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Whole Foods Market –SWOT Analysis

Whole Foods Market is a company that was founded in 1980 in Texas by John Mackey Craig Weeler, Renee Lawson, and Mark Skiles. John Mackey and Renee Lawson owned a food market called Safer Way Natural Foods and Craig Weeler, and Mark Skiles owned a company called Clarksville Natural Grocery. All four parties came together with a joint vision and named the company Whole Foods Market. When Whole Foods Market launched, there were less than a dozen natural food superMarket in the United States. Today this American based company employs more than 89,000 people and holds operations in the United States, Canada, and the United Kingdom. (Whole Foods, 2018)

Whole Foods Market is known for being the biggest natural and organic food grocery store in the United States. All of the stores are nationally certified as organic; they have private branding and sell high-quality foods and products. The Whole Foods Market provides everyday grocery products, for instance, meats and seafood, bakery items, coffee and tea, prepared foods, etc. The company’s goal is healthy eating and knowing what is in the foods you eat. Research is completed on the foods they sell from additives to products to antibiotics in the meat to ensure all natural and organic food products are sold to their customers. Nevertheless, over the past years, they have not been able to remain competitive with the natural and organic Market.

As the natural and organic food market began to expand, competitors such as Kroger and Walmart, jumped on the bandwagon to offer organic, heather, and natural foods to their customers also. For example, in 2014, Kroger launched a product line called Simple Truth. By 2018 merchandising sales have reached $2 billion alone in sales for the Kroger company, which makes the Simple truth the second largest brand sold in the Kroger stores. The Simple Truth strategy is healthy eating through clean labels, great flavors, and affordable. (Kowitt, B. 2015) The Whole Foods Market has over 472 stores and Kroger over 3,700 stores globally, Kroger has the advantage of the organic consumer market.

Financial Performance

As you can see from the chart below the performance of Whole Foods Market has been declining over the last couple of years. According to the analysis report provided by Mergent (2017), the balance sheet is showing a decline in the significant financial categories. Below you will find the current financial report taken directly off of Mergent (2017) database. The revenues have increased from 2016. However, the direct costs have increased, and the gross profit has declined. The Mergent (2017) report shows a Net Income for the annual growth rate of (0.15) for the next five years.

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Whole Foods Market Inc (NMS: WFM)

Exchange rate used is

that of the Year End

As Reported Annual

Start Date09/24/201709/25/201609/27/201509/28/201409/29/2013

End Date

Service ProviderErnst & Young LLPErnst & Young LLPErnst & Young LLPErnst & Young LLPErnst & Young LLP

Audit Fees$0.00$2,185,000.00$2,004,000.00$1,600,000.00$1,610,000.00

Audit Related Fees$0.00$0.00$0.00$0.00$0.00

Tax Fees$0.00$0.00$0.00$0.00$0.00

All Other Fees$0.00$0.00$0.00$51,000.00$0.00

Total Reported Fees$0.00$0.00$2,004,000.00$0.00$0.00

Total Fees$0.00$2,185,000.00$2,004,000.00$1,651,000.00$1,610,000.00

Report Date09/24/201709/25/201609/27/201509/28/201409/29/2013

CurrencyUSDUSDUSDUSDUSD

Audit StatusNot QualifiedNot QualifiedNot QualifiedNot QualifiedNot Qualified

ConsolidatedYesYesYesYesYes

Cash & cash $322,000,000.00$351,000,000.00$237,000,000.00$190,000,000.00$290,000,000.00

Short-term investments - $504,000,000.00$379,000,000.00$155,000,000.00$553,000,000.00$733,000,000.00

Restricted cash$124,000,000.00$122,000,000.00$127,000,000.00$109,000,000.00$111,000,000.00

Accounts receivable$242,000,000.00$242,000,000.00$218,000,000.00$198,000,000.00$188,000,000.00

Merchandise inventories$471,000,000.00$517,000,000.00$500,000,000.00$441,000,000.00$414,000,000.00

Prepaid expenses & $143,000,000.00$167,000,000.00$108,000,000.00$97,000,000.00$93,000,000.00

Receivable from parent$124,000,000.00----

Deferred income taxes$215,000,000.00$197,000,000.00$199,000,000.00$168,000,000.00$151,000,000.00

Total current assets$2,145,000,000.00$1,975,000,000.00$1,544,000,000.00$1,756,000,000.00$1,980,000,000.00

Land$156,000,000.00$161,000,000.00$151,000,000.00$139,000,000.00$77,000,000.00

Buildings & leasehold $3,641,000,000.00$3,390,000,000.00$3,116,000,000.00$2,628,000,000.00$2,427,000,000.00

Capitalized real estate $120,000,000.00$80,000,000.00$81,000,000.00$81,000,000.00$33,000,000.00

