
Sustainability
Health Foods
Corporate Strategy
Horizontal Growth Strategy
Social Responsibility
Mission and Vision
Marketing Strategy
Market Segmentation
Differentiation Focus Competitive
Strategy
Objectives and Goals
Functional Strategy
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
20-2
III. STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS
Strategy Formulation
Strategy
Implementation
Evaluation &
Control
IV. CASE OBJECTIVES
1. To evaluate how a company reacts to opportunities and threats within
the industry.
2. To evaluate how a company identifies keys to success within an
3. To evaluate a company’s competitive market position within a given
industry.
4. To increase the student’s ability to understand a situation or
5. To increase a student’s ability to evaluate a situation and
effectively communicate, both written and verbally, remedies for the
situation.
7. To evaluate a company’s ability to react to a changing marketplace
and develop alternative strategies to deal with this change.
V. SUGGESTED CLASSROOM APPROACHES TO THE CASE
1. We suggest that you can place this case anywhere in your course,
because of the turn-on value of the case
SUGGESTION FOR DAILY CLASS PARTICIPATION
SPECIAL NOTE
We have found it is difficult to get quality daily participation from our
students. We suggest the following:
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
1. Have the class members prepare—individually or as a team—(a)
EFAS, IFAS, and SFAS or (b) just an SFAS for the assigned case.
• We have one or two individual students of a team bring their
2. We compare the students work with the team or individual
students making the presentation to the class.
3. We ask each student at the beginning of the class to write down
his or her Total Weighted Score for the case under discussion
and pass it on.
• You can use the results to call on students whose score seem
to be out of line with the case.
VI. DISCUSSION QUESTIONS
1. What are the strengths and weaknesses of Whole Foods?
2. What are the opportunities and threats facing Whole Foods?
3. What are the strategic factors facing Whole Foods?
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?
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
20-4
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?
VII. CASE AUTHOR’S TEACHING NOTE—none available
VIII. STUDENT STRATEGIC AUDIT/STUDENT PAPER
I. CURRENT SITUATION
A. Performance
1. The total number of stores have increased from 175 in
2. Over a period from September 2005 through January 2010, while
total sales of Whole Foods have continued to increase, the
operating margin has declined. With the acquisition of the Wild
Oats, the operating margin decreased significantly from 5.7
3. Whole Food Markets has been working to correct their “pricey”
image by expanding offerings of private label products through
their “365 Everyday Value” and “365 Organic” product lines.
B. Strategic Position
1. Mission
a) “Whole Foods, Whole People, Whole Planet—emphasizes that
our vision reaches far beyond just being a food retailer. Our
success in fulfilling our vision is measured by customer
b) Whole Foods Core Values
• Selling the highest quality natural and organic products
available.
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
2. Objectives
• Whole Foods Market commits to reducing energy
consumption by 25 percent per square foot by 2015.
• To reach $15 billion in revenue with 400+ stores by 2020
without sacrificing quality or their current reputation.
• To conduct business in a manner consistent with their
mission and vision.
3. Policies
• Maintain high ethical standards in all interactions with
customers, team members, vendors, and other stakeholders
in the company.
• Assume social and environmental responsibility
throughout the world.
4. Strategies
• Encourage a team based environment allowing each store
to make independent decisions regarding its operations.
II. CORPORATE GOVERNANCE
A. Board of Directors
1. Currently eleven board members.
• Nine male, two female
• Ages ranging from forty-nine to seventy-six years old
2. All board members are highly educated and many are involved in
external affairs.
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
20-6
DR. JOHN B. ELSTROTT, Chairman of the Board, has served as a
director of the company since 1995. Dr. Elstrott is a Clinical Professor of
Entrepreneurship and the founding director of the Levy-Rosenblum Institute
for Entrepreneurship at Tulane University’s Freeman School of Business, which
was started in 1991.
JOHN MACKEY, co-founder of the Company, has served as Chief
Executive Officer since 1980. Mr. Mackey also served as President from June
2001 to October 2004, and as Chairman of the Board from 1978 to December
2009.
WALTER ROBB, Co-CEO, joined Whole Foods Market in 1991. He
operated the Mill Valley, CA store until he became president of the Northern
2003. Ms. Greene has served as a Principal of a diversified investment fund,
Rustic Canyon/Fontis Partners, LP, since its inception in October 2005. In
addition, Ms. Greene served as Chief Financial Officer of the Villanueva
Companies, a private holding company with diverse investment interests from
2002 through 2005. Ms. Greene also serves on the board of directors of Bright
Horizons Family Solutions.
of directors of Home Shopping Network.
