Whole Foods Market

Whole Foods Market Case Study

I. History/Introduction

Whole Foods Market was founded 1980 in Austin, Texas by three businessmen who felt that the natural food industry was ready for a supermarket setup. Two separate individual companies, Safer Way Natural Foods and Clarksville Natural Grocery, formed Whole Foods Market. After 27 years of operation, the company has come a long way. Today Whole Foods Market is the leading retailer of natural and organic foods, with 194 stores/locations in the United States, Great Britain, and Canada (wholefoodsmarket.com). The company has been in the Fortune Magazine's "100 Best Companies to Work for" every year since the list was made up in 1998 (2007 ranked 5th). The cofounder and CEO, John Mackey, believes that the success of the company is due to the unique mission of the company and its application. The mission of the company is "highly selective about what we sell, dedicated to our core values and stringent quality standards and committed to sustainable agriculture." Or another way to say it "the highest quality, least processed, most flavorful and naturally preserved foods." (pg C-1)

The market for natural and organic foods has been growing rapidly since the company's conception in 1980. The Organic Trade Association (OTA) showed that in 1990 sales of organic and natural foods were $1 billion. In 13 years, the total sales went from $1 billion to $10 billion (sales have increased 10 times). By the end of 2007, the OTA predicts that sales will increase to $30 billion. The growth rate of the market is reaching new heights. The year 2000 was the first time that major supermarkets in the U.S. sold more organic and natural foods than the 14,500 natural food stores. Larger Supermarkets such as Kroger and Wal-Mart have created special "health food" sections for natural and organic foods. (p. C-3) Legislation passed the Organic Food Production Act which has helped with increased growth in the market. October 2002, the USDA established a labeling standard so people know that they are buying an organic/natural good. The labeling system and the increased demand have led to a very competitive

Market.

How has Whole Foods Market survived? That question is easy. They follow their motto of "Whole Foods, Whole People, Whole Planet". This motto means more than what it seems. The company gets their product from local business and also from all over the world. They are often small businesses/farms who are dedicated to their unique foods. The company wants the best product but they also want the best workers to join their team. They look for people that can make their own decisions, passionate about their work, and well-rounded human beings. The company also believes that they should take responsibility for their portion of the Planet. They believe that the best way to keep the environment safe and promoting sustainable agriculture is by organic farming. (p. C-2) The company lives beyond their mission of selling food, with focusing on their motto too.

Like every company in America, Whole Foods uses strategies that maximize their profits, but will not endanger their quality of product. The strategy that the company believes is high quality and great, nutritious taste. The company looks to keep growing by acquiring more and more stores. With new acquisition, the company still keeps their reputation of being high quality, nutritious products. Since 1991, they have acquired 67 stores through 14 acquisitions. In the years to come, the company is expected to build more new stores instead of buying existing stores. (p.C-6) Building new stores has come about because the natural foods stores are normally not big enough for the likes of Whole Foods Market.

The stores that are more than eight years old averaged about 28,000 square feet, but stores less than eight years old average about 36,000 square feet. The newest stores range between 25,000 and 80,000 square feet. This shows the expansions that the company has went through, going from 28,000 square feet to their 2001 acquisition in New York of 75,000-80,000 square feet. (p. C-6) The company planned to open up their new stores in the upscale areas of urban metropolitan centers. By 2004, Whole Foods had stores in 25 states and 33 of the top 50 U.S. metropolitan areas. The company wants to focus their attention to high traffic areas and areas that can afford their products.

We see how new Wal-Mart's and Kroger's use a certain setup, so all of their stores are uniform. Whole Foods Market does not follow this uniform setup. Each area has different size stores for the population density there. The size of their stores are different but also the inside setup. Each store has the ability to set their stores to the needs and wants of their customers in each area. (p. C-12) The store also relies on customers spreading the name of the company. This is the main way that the business advertises their business. Whole Foods spends less than most conventional supermarkets on advertising, that is where word-of-mouth is utilized. (p. C-14) The company goes back to their core values to satisfy and delight the customers. If they have poor customer service, then the advertising by word-of-mouth would not work. With great service, you will get loyal customers. "Management believed its team members were inspired by the company's mission because it complemented their own views about the benefits of a natural and organic foods diet." The management gives their team leaders freedoms to make decisions that will benefit the company and customers.

II. Analysis

Strengths

One of the advantages, as I discussed earlier, is that the stores are setup to specialize to their customers. The business wants to draw everyone's attention in their areas by offering the types of products the customers want to buy. Along the same lines the management uses a decentralized structure. This allows for store managers and employees to react quickly to the different needs and wants by customers, because they do not have to run it by their headquarters. Example: Offer products to customers that are vegans

Satisfy and Delight customers are the most important core value of Whole Foods. Why is this so important? Reputation! One thing the company has over competitors is their reputation. All of the products in the store are guaranteed 100% satisfaction. This shows customers that their product is the best on the market. Customer Service goes a long way with reputation. For example when a customer wants to know where to find