WholeFood CaseStudy

Agenda

Brief Background & ... Rita

Market Presence Jewel

Functional Level Strategies Son

Threats & Opportunities Jessica

Strategy & New Business Model Jeshua

Class Questions Team

Q&A Team

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Who is Whole Foods ?

● Healthy and social responsible lifestyle

● Innovative ● Focused on the quality of excellence

● Natural and organic food

● Practice win-win partnerships with our suppliers

● Create profits and prosperity

● Care About the Community and the Environment

https://www.wholefoodsmarket.com/quality-standards Rita 3

Quick Facts about Whole Foods

● CEO : John Mackey ● Founders-John Mackey, Rene Lawson

Hardy, Craig Weller and Mark Skiles ● 508 Stores -487 stores in the US

14 stores in Canada

7 stores in the UK

● 95,000 Team Members ● WFM Ticker Symbol

Rita 4

1980

Hwol

1992

Company goes public Jan 23 Split IPO 1.06

2003

First National Organic Grocer

2006

Purchases 100% renewable energy

2014

Intsacart and Value Matters Campaign

2017

Amazon Acquires Whole Foods

Founded in Houston, Texas

https://media.wholefoodsmarket.com/history/ Rita 5

Current News

● Hult all food sampling ● Allocating time for elderly to shop across US and Canada

Customers 60+: extra 1 hour before store opening. ● Stores & offices: enhancing cleaning & sanitizing, temporary closure self serving

bars, indoor & outdoor restaurants. ● Increasing numbers & location of hand sanitizer locations ● Enhancing online orders & delivery services ● Training employees

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Q1: What has created the durability of Whole Foods’ market presence? What has given them

their competitive advantage?

Jewel 10

● Little competition during inception ○ 1980: Natural foods was a new

concept ○ Less than 6 other natural food stores

in U.S. ● The Green Movement ● Strict quality standards ● Acquisition under Amazon.com, Inc.

Jewel 11

Attributable Factors

The Green Mission

“... Dedicated not only to all natural foods, but to a green world and healthy people.” (p. C30)

Jewel 12

The Green Mission (Cont.d)

● Reduce, Reuse, Recycle ● Food Waste Reduction ● Alternative Energy

○ Solar, Electric Vehicles, Green Building, Community Support, Product Sourcing, Palm Oil Pledge

Jewel 13

Superior Quality Standards

● Seafood: No cloned or genetically modified products ● Meat and Poultry: No antibiotic or growth hormones ● Eggs: Cage free, pasture raised and outdoor living ● Beauty: Banned 100+ ingredients commonly used ● Organic: Certified organic grocer, organic labeling, history of

growth in organic, biodynamic agriculture ● Household cleaning: Red rating not accepted on Eco-Scale

Jewel 14

Q2:What functional level strategies has Whole Foods employed? Have these strategies been

successful?

15Son Nguyen

Introduction of functional level strategies

Functional Level Strategies Levels of Strategic Management

16Son Nguyen

1. Financial Strategy ● Acquiring capital: Whole Foods sold for Amazon for $13.4B in cash

● Threatening competitors by “Amazon effect”

Grocery chain share price percentage change on June 16, 2017. Source: FactSet 17Son Nguyen

1. Financial Strategy

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Grocery Chain Price Per Share Source: Yahoo Finance

Son Nguyen

1. Financial Strategy ● Amazon subsidiary

○ Bringing more shoppers into stores

■ More than 100M Prime members

■ Foot traffic: increase 16.5% in Q1 2019

■ But, the length of store visiting: decrease

■ Trips less than 5 minutes: increase 10%.

● Closing 12 subsidiary 365 stores

○ To reduce cost

○ Focusing on building a new Whole Foods chain with a lower price strategy

19Son Nguyen

2. Marketing Strategy: top spender in advertising in Q2 2019. ● Product & service strategy

○ Diverse healthy food: ■ Average SKUs (stock-keeping unit)

● Whole Foods- 30,000+ ● Trader Joe’s- 4,000 ● Walmart - 100,000 ● Typical grocery store- 50,000 ● (Source: Food Business News)

■ Budget private label: 365 Everyday Value ○ Excellent quality reputation

■ First U.S. Certified Organic national retailer ■ Some complaints about products’ quality after Amazon acquisition

20Son Nguyen

2. Marketing Strategy ● Pricing Strategy

○ An extremely big major change- lowering prices ■ 2017, 2 months after the deal, Whole Foods cut prices on 500 items up to 43% ■ 2019, cutting prices again by 2.5% on average ■ Good news: Shoppers are noticing ■ Pricing is still higher than any competitors in the industry.