JONATHAN A. SEIFFER
has been a Partner of Leonard Green and
Partners, L.P. since 1999 and joined Leonard Green and Partners, L.P. in
1994. Leonard Green and Partners, L.P. is an affiliate of Green Equity
Investors V, L.P.
MORRIS SIEGEL
has served as a director of the company since
2003. Mr. Siegel is currently self-employed, having operated Capitol Peaks,
an investment firm since 2002. Mr. Siegel was the co-founder of Celestial
Seasonings, Inc., serving as Chairman and CEO from 1970 until 2002. Celestial
Seasonings merged with The Hain Food Group, forming The Hain Celestial Group
of which Mr. Siegel served as Vice Chairman from 2000 until retiring in 2002.
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
20-7
since 1994. Dr. Sorenson is the Managing Partner of the Sorenson Limited
Partnership, a venture investment partnership. Dr. Sorenson is President
Emeritus of Babson College (1974-1981), Professor Emeritus and former Dean of
the University of Colorado, College of Business Administration (1992-
present), and former Chairman and CEO of Barry Wright Corporation, a NYSE
company (1981-1989). Dr. Sorenson is also a former director of the Federal
Reserve Bank of Boston and has served in the past on the boards of directors
of a number of other prominent public companies.
B. Top Management
1. John P. Mackey
• Co-founder of the company.
• Served as Chairman and CEO since 1988, and President from
2001 to 2004.
III. EXTERNAL ENVIRONMENT—EFAS see Exhibit 1
A. Societal Environment
1. Economy
• Changing economy—more competitive(O)
• Market for organic foods increased 80.5 percent from 2001
to 2004 (O/T).
• European expansion provides enormous potential (O).
• Perceived as a more sophisticated organic-foods market
in terms of suppliers and acceptance by the public.
• Supermarkets, mass marketers, director marketers, and the
Internet.
2. Technology
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
20-8
• “Take Action Food Centers”—customers can access legislation
involving food and environment (O).
• Some stores offer home delivery, cooking classes, massages,
and valet parking (O).
• Utilizes price marketing tool in select areas by using 365
Whole Foods brand name products (priced less than organic
products also carried in store) (O).
• Created three private label products due to lack of
available nutritional brands with a national identity (O).
1. 365 Everyday Value—meets whole foods standards but less
3. Sociocultural
• Minimally processed, high-quality food favored by aging
baby boomers and college educated populations (O).
• 61 percent of consumers perceive organic foods as
increasing longevity and helping improve fitness (Food
Marketing Institute Prevention Magazine Study).
4. Political-Legal
• Whole Foods saves considerably on advertising by relying on
customer word-of-mouth (O).
• Promoted in several health conscious magazines (O).
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
20-9
B. Task Environment
1. Threat of new entrants: HIGH
• Natural and Organic food markets expected to continue:
• With health-conscious population increasing.
2. Bargaining power of buyer: HIGH
• Buyers dictate the existence of Whole Foods.
• Woodland Hills, CA Whole Foods Market redesigned its
prepared foods section more than three times due to 40
percent growth.
3. Threats of Substitutes products: MEDIUM
• High inflation or deep recession would force buyers to
return to cheaper less healthy foods.
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
• Trader Joe’s Co. (founded 1958) (2nd largest)—high
quality at low prices.
6. Power of other stockholders: HIGH
• Strict government requirements must be satisfied to be
classified as organically grown (time-consuming, more
effort intensive, costly).
• A change in government laws requiring possibly
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
• Farmland thus organic foods can become a scarcity
due to high demand.
IV. INTERNAL ENVIRONMENT—IFAS see Exhibit 2
A. Corporate Structure
1. Started with entrepreneur John Mackey.
2. Decentralized decision-making; decisions made from the top down.
B. Corporate Culture
1. Will only do business with companies that treat their animals
humanely.
2. Fourteen pages of code of conduct document that addresses its
expected and desired behavior for its employees.
C. Corporate Resources
1. Marketing
• Targeting urban singles and aging baby boomers, due to
their abundance of disposable income.
• Seventh highest category on which consumers spend their
money.
2. Finance
• Focuses on earning a profit while providing job security to
its workforce.
• Whole Foods donates 5 percent of its after-tax profits to
non-profit organizations.
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
20-11
• Objective is to reach $15 billion in revenue with 400+
stores by 2020 without sacrificing quality.
3. Research and Development
• Organic crops yield a lower quantity of output; accounting
for 3 percent of U.S. farmland usage.
• Strict government requirements must be met, which is time-
consuming, more effort intensive, and more costly to adhere
to.
4. Operations and Logistics
• In response to a 40 percent growth in prepared food sales,
Whole Foods redesigned its prepared foods section more than
three times; products underwent a strict quality test to
determine if they are “whole foods material.”
