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ACCT 70311

ACCT 70311. Module 1 Ewa Nelip . Industry Analysis. Grocery Stores SIC: 541 NAICS: 445110. General Overview. The Supermarkets and Grocery Stores industry makes up the largest food retail channel in the United States . Key Economic Drivers: Per capita disposable income

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ACCT 70311

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  1. ACCT 70311 Module 1 Ewa Nelip

  2. Industry Analysis Grocery Stores SIC: 541 NAICS: 445110

  3. General Overview • The Supermarkets and Grocery Stores industry makes up the largest food retail channel in the United States. • Key Economic Drivers: • Per capita disposable income • Consumer Confidence Index • Population

  4. Key Statistics • Revenue: $ 517.8 bn • Profit: $6.7 bn • Annual Growth 2008-2013: -0.4% • Expected Growth 2013-2018: 0.8%

  5. Porter’s Five Forces • Industry Competition: High • Bargaining Power of Buyers: Low • Bargaining Power of Suppliers: High • Threat of Substitution: Low • Threat of Entry: Low

  6. EXTERNAL KEY DRIVERS • Disposable income: • Less disposable income leads consumers to buy only staple items and substitute name brand items for generic • As disposable income increases, people eat out more resulting in less trips to the grocery store • Consumer Confidence • Low consumer confidence leads people to shop at grocery stores more, but buy less • Population • Determines the number of and types of stores in a particular area

  7. Current Performance • Fluctuations in disposable income has caused consumers to reduce the quality and quantity of goods they purchase • Growth in the past 5 years is mainly due to spending on consumables and expansion initiatives • The industry is highly saturated and has low profit margins • Warehouse clubs and Supercenters have increased their grocery offerings, which increases competition in the industry • High food prices have also limited profitability

  8. Industry Life Cycle • This industry is Mature • The industry is expected to grow at a slower rate than the overall economy • Usually, this would mean the industry is in the decline phase of its life cycle but due to market saturation, low profit margin and slow technological change, industry growth is skewed • Smaller stores are being forced to exit the industry • Larger stores are remaining competitive through aggressive acquisitions

  9. Major Competitors

  10. Whole Foods Market Inc.WFM (NASDAQ) • Whole Foods Market Inc. is the world’s leading retailer of natural and organic foods. • WFM has ridden the health and wellness trend, thanks to consumers’ perception that organic foods are healthier than their non-organic counterparts. As a result, Whole Foods can charge a substantial premium for the products it carries. • The large size of the company gives it the ability to realize economies of scale in its supply chain, which in turn has enabled it to post strong growth in profitability as well as revenues.

  11. Whole Foods Market Inc. • Revenue: $12.92 bn • Earnings per share: $1.47 • Market Cap: $21.72 bn • Employees: 56,700 • Market Price (as of 01/14/14): $53.19 • Number of Stores (as of 11/6/13): 367

  12. Revenue Growth

  13. Market Price LTM

  14. SWOT Analysis

  15. Porter’s Five Forces • Industry Competition: High, because competitors do have products that could substitute for lower prices. • Bargaining Power of Buyers: Low because customers will pay the higher price as they perceive products at Whole Foods of higher quality. • Bargaining Power of Suppliers: Low because Whole Foods are their biggest buyers in the niche. • Threat of Substitution: High threat of substitutes could be a restaurant meal, farmers market, etc. • Threat of New Entrants: Low barriers of entry for current grocery stores.

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