● Before: 20% more expensive ● Today: 12%+ more expensive

21Son Nguyen

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“Before”: March 29, 2019 “After”: April 4, 2019 Source: Whole Foods website

Son Nguyen

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Whole Foods versus Trader Joe’s Price Chart Feb, 2019

Source: Yahoo Finance

Son Nguyen

2. Marketing Strategy ● Promotion Strategy

○ Only 11% Prime members shop several times/month ○ 42% Prime members never shop at Whole Foods (Source:

Wolfe Research)

● Place/Distribution: Enhancing online shopping ○ Stopped the 5 year contract with Instacart in 2018 ○ Cooperating with Amazon shipping team ○ Ranked 5th

24Son Nguyen

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In-store and online grocery shopper percentage in 2018 Source: Coresight Research

2. Marketing Strategy

Son Nguyen

3. Human Resource Strategy

● Achieved ○ “Fortune’s 100 Best Companies to Work For” in 20 consecutive years. ○ Only 12 companies earned this honor. ○ 80%+ employees say Whole Foods is a great place to work (Sep 2018)

● Salary strategy ○ Open salaries. ○ The salary of executive is no more than 14 times of the average annual salary of

a Whole Foods worker.

26Son Nguyen

❏ Team member is sick or placed into quarantine: receive up to 2 weeks of pay.

❏ Hourly employees: an additional $2/hour through the end of April.

❏ Team Member Emergency Fund: $1.6M +

❏ Additional Paid-for Sick Time to All Crew Members.

❏ Team member is sick or placed into quarantine: receive up to 2 weeks of pay.

❏ May receive up to 26 weeks if an associate is not able to return to work after that time.

Covid-19 Policy to Support the Health of Associates Source: Company Website 27Son Nguyen

Q3.What opportunities and threats can be identified through examining Whole Foods in the context of the competitive forces model and a competitor analysis?

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Overview

Competitive Forces Model

1. Threats of New Entry 2. Threats of Substitutes 3. Supplier Power 4. Buyer Power 5. Industry Rivalry

SWOT Analysis

Threats - Bad Publicity - Increasing Competition

Opportunities - Diversification (365 Stores) - International Expansion - Alliances

Jessica 29

Competitive Forces Model

Threat of New Entry (LOW): Grocery industry is highly competitive, with low profit margins. Entering this market is costly and difficult.

Supplier Power (MED-HIGH): Whole Foods leans toward local suppliers, but only 5% of U.S. crop land is certified organic. In addition, United Natural Foods which is its largest supplier ranges from approximately 30% of its total purchases.

Buyer Power (LOW-MED): Excessive consolidation in the grocery industry provides supermarkets all the power and buyer must pay what grocers demand. Whole Foods corresponds with other retailers by having a low switching costs; otherwise consumers would move to other grocery’ stores.

Jessica 30

Competitive Forces Model

Threat of Substitution (HIGH): Although Whole Foods is known for its “organic food” it is highly costly too, and so buyers tend to go at a local farmer’s market in which they can save money out of their pocket. As it is easy for other grocers to sell out other organic and natural food to sell.

Industry Rivalry (HIGH): Whole Foods Market is known for its organic and natural food industry. As many food industry are entering into this “organic and natural” it would be difficult for them to face this growing competition; especially towards Trader Joe’s and Sprouts.

https://ww.marketrealist.com/2018/11/porters-five-forces-analysis-whole-foods-fiscal-2018/ Jessica 31

Whole Foods >> Opportunities ● International Expansion - gave company to

diversify its operational resources. It had branches in Canada and UK.

● Alliances - Amazon had become their parent company ever since 2017. Amazon prime members gets 10% off sale items at Whole Foods and weekly discounts on best-selling items.

Jessica 32

Whole Foods >> Threats ● Bad Publicity - the company faced lots of negativity

because of how they overcharged customers without them knowing.

