overview

1. Business Policy & Planning Case Study 2012www.wholefoodsmarket.comSteven Pelletier, Jarryd Phillips, OthnielHyliger, Spencer Jacoby, Jermaine West

2. overview Company Overview Brief History Current Vision & Mission Current goals and policies New Mission and Vision Statements Core Values Organizational Chart External Assessments Industry Analysis Opportunities and threats EFE Matrix CPM Matrix Internal Assessment Strengths and weaknesses Financial condition IFE Matrix Strategy Formulation SWOT Matrix Space Matrix Grand Strategy Matrix IE Matrix Matrix Analysis Possible Strategy QSPM Matrix Future Strategic Plans Objectives Recommendations Implementation Issues EPS/EBIT Potential issues Sources

3. Timeline History • 1978- twenty-five year old dropout John Mackey and twenty-one year old Rene Lawson Hardy, opened the small natural foods store. • 1980- John and Rene partnered with Craig Weller and Mark Skiles to merge SaferWay with their Clarksville Natural Grocery. • 1981- The worst flood in 70 years devastated the city of Austin. • 1984- Whole Foods Market began its expansion. • 1989- We expanded to the West Coast. • 1990-1999- acquiring other natural foods chains throughout the 90's. • 1998- Development of "virtual" store began. • 1999- Site went live. • 2000- Additional acquisitions. • 2001- Whole Foods moved into Manhattan. • 2002- Saw an expansion into Canada • 2003-2004- Whole Foods Market entered the United Kingdom. • 2007- Merger with Whole Foods Market • 2008- John Mackey cleared of charges. • August 2008- voluntary multi-state recall. • 2009- John Mackey voluntarily gave up his chairmanship • 2011- The stock symbol changed

4. Current Vision Statement Our “bottom line” ultimately depends on our ability to satisfy all of our stakeholders. Our goal is to balance the needs and desires of our customers, Team Members, shareholders, communities and the environment while creating value for all. By growing the collective pie, we create larger slices for all of our stakeholders. Our core values reflect this sense of collective fate and are the soul of our company. 2

5. Whole Foods Market Goals We aspire to become an international brand synonymous with not just natural and organic foods, but also with being the best food retailer in every community in which we are located. We believe our heavy emphasis on perishables and locally grown products, along with our unparalleled customer service, is helping us reach that goal, differentiating our stores from other supermarkets and enabling us to attract a broad base of loyal customers. We are well positioned to take advantage of changing demographic trends, and I expect our renewed emphasis on healthy eating to help further differentiate us and solidify our unique position within the food retailing universe. 3

6. Whole Foods Market Policies We believe that much of our success to date is because we remain a uniquely mission-driven Company. We are highly selective about what we sell. We believe in providing an empowering work environment for our team members, and we are committed to sustainable agriculture. Our motto, “Whole Foods, Whole People, Whole Planet,” emphasizes that our vision reaches far beyond just food retailing. We strive to promote a strong Company culture featuring a team approach to store operations that we believe is distinctly more empowering of team members than that of the traditional supermarket. We also promote a decentralized team approach to store operations in which many decisions are made by teams at the individual store level. 4

7. New Vision & Mission Statements While we fulfill a part of our mission every day through selling the highest quality natural and organic foods available, we believe we have the opportunity and obligation to do more in terms of educating our stakeholders about the benefits of healthy lifestyle choices. To underscore our renewed focus, we created a new Core Value this year – Promoting the health of our stakeholders through healthy eating education. 5

8. Core Values • SELLING THE HIGHEST QUALITY NATURAL & ORGANIC PRODUCTS AVAILABLE • SATISFYING & DELIGHTING OUR CUSTOMERS • SUPPORTING TEAM MEMBER HAPPINESS & EXCELLENCE • CREATING WEALTH THROUGH PROFITS & GROWTH • CARING ABOUT OUR COMMUNITIES & OUR ENVIRONMENT • CREATING ONGOING WIN-WIN PARTNERSHIPS WITH OUR SUPPLIERS • PROMOTING THE HEALTH OF OUR STAKEHOLDERS THROUGH HEALTHY EATING EDUCATION 6

9. Organizational chart 7

10. EXTERNAL ASSESSMENTS 8

11. Global Industry Analysis Organic Market Growth Rates Revenues (US $ Billions) 9 Source: Organic Monitor

12. US Industry Growth Organic Food Growth 2006-2009 10 Source: Organic Trade Association’s 2011 Organic Industry Survey conducted 12/22/2010 – 3/7/2011 ($ mil consumer sales).