Fixtures & equipment$2,615,000,000.00$2,499,000,000.00$2,330,000,000.00$2,099,000,000.00$1,706,000,000.00

Construction in $265,000,000.00$284,000,000.00$176,000,000.00$362,000,000.00$269,000,000.00

Gross property & $6,797,000,000.00$6,414,000,000.00$5,854,000,000.00$5,309,000,000.00$4,512,000,000.00

Less accumulated $3,283,000,000.00$2,972,000,000.00$2,691,000,000.00$2,386,000,000.00$2,084,000,000.00

Property & equipment,

net of accumulated $3,514,000,000.00$3,442,000,000.00$3,163,000,000.00$2,923,000,000.00$2,428,000,000.00

Long-term investments - $121,000,000.00-$63,000,000.00$120,000,000.00$302,000,000.00

Goodwill $710,000,000.00$710,000,000.00$710,000,000.00$708,000,000.00$679,000,000.00

Intangible assets, net of $68,000,000.00$74,000,000.00$79,000,000.00$81,000,000.00$65,000,000.00

Deferred income taxes$74,000,000.00$100,000,000.00$144,000,000.00$132,000,000.00$72,000,000.00

Other assets$44,000,000.00$40,000,000.00$38,000,000.00$24,000,000.00$12,000,000.00

Total assets$6,676,000,000.00$6,341,000,000.00$5,741,000,000.00$5,744,000,000.00$5,538,000,000.00

Current installments of

long-term debt & capital $2,000,000.00----

Current installments of -$3,000,000.00$3,000,000.00$2,000,000.00$1,000,000.00

Accounts payable$371,000,000.00$307,000,000.00$295,000,000.00$276,000,000.00$247,000,000.00

Accrued payroll, bonus

& other benefits due $397,000,000.00$407,000,000.00$436,000,000.00$379,000,000.00$367,000,000.00

Dividends payable-$43,000,000.00$45,000,000.00$43,000,000.00$37,000,000.00

Other current liabilities$585,000,000.00$581,000,000.00$473,000,000.00$557,000,000.00$436,000,000.00

Total current liabilities$1,355,000,000.00$1,341,000,000.00$1,252,000,000.00$1,257,000,000.00$1,088,000,000.00

Long-term capital lease

obligations, less current -$1,048,000,000.00$62,000,000.00--

Senior unsecured notes$999,000,000.00----

Less: unamortized

discount and debt -$6,000,000.00----

Carrying value of senior $993,000,000.00----

Capital lease $90,000,000.00----

Total long-term debt & $1,083,000,000.00----

Less: current $2,000,000.00----

Long-term debt &

capital lease $1,081,000,000.00--$60,000,000.00$26,000,000.00

Deferred lease liabilities$690,000,000.00$640,000,000.00$587,000,000.00$548,000,000.00$500,000,000.00

Other long-term $120,000,000.00$88,000,000.00$71,000,000.00$66,000,000.00$46,000,000.00

Total liabilities$3,246,000,000.00$3,117,000,000.00$1,972,000,000.00$1,931,000,000.00$1,660,000,000.00

Common stock$2,972,000,000.00$2,933,000,000.00$2,904,000,000.00$2,863,000,000.00$2,765,000,000.00

Common stock in -$2,026,000,000.00$1,124,000,000.00$711,000,000.00$153,000,000.00

Accumulated other -$38,000,000.00-$32,000,000.00-$28,000,000.00-$7,000,000.00$1,000,000.00

Retained earnings $496,000,000.00$2,349,000,000.00$2,017,000,000.00$1,668,000,000.00$1,265,000,000.00

Total shareholders' $3,430,000,000.00$3,224,000,000.00$3,769,000,000.00$3,813,000,000.00$3,878,000,000.00

SWOT – Analysis

Below you will find the SWOT analysis completed on the Whole Foods Market. All areas in this analysis are what Whole Foods Market may have in its future and what areas they will need to improve upon to expand the globe.

	SWOT Analysis
		Environment
		Opportunity		Threat
Company	Strength	· Organization Culture · Superior Customer service · Loyal Clientele · Best Quality Food in Natural and Organic · Local Marketing so they have a small store feel · Strong Brand Name · Expanding the Brand Name · Whole Foods is a household name		· Global expansion and open up new stores into the world of Organic Foods · Add some non-organic and natural foods, so customers have a broader choice of foods · Negative publicity · Add more suppliers of food, so customers have more of a chosen · Lower pricing
	Weakness	· Pricing is more expensive than competitors · Customer perception (Organic and Natural foods is expensive) · Lack of International Market		· Strong Competitors are entering into the organic market with cheaper pricing on foods. For instance, Aldi, Walmart, Trader Joes · Rise of Non -GMO products. · Lack of other products for customers to choose from. For example, Gluten Free products

Strengthens

Whole Foods Market has flooded the market with natural and organic products with high-quality standards, that guarantee that the consumer will be satisfied with their products.

