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A niche product to a national competitor. By: Tom Anderson Kyle McDaniel Dan McLindon Ray Moorman Jeremy Smiley. Key Question. Can Whole Foods remain competitive in the face of major changes in the external environment?. Supporting Questions:. What is the history of Whole Foods?
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A niche product to a national competitor By: Tom Anderson Kyle McDaniel Dan McLindon Ray Moorman Jeremy Smiley
Key Question Can Whole Foods remain competitive in the face of major changes in the external environment?
Supporting Questions: • What is the history of Whole Foods? • What is changing in the external environment? • What are the changes in demand? • How is supply changing in the retail food industry? • How is the competitive landscape changing? • What is Whole Foods Strategy? • Marketing • Growth • Operational
Supporting Questions: • What internal factors are affecting Whole Foods? • What are the strengths, weaknesses, opportunities, and threats for Whole Foods? • What are the future challenges of Whole Foods? • How should Whole Foods proceed?
Porter’s Five Forces Heating Up Cool To Warm
Changes in the Competitive LandscapeShould they really welcome competition? • Local, regional, independent, national, and specialty stores are all competitors. • CEO say it is a gateway for customers to try natural/organic foods or opportunity for the competition? Take a look at Store Sales Growth Sales growth has been cut in half since 2004!
Changes in the Competitive Landscape We may be seeing a revolution in the food retailing business. Supercenters – Marketplaces – Wholesale Clubs Will the competition force Whole Foods to rethink their strategy?
What is Whole Foods Strategy? Marketing Growth Operational
Marketing Strategy Product High Quality Natural and Organic Food and nonfood items Offerings vary based on store size and tastes of local clientele Exotic offerings and product variety Ex) Japanese eggplant, 40 cheeses, 20 coffees Private label products Emphasis on perishables (fruits/veg., bakery goods, meat, seafood) – 67 % of sales
Marketing Strategy Price Goal is competitive price at highest quality Organic foods are 25 – 75% more costly to grow and market Price and Quality are competing forces Whole Foods chooses to focus on Quality, therefore prices are higher than conventional grocers
Marketing Strategy Place No standard store design. Layout customized for site and product mix. Colorful, inviting, fun Gathering place to learn, interact, eat, and grocery shop Presentation Highly regarded food displays, cleanliness, wide aisles
Marketing Strategy Promotion Primarily rely on word-of-mouth recommendations 0.5% of revenue spent on advertising Most marketing spend is for in-store signage and events Store personnel is knowledgeable and personable
Growth Strategy New stores and acquisitions of small owner-managed chains in desirable markets Ideal store size is 45,000 – 60,000 sq. ft.
Operational Strategy Team-based management of store operations Many personnel, merchandising, and operating decisions made at store level Buying responsibility at the national and regional levels for volume discounts Own and operate many distribution centers: 2 for produce, 9 bake houses, 5 commissary kitchens for prepared food, and a central coffee roaster
Internal Analysis Affordability is a key Weakness – WF must build value with every customer interaction. Email recipes, establish newsletter, personalized services once customer is in the store, free organic cooking classes, partner with local farmers in advertising
Internal Analysis Value Chain Analysis Logistics seem to be streamlined Operations – opportunity to be more efficient, appeal to more customers/increase average spending Focus more on perishables (fruit and vegetables) – reduce waste and spoilage in biggest section of the store Eliminate non-essential services – valet parking, massages Develop budget that allows chefs to teach organic cooking classes to customers at no cost. Continue to invest in customer service associates. Their interactions can help build brand loyalty.
Internal Analysis Value Chain Analysis (continued) Marketing – severely under-funded, develop new marketing campaign in current markets to reach more middle/upper income families. Focus on pesticide/hormone free and benefits to the earth – capitalize on green/healthy trends. Management/Administration – board should remove John Mackey and replace him with a leader with experience in grocery or organics. Proven inability to lead at this level. Doesn’t have the vision to make the changes necessary right now.
What are the strengths, weaknesses, opportunities, and threats for Whole Foods?
Future Challenges Conventional Grocery Stores over saturate Market & offer Organic & Natural Foods Convince new customers to shop at WF rather than more convenient stores Pricing – being able to compete against the conventional grocery chains Getting more people in the store
Recommendations Lower Price to Compete with Grocery Stores Add a customer rewards program for frequent buyers Mail coupons to customers in a targeted marketing effort Expand Private Label Selection Lowers mfg costs, could offer discounts to customer for using WF brand products
Recommendations Expand Private Label Selection Lowers manufacturing costs, offer discounts to customer for using WF brand products
Recommendations Personalize Service at WF 3 days after purchase, email Thank You cards to customers after purchases 7 days after purchase, email 10% coupon to use on next purchase Email recipes Advertise, Advertise, Advertise Mail fliers to local zip codes – show locally grown foods, classes offered, items on sale, coupons
Recommendations Catering Offer catering to local businesses & events Stop re-branding Wild Oats stores Halt expansion until WF builds up more cash Focus on profitable stores and use that philosophy to improve unprofitable stores Look at option of selling some underperforming Wild Oats stores