13. Global Segmentation by Location • United States – 97% of sales • Canada and UK – 3% of sales 11

14. Competitors 12

15. Opportunities • They could sponsor more town events (not just in-store events) to increase recognition of the brand name and make customers more aware of the products they offer. • Expand private label selection – lower price for customers • Class offerings that educate the new consumer about a new product. (Cooking classes.) • International expansion • More recently, Whole Foods has implemented a new marketing strategy to combat the perception of high prices. • Promote and build brand identity with organic foods, eventually leading to the idea that when people think "organic" they will think "Whole Foods." • Rewards program – frequent buyer cards (like Kroger cards) • Expand prepared foods. • Customer service enhancement • Create a discount product line for lower income segment 13

16. Threats • Increased competition from existing supermarkets that are re-branding in order to compete with them like; Wal-Mart, HEB, Wegman's (New York), and Publix (Southern US). • Local Farmers’ Markets/Independent Retail Chains • Low spend per trip due to high prices. Individuals buy the specialty item and not the essentials. • Product recalls – Ecoli and salmonella • In a recession environment, consumers are concerned with falling home prices, lower job security, and commodity inflation • Changes in government regulations on organic food would impact consumer spending even further. • Competitors - lower cost or imports; Trader Joe’s, Costco • Consumers are avoiding any products that might be considered lavish or more than a necessity. 14

17. Competitive Profile Matrix 15

18. EFE Matrix 16

19. Internal Assessment 17

20. Stock Performance 2007-2012 18

21. Closest Competitors Comparison 2007-2012 19

22. Income Statement 20

23. Balance Sheet 21

24. Financial Ratios 22

25. Trend Analysis Recent trends in the industry of grocery stores consist of expanding what they have to offer, trying to draw in customers and keep customers in the store longer. Some examples of these are: • Interactive web sites • Recipes • Earning loyalty cards • Providing cooking classes (online/privately or group). • Freshly prepared onsite ready to eat meals. • Sit down spaces to eat, keeping customer’s onsite longer. • Salad bars and coffee areas. There is also a negative side to industry trends too. With the recession being the main reason for these, some are however; also global problems have taken its toll on all industries. For example: • Higher gas prices • Mortgage failures • Job losses • Investment fears • Food inflation • Many grocery shoppers have begun looking for bargains. In the recent economic recession that began to happen in 2008, the wealthy are even showing signs of taking their foot off the gas when it comes to spending and are looking for ways to save a penny wherever they can. A 2008 survey found that many adults are preparing more meals at home (43%), using more coupons (40%), or going out of their way to look for lower-cost items (37%) as a result of higher food costs (Reuters, 2008). 23 Ref: http://www.reuters.com/article/2008/08/26/idUS192211+26-Aug-2008+PRN20080826

26. Strengths • The company recorded revenues of $7,953.9 million during the financial year (FY) ended September 2008, an increase of 20.7% over FY2007. • High quality food. • Strong brand equity – the Whole Food’s brand is known worldwide for its organic products. • Staff is passionate about promoting the products and sharing that enthusiasm. • Nationally Known Organic/Natural Foods Seller • They have an amazing website with blogs, recipes, sale items, tips, podcasts and more. • The website is well designed and explains the Whole Foods concept very well. • Experience in the Industry • Fair labor wages for the farmers.  • Financial position – consistent annual sales growth • Locations based on demographics. 24

27. Weaknesses • US government provides money to support the corn growers industry, but not the organic farmer-therefore companies not utilizing organic ingredients can grow more food cheaper and faster. • Price – up to 75% higher • Viewed as a luxury shopping destination. • Weak management team • Customer loyalty is missing • Number of organic food farmers is growing, but slowly and the supply chain for organic foods is underdeveloped and cannot meet the needs of the American food system. • Advertising Budget very low (WOM approach) • They are known as "whole paycheck" because some of the foods are higher priced than other grocery stores. • Diseconomies of scale • Targets a small amount of shoppers 25