5. Human Resources Management
• Now the largest natural food supermarket in the United
States, with 54,000 employees operating 289 stores (2010).
6. Information Systems
• Not mentioned
V. STRATEGIC FACTORS—SFAS see Exhibit 3)
A. Strategic Factors—see Exhibit 3
B. Review of Mission and Objectives
VI. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY
A. Strategic Alternatives
1. Growth: Grow into the European Market
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
20-12
Con: A very risky move to make and will have big
consequences if it fails
2. Retrenchment: Can divest stores in the UK to focus on growing
their market share in the US.
3. Stability: Whole Foods can stay as is and focus on growing
their existing stores.
Pro: Can produce even bigger profits for stores already in
existence.
Con: Does not provide the opportunity for worldwide
expansion.
B. RECOMMENDATIONS
1. We recommend the stability strategy, at least for a few years, so
that Whole Foods can gauge the European market more accurately
before expanding into all of Europe and taking such a huge risk.
VII. IMPLEMENTATION,EVALUATION, AND CONTROL—see Exhibit 4
VIII. EVALUATION AND CONTROL—see Exhibit 4
IX. EFAS, IFAS, and SFAS Exhibits
Exhibit 1
EFAS (External Factor Analysis Summary)
Key External Factors
Weight
Rating
Weighted
Score
Comments
Opportunities
Demographics Favor Quality Over Price
.20
5
1.00
Baby boomers and Y boomers are
expecting to live much longer lives
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
vigorously pursue the European
Market
Threats
Strong Competition From Trader Joe’s
Company and Wild Oats
.20
Although there is strong competition
from Trader Joe’s Company and
Wild Oats for the #1 sales position,
Whole Foods still retains the title
New Market Entrant
.15
2
.30
However, the opportunity for
another small company to enter the
competitive market is likely due to
the high demand of buyers.
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
20-14
IX. IFAS, EFAS, AND SFAS EXHIBITS
Exhibit 2
IFAS (Internal Factor Analysis Summary)
Key Internal Factors
Weight
Rating
Weighted
Score
Comments
Strengths
Quality Whole Foods Culture
.10
4
.40
Focuses on quality and high
standard of business.
Financial Position
.20
5
1.00
Sales and profits are steadily
increasing.
Experienced Top Management
.05
3
.15
Over thirty years supermarket
experience with CEO John
Mackey.
Weaknesses
GlobalPosition
.15
3
.45
Stores in US and UK only; room
for expansion.
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
20-15
IX. SFAS, EFAS, AND IFAS EXHIBITS
Exhibit 3
SFAS (Strategic Factor Analysis Summary)
Key Strategic Factors
Weight
Rating
Weighted
Score
Duration
S I L
Comments
Strengths
Demographics Favor Quality
Over Price (O)
.12
4
0.48
X
Baby boomers are expected
to live longer lives and
desire quality over price.
Scarcity of Prime Locations (T)
.10
4
0.40
X
Whole Foods only opens
stores in cities where 40
percent of population is
college educated.
Quality Whole Foods Culture
(S)
.14
5
0.70
X
Focuses on quality and
high standard of business.
Top natural foods
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
Exhibit 4
Whole Foods Markets
Priority
Who Will
Who Will
How
What Criteria
Strategic Factor
Action Plan
System
Implement?
Review?
Often?
Reviewed?
(1-5)
Quality over Price
Committee to follow
Ms. Glenda
Flanagan
Mr. John P.
Sales Position
societal changes.
3
Principal
Accounting
Mackay
Monthly
in Food
Officer, Exec. VP
CEO
Market
Increase in
Government
Committee to follow and
Mr. A. C. Gallo
Legislation
Regulations
forecast government
3
Chief Operating
CEO
Quarterly
and Laws
changes.
Officer
Scarcity of Prime
Locate new locations that
fit
Potential
Locations
current specifications and
VP Growth
CEO
Monthly
Sales in
develop new
specifications to
3
Targeted
allow prime locations to
meet
Locations
different standards.
position.
3
Officer
Experienced Top
Use current success in
Chief Operating
Strategic
Management
top management to train
2
Officer
CEO
Quarterly
Decisions of
lower level managers to
secure
Top
CASE 20
Whole Foods Market (2010):
How to Grow in an Increasingly Competitive Market
20-17
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
FINANCIAL CONDITION
Debt/Equity Ratio
0.16
Current Ratio
1.6
Quick Ratio
1.2
PROFIT MARGINS %
Gross Margin
34.9
Pre-Tax Margin
5.0
Net Profit Margin
3.0
X. FINANCIAL ANALYSIS
Was inappropriate for this case.