● Increasing Competition - The company has established itself as a leader in the organic and natural food segment.

- Sprouts and Trader Joe’s are their top competitors as both offers inexpensive yet innovative products; key to its value-based pricing strategy.

https://bstrategyhub.com/swot-analysis-of-whole-foods-2019-whole-foods-market-swot-analysis/ https://www.investopedia.com/ask/answers/052015/who-are-whole-foods-wfm-main-competitors.asp

Jessica 33

Q4.What steps has Whole Foods taken in appropriately planning strategy? Assuming Whole Foods must develop a new business model, how should they go about this?

Jeshua 34

Corporate Level Strategy

Jeshua 35

1. We Sell the highest quality natural and organic foods

2. We practice win-win partnerships with our suppliers

3. We satisfy and delight our customers 4. We promote team member growth and

happiness 5. We care about our community and the

environment 6. We create profits and prosperity

Jeshua36

Strategy - Differentiation ● Offer organic food ● Vet suppliers ● Provide personable customer service ● Amazon

○ Prime Member Discount ○ Devices in stores ○ Free Delivery

Jeshua 37

Range Me

Jeshua 38

Unacceptable Ingredients for Food

Can you take a guess of how many items are on that list?

170 items

Jeshua 39

● benzoates ● benzoic acid ● Benzophenone ● benzoyl peroxide ● benzyl alcohol ● beta-cyclodextrin ● BHA (butylated

hydroxyanisole) ● BHT (butylated

hydroxytoluene) ● bleached flour ● bromated flour ● brominated vegetable oil ● burnt alum ● butylparaben ● caffeine (extended

release) ● calcium benzoate ● calcium bromate ● calcium disodium EDTA ● calcium peroxide ● calcium propionate ● calcium saccharin ● calcium sorbate ● calcium stearoyl-2-

lactylate

● 2,4,5- trihydroxybutyrophenone (THBP)

● acesulfame-K ● acetoin (synthetic) ● acetone peroxides ● acetylated esters of mono- and

diglycerides ● activated charcoal ● advantame ● aluminum ammonium sulfate ● aluminum potassium sulfate ● aluminum starch

octenylsuccinate ● aluminum sulfate ● ammonium alum ● ammonium chloride ● ammonium saccharin ● ammonium sulfate ● apricot kernel/extract ● artificial sweeteners ● aspartame ● azo dyes ● Azodicarbonamide ● bacillus subtilis DE111 ● bacteriophage preparation

b

● canthaxanthin ● caprocaprylobehenin ● carmine ● CBD/cannabidiol ● certified colors ● charcoal powder ● Citrus Red No. 2 ● cochineal ● DATEM ● diacetyl (synthetic) ● dimethyl Silicone ● dimethylpolysiloxane ● dioctyl sodium

sulfosuccinate (DSS) ● disodium 5'-

ribonucleotides ● disodium calcium EDTA ● disodium dihydrogen

EDTA ● disodium EDTA ● disodium guanylate ● disodium inosinate ● dodecyl gallate ● EDTA ● erythrosine ● ethoxyquin

● ethyl acrylate (synthetic)

● ethyl vanillin (synthetic)

● ethylene glycol ● ethylene oxide ● eugenyl methyl ether

(synthetic) ● FD&C Blue No. 1 ● FD&C Blue No. 2 ● FD&C Colors ● FD&C Green No. 3 ● FD&C Red No. 3 ● FD&C Red No. 40 ● FD&C Yellow No. 5 ● FD&C Yellow No. 6 ● foie gras ● gardenia blue ● GMP ● gold/gold leaf ● heptylparaben ● hexa-, hepta- and octa-

esters of sucrose ● high-fructose corn

syrup/HFCS ● hjijiki

Jeshua 40

● polydextrose ● potassium alum ● potassium benzoate ● potassium bisulfite (okay in wine,

mead, cider) ● potassium bromate ● potassium metabisulfite (okay in

wine, mead, cider) ● potassium nitrate ● potassium nitrite ● potassium propionate ● potassium sorbate ● propane-1,2-Diol esters of fatty acids ● propionates ● propionic acid ● propyl gallate ● propylene glycol esters of fatty acids ● propylene oxide ● propylparaben ● pulegone (synthetic) ● pyridine (synthetic) ● saccharin ● saccharin sodium salt ● salatrim (short and long chain acyl