28. IFE Matrix 26

29. Strategic Formulations 27

30. SWOT Matrix WO Strategies SO Strategies W1, O1: they could sponsor some of the organic farmers, if costs for organic farmers are lowered, they will also be able to produce more- could arrange a selling/ price deal between farmers and Whole Foods. W2, O2: with prices 75% higher, would increase sales if prices (even just certain prices) were adjusted to a more reasonable cost. W3, O3: In order to be truly experienced in various industries, you need a management team who is experienced who are also mentoring/ molding newer and less experienced managers for the future. W4, O5: It can and should be a strength to be viewed as a luxury shopping destination, thus a better perception on higher prices and value for money should be encouraged. It can still be luxurious with a more reasonable price range. W8, O6: in order to appeal to a wider range of customers without decreasing their prices, creating a prepared foods/ meals section would appeal to more people because of the convenience. • S1, O1: Use the significant financial growth to get more involved in the local community in order to appeal to a wider group of potential customers • S2, O2: With it's growing presence- and more customers, whole foods have the opportunity to make prices more reasonable. • S3, O3: Good opportunity to use the passionate staff to make cooking courses (classes) a noticeable attraction. • S4, O4: use experience to successfully expand into international markets- yet still appeal to different countries locals. • S7, O5: Expanding into other markets will require a diversified portfolio, which if done correctly will S • S7, O7: Use company's name to create a successful growth in prepared organic foods/ meals. 28

31. SWOT Matrix ST Strategies WT Strategies S1, T1: Concentrate on strengths and what will separate them from all the other stores in order to maintain consistent growth rates. S2, T2: promote brand image in order to make customers and potential customers aware that they cannot receive the same quality and value for money anywhere else except for Whole Foods. S3, T3: The employees can have a huge influence on the atmosphere of the stores, would be important to use employee passion to make customers feel more at home and thus increase likelihood on giving tips. S4, T4: it's important to use staff and industry experience to either inspect foods more, maintain a strict organic profile in order to prevent product recalls. S5, T5: By maintaining a good relationship with farmers, government regulations may have less of an impact on the organic food than farmers may fear. W1, T1: support farmers in order to help them keep cost of farming certain foods W2, T2: highlight/ promote the benefits of buying from Whole Foods compared to farmers markets. W3, T3: With new brands expanding into markets, cant afford to be stuck with assembly line trends. W4, T4: Sales should attempt to remain consistant, and not fluctuate with seasons. W5, T5: With government regulations and the increase of organic farms, quality may decrease. Important that Whole Foods maintains high level of consistency in food quality. 29

32. Space Matrix 30

33. Grand Strategy Matrix 31 With the way in which the business is currently situated it would be in their best interest to use quadrant I, as they can maintain there hold while integrating themselves into new investments and further move them forward.

34. BCG Matrix 32

35. IE Matrix 33

36. Matrix Analysis 34

37. Possible Strategies • Market expansion within foreign markets • Europe • Canada • UK • Expand advertisement budget • Ecommerce • Television • Product development • Prepared meals • Expand on Green initiatives 35

38. QSPM 36

39. Future Plans • Expand online services • Express stores • Expansion into foreign markets • Celebrity marketing and reality show market 37

40. Objectives • Objectives listed in 2009 Founder’s address within the annual report • More aggressive on purchasing side of business • Create more value for customers on pricing side of business • Be better stewards of capital • Have smaller and less expensive stores • Promote healthy eating education 38

41. Recommendations • Market expansion to foreign markets by adding 5 stores $10,000,000 • Expand advertising budget to increase market share and sales $2,500,000 • Expand product to include prepared foods that will compete with diet system competitors $2,500,000 • Total cost = $15,000,000 39

42. Implementations 40

43. EPS/EBIT Analysis • $ amount needed: 15M • Stock Price: $20 • Tax rate: 35% • Interest rate: 4% • # of shares outstanding: $1.283M 41

44. Potential Issues • Organic food competitors increasing • Federal regulations • Potential future recessions • Crop disease control • Employee compensation 42

45. Balance Scorecard 43

46. Source of Information • Whole Foods Market Reports First Quarter 2009 Results, http://www.wholefoodsmarket.com/company/pdfs/Q109financial.pdf • Whole Foods Market 2009 Annual Report • http://www.wholefoodsmarket.com/company/pdfs/ar09.pdf • YCHARTS • http://ycharts.com/companies/WFM/eps_ttm#series=type:company,id:WFM,calc:eps_ttm&zoom=&startDate=6/30/2007&endDate=12/31/2009&format=real&recessions=false • Wholefoods Marketing Information • http://www.wikinvest.com/stock/Whole_Foods_Market_(WFM) • Wholefoods Historical Stock Information • http://finance.yahoo.com/q/hp?s=WFM&a=08&b=31&c=2009&d=08&e=31&f=2009&g=d&z=66&y=594 • Wholefoods Competitor Information • http://knowledgeproblem.com/2009/08/10/evolving-competition-whole-foods-costco-trader-joes/ • Wholefoods SWOT Information • Business Source Complete – datamonitor.com • Growth Rates • Market Trends http://www.reuters.com/article/2008/08/26/idUS192211+26-Aug-2008+PRN20080826 44