Whole Foods: Market Analysis Essay
Whole Foods: Market Analysis
Whole foods has been a major natural and organic supermarket player since it was founded in 1980. It’s success can be linked to number of different factors, arguably the most valuable of which was the development of their “Whole Foods, Whole People, Whole Planet” slogan in the late 90’s. This was a key factor in their success, it outlines Whole foods most basic mission and has been the mantra in which all value, vision, and growth decisions are derived. The whole foods part of the slogan refers to their niche product lines. Whole Foods has a passion for organic and all natural inventory. In the United States there has been an increasing concern with health, healthy eating, and health sustainability, the consumption of organic food has been on an upward trend since the mid 90’s. Whole foods has worked tirelessly and successfully at targeting and maintaining a great deal of market share within this niche. The whole planet part of the slogan draws in the community involvement Whole foods strives for by donating to local charities, buying from local suppliers, and encouraging sustainability.
Whole foods authorizes stores to use their discretion and purchase products and produce from local organic farmers. The worldly view is also captured by Whole Foods’ relentless encouragement for recycling and, notably, the removal the plastic bag as a grocery packing option. The whole people aspect of the slogan has affected employees as well as customers. Every Whole Foods store is unique to the region, therefore, stocking and ordering product is done in a decentralized fashion to cater to the needs of the local community. This also encourages employees to play an active role in the everyday work environment and helps to cultivate a strong team culture. There are specialized employment positions throughout the store and employees are promoted from within to encourage them to make careers out of their employment. Ultimately the focal point and success of the organization is measured by customer satisfaction. Unlike most supermarkets, in 2011 Whole Foods spent less than .04% of their total sales on advertising (Baillieul). The primary means by which Whole Foods advertises is by word of mouth and that word means everything. Analysis
Though success has seemed to come with relative ease to Whole Foods, it has only been achieved by constantly evaluating and evolving their market strategy. There are many different ways of looking at the value and position of a business in a market segment. An analysis of Whole Foods strengths, weaknesses, opportunities, and threats, or SWOT analysis, will give a greater understanding and respect for obstacles Whole foods has to overcome to maintained market leadership.
Like many niche markets, customers have very little bargaining power in the market place of natural and organic foods. This is one of Whole Foods most valuable strengths. As addressed above, Whole Foods does very little by way of advertising and promotion of their products but they are known as one of the largest retailers of organic products and produce in the US (Chat). Why does this make them so successful? Ultimately, they are relying on the popular consumer attitude that consuming organic products are healthier for you to maintain success in this market niche. According Cornell University’s Food and Brand Lab “studies have shown that this simple label (organic) can lead us to think that a food is healthier, through what is known as the ‘health halo effect’” (Wan-chen). This consumer understanding of organic foods as healthy and GMO’s as unhealthy, has proven to be an invaluable part of Whole Foods market strategy.
If there is one thing that sets apart all natural and organic foods from common supermarket foods, it’s the price. Organic food prices run on average about 20% more than their processed counterparts (All About Organics- OCA’s Organic Resource Center). This is one of the largest weaknesses in the organic food industry. Whole foods is able to keep a competitive edge by employing several different strategies. In early 2007 Whole Foods bought out Wild Oats Markets Inc., effectively eliminating a market player and taking over market share in otherwise untapped markets. Whole foods encourages stores to buy from local organic farmers making product more readily available, cutting back on shipping costs, and puts money into the local community. Whole foods also has a very close relationship with Hain Celestial, one of the largest suppliers of all-natural organic produce (O’Connor). The closeness of their relationship contributes to the competitive advantage of both companies and thus mitigating one of their industries largest weaknesses.
In order to intimidate new entrants and keep competitors at bay, Whole Foods has been exploiting its opportunity for expansion since it opened its first store in Austin, TX in 1980. Whole Foods customers would agree that there are very few reliable sources with the array of inventory and products found at Whole Foods. Whole foods is able to overcome competitors by maintaining larger stores with vast product diversity but they must keep expanding. With competitors like Trader Joe’s and Sprouts nipping at their heals, maintaining more than 520 across the United States (Gaar). Whole Foods cannot afford to lose sight of their goals. As result, Whole Foods has continued to scout overseas opportunities and expanding a world presents in smaller niche markets.
There are many potential threats that exist to affect Whole Foods. In 2012 a draught affected many organic farmers in the Midwest (Agostinelli). Not only were crops yield the lowest in years, farmers were subject to lower insurance payout and smaller disaster-relief programs, negatively effecting the affordability and availability of organic foods. Additionally, traces of GMO’s have been found in otherwise labeled “organic” crops (Gillam). Spreading of GMO’s can make finding organic products harder to come by and ultimately more expensive. Lastly, in many cases eating organic food has been considered a luxury, as with many luxury items they are considered to be expendable and are the first things to be removed from the budget in times of financial strain. In 2008 during the height of the recession Walter Robb, co-CEO of Whole Foods, described the effects on his business, “Customers left us in droves.” (Patton). Natural disasters, the unintentional spreading of GMO, and decline of organic farming are all factors that could threats to organic food retailers like Whole Foods. Conclusion
Every successful business has a responsibility to itself and to its constituencies to know and understand its value in the market place. When looking at its current position, it is obvious that even a business as large as Whole Foods has periodically taken the time to analyze and understand their strengths, weaknesses, opportunities, and threats in the market place. Understanding where they are most valuable and where they are most vulnerable will encourage them to continue to make adjustments to their market strategy. Conclusively, it is the only way they will be able to maintain competitive advantage in their industry moving forward.
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