triglyceride molecule) ● shark cartilage

● smoke flavor (synthetic) ● sodium acid sulfate ● sodium alum ● sodium aluminum phosphate ● sodium aluminum sulfate ● sodium benzoate ● sodium bisulfite (okay in wine, mead,

cider) ● sodium cyclamate ● sodium diacetate ● sodium lauryl sulfate ● sodium metabisulfite (okay in wine,

mead, cider) ● sodium nitrate/nitrite (synthetic) ● sodium propionate ● sodium saccharin ● sodium sorbate ● sodium stearoyl lactylate ● sodium stearoyl-2-lactylate ● sodium sulfite (okay in wine, mead,

cider) ● sorbic acid ● stannous chloride ● succistearin ● sucralose ● sucroglycerides

● hydrogenated oils ● inosine monophosphate ● insect Flour ● iron oxide ● kava/kava kava ● lactic acid esters of monoglycerides ● lactylated esters of mono- and

diglycerides ● ma huang ● methyl silicon ● methylparaben ● microparticularized whey ● protein derived fat substitute ● monoammonium glutamate ● monopotassium glutamate ● monosodium glutamate ● myrcene (synthetic) ● natamycin (okay in cheese-rind wax) ● neotame ● nitrates (synthetic) ● nitrites (synthetic) ● octyl gallate ● olestra ● Orange B ● partially hydrogenated oils ● plant sterols

● sucrose acetate isobutyrate

● sucrose ester

● sucrose polyester

● sulfites (okay in wine, mead, cider)

● sulfur dioxide (okay in wine, mead, cider)

● TBHQ (tertiary butylhydro quinone)

● tetrasodiu m EDTA Jeshua 41

Customer Service

Jeshua 42

Amazon Prime Members

● Discounts for Prime Members

Jeshua 43

Amazon Prime Members

Jeshua 44

New Business Model and Implementation

What new strategy can:

● Provide stores with Organic: ○ Fruits ○ Vegetables ○ Fresh fish

● Reduce cost of food ● Reduce Carbon footprint ● Increase in-store sales ● Provide grounds into expanding to lower income communities

Jeshua45

Aquaponic Farms

● Create Automated Aquaponic Farms that grow variety of foods, and fishes.

● What is Aquaponics?

Jeshua 46

Implementation

● Utilize Amazon’s autonomous robots and warehouse infrastructure

● Automate all moving parts

● Establish farms near stores and in urban areas

Jeshua 47

New Business Model Outcome

● Grow and raise own produce and fish ○ Decrease price of food ○ Cut out third party suppliers ○ Reduce CO2 emissions

● Increase ability to penetrate lower income areas ● Increase in-store sales

Jeshua 48

Questions

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Questions...

In what year was Whole Foods Founded?

A.1990

B.1980

C.2001

D.1880

Answer: 1980

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What has Whole Foods done in response to Covid19?

A. Designated a time for elderly to shop B. Disinfected store frequently C. Imposed purchase limits on high demand items D. All of the above

Answer: D

How many stores does Whole Foods have in the US?

A. 508 B. 487 C. 327 D. None of the above

answer : B

What caused Whole Foods to get bad publicity? a. overcharging customer b. found out there was spoiled food c. it was expensive d. their foods were not organic

Answer: A

53

What percentage were Whole Foods largest supplier in

accordance to United Natural Foods? a. 5% b. 40% c. 30% d. 20%

Answer: C

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Which company of the following is Whole Foods brand alliance? a. Walmart b. Amazon c. Aldi d. Albertsons Safeway

Answer: B

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How many stores does Whole Foods have in the US

A. 508 B. 487 C. 327 D. None of the above

answer : B

Any Questions?

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Backup Charts

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Backup Charts

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Backup Charts

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Backup Charts

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Resources https://media.wholefoodsmarket.com/history/ https://www.wholefoodsmarket.com/quality-standards

https://www.statesman.com/news/20200317/coronavirus-in-austin-whole-foods-to-open-doors-earlier-to-older-clients

https://wholefoods.coop/covid-19/

https://finance.yahoo.com/news/amid-coronavirus-amazon-whole-foods-180114961.html

https://www.investopedia.com/ask/answers/052015/who-are-whole-foods-wfm-main-competitors.asp

https://www.wholefoodsmarket.com/mission-valueshttps://www.rangeme.com/whole-foods-landing

https://www.wholefoodsmarket.com/quality-standards/food-ingredient-standards

https://www.amazon.com/fmc/storedeals/ref=sn_gfs_co_fresh-grocery- subnav_ISD_2?_encoding=UTF8&almBrandId=VUZHIFdob2xlIEZvb2Rz&pf_rd_p=fd28f490-369a-443a-8074- 8b09110d9cbe&pf_rd_r=8SKFZNEAE42MG0CKGCF6&pf_rd_s=wfm-subnav-desktop-content- 7&pf_rd_t=SubnavFlyout&ref=wf_mwb_mm_lsd

Resources https://www.amazon.com/fmc/storedeals/ref=sn_gfs_co_fresh-grocery- subnav_ISD_2?_encoding=UTF8&almBrandId=VUZHIFdob2xlIEZvb2Rz&pf_rd_p=fd28f490-369a-443a-8074- 8b09110d9cbe&pf_rd_r=8SKFZNEAE42MG0CKGCF6&pf_rd_s=wfm-subnav-desktop-content- 7&pf_rd_t=SubnavFlyout&ref=wf_mwb_mm_lsd

https://www.amazon.com/b?ie=UTF8&node=17235386011 https://www.digitalcommerce360.com/2019/06/21/how-amazons-whole-foods-acquisition-changed-the-grocery-industry/ https://techcrunch.com/2017/06/16/foodpocalypse/ https://finance.yahoo.com/quote/KR/ https://www.barchart.com/stocks/quotes/WFM https://www.marketbeat.com/stocks/NASDAQ/WFM/ https://finance.yahoo.com/quote/WMT?p=WMT&.tsrc=fin-srch https://blog.homestars.com/guide-to-home-aquaponics/ https://www.digitalcommerce360.com/2019/07/11/82-of-us-households-have-a-amazon-prime-membership/

https://www.supermarketnews.com/retail-financial/amazon-helps-lift-traffic-whole-foods https://www.marketwatch.com/story/amazon-lockers-are-driving-people-to-whole-foods-but-theyre-staying-less-than-5-minutes-2019- 05-15 https://www.bizjournals.com/austin/news/2019/01/14/whole-foods-wont-open-any-more-365-stores.html https://www.washingtonpost.com/blogs/post-partisan/wp/2018/03/30/whats-not-to-love-about-trader-joes/

https://www.foodbusinessnews.net/articles/5382-the-whole-foods-equation https://digital.hbs.edu/platform-rctom/submission/trader-joes/

Resources https://www.cnbc.com/2019/08/27/amazon-cutting-prices-at-whole-foods-in-last-6-months-morgan-stanley.html https://www.businessinsider.com/whole-foods-prices-drop-under-amazon-morgan-stanley-2019-8 https://www.grocerydive.com/news/amazon-cuts-prices-on-hundreds-of-whole-foods-products/551778/ https://www.vox.com/2019/4/4/18292262/whole-foods-lower-prices-sale-discount-amazon-prime https://media.wholefoodsmarket.com/news/amazon-and-whole-foods-market-make-biggest-investment-in-lowering-prices-an https://finance.yahoo.com/news/whole-foods-prices-beat-trader-090000793.html https://www.wsj.com/articles/amazon-cuts-more-prices-at-whole-foods-11554146071 https://www.forbes.com/sites/bryanpearson/2019/04/09/why-cant-amazon-convert-prime-shoppers-into-whole-foods- shoppers/#5c54c1d9683b https://www.vox.com/2018/12/13/18139324/whole-foods-instacart-partnership-ended-amazon https://www.supermarketnews.com/online-retail/study-number-online-grocery-shoppers-surges https://media.wholefoodsmarket.com/news/whole-foods-market-celebrates-20-years-as-one-of-fortunes-100-best-companie https://www.greatplacetowork.com/certified-company/1000461 https://media.wholefoodsmarket.com/news/how-whole-foods-market-is-responding-to-covid-19 https://www.traderjoes.com/announcements https://corporate.walmart.com/newsroom/2020/03/10/the-latest-on-walmarts-response-to-the-coronavirus

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