The results and high standards of food have given Whole Foods Market one up on the competition. They are offering an assortment of food products to promote a healthy, clean eating lifestyle with a brand that is highly regarded in the organic food sector. In 2017, Whole Foods Market merged with Amazon under a new umbrella Amazon Fresh Pickup. Which caused a drop in prices on Whole Foods popular items meaning more people will be more likely to buy them. Threw the merger Whole Foods Market will be able to reach a more extensive customer base and have access to shipping of their products. With the new business idea, you don’t have to visit a store to eat fresh; you can use the Amazon grocery app. By using access to Amazon Prime members, Whole Foods has access to already defined clientele and provides additional goods to offer. Customer loyalty is another asset that Whole Foods Market has, the people who shop at their stores are loyal and will keep going back. The foods that Whole Foods Market sells is only made of natural an organic material, and that is what keeps their customers happy. Whole Foods Market hire a local marketing manager to market their stores to the local community, so the company doesn’t feel like a chine grocery store but a local organic shop. Customers who shop at Whole Foods Market rave about the organization's culture and superior customer service.

Weaknesses

One major weakness is that consumer perception is that organic and natural foods are much more expensive than their counterparts. This is not always the case; some customers believe that Whole Foods Market overcharge for their products because they are certified organic and all natural. Another issue is the Whole Foods Market are dependent upon the American Market, which is costly for the company, and this is a reason for higher prices for their products. This has proved to be a bad business idea for Whole Foods Market because they have already been forced to close stores due to competition from national chain grocery stores emerging into the organic market. Because of this competition, Whole Foods has had a decrease in store traffic, stocks have been underperforming, and they had no strategy to compete on a larger scale with their competitors until the merger with Amazon the company was doomed.

Opportunities

The most recent acquisition of Whole Foods Market and Amazon leaves various openings for the Market to discover. Whole Foods will be able to reach a broader base of clientele, with paring with Amazon Prime to market its products, the company does not need to waste money marketing because Amazon will do it for them. Whole Foods will be able to ship their products to other places that don’t have Whole Foods Market. They will be able to expand their online presence and maybe open stores internationals. Also, with Amazon, they will have more buying power and will be able to get products cheaper and from other vendors. Physical store locations can remain open to compete against their competitors. Keeping local retail stores will allow Whole Foods Market to improve sales and promote brand growth. The merger with Amazon will encourage customers to purchase their products over competitors with their ship to home option.

Threats

One obstacle that Whole Foods Market is facing is their competitors charge a lower cost for Organic and Natural products. Companies like Aldi are known for their off brands but low pricing. Other competitors are Target, Trader Joe’s, Walmart, and Kroger, and they are all offering all fresh, organic, and natural foods for a low price. Another is the decline in sales and customer foot traffic for their local retail stores. Even though the foods that Whole Foods sell is certified, consumers look at pricing, and if they can get something that is fresh and organic for cheaper elsewhere, they will bring their business to that other store. The only presence of Whole Foods is nonexistent before the merger with Amazon. Most other competitors offer to ship to consumers’ homes. Even if the local stores offered home delivery that would be a competitive advantage against their competition. Whole Foods Market will need to change their overall customer perception and become more aware of what their consumer base is looking.

Conclusion

While reviewing the SWOT analysis for the Whole Foods Market, it is imperative that the Organization conforms to the merger with Amazon because they will give the company a more significant opportunity over the competition. Whole Foods should utilize all the tools that Amazon has to offer and come up with an operational strategy to revive the company and expand its consumer base. Whole Foods should connect with its current consumers to get a better understanding of what they are looking for from the company they love. So they can take their company to the next level and expand internationally.

References

Aschemann-Witzel, J. & Sielke, S. (2017)Can't Buy Me Green? A Review of Consumer Perceptions of and Behavior Toward the Price of Organic Food. Journal of Consumer Affairs. Spring2017, Vol. 51 Issue 1, p211-251. 41p. DOI: 10.1111/joca.12092. , Database: Business Source Elite

Kowitt, B (2015) Is the largest natural-foods brand even sold at Whole Foods? Article October 28, 2015. Fortune.

Kusek, K. (2015, February 17). Five Lessons Retailers Can Learn From Whole Foods Market's Q1 Performance. Retrieved from https://www.forbes.com/sites/kathleenkusek/2015/02/17/five-lessons-retailers-can-learn-from-whole-foods-Market-q1-performance/

Mergent. (2017). Acadia Healthcare Company Financial. Retrieved from Mergent Oline database.

Petro, G. (2017, August 03). Amazon's Acquisition Of Whole Foods Is About Two Things: Data And Product. Retrieved from https://www.forbes.com/sites/gregpetro/2017/08/02/amazons-acquisition-of-whole-foods-is-about-two-things-data-and-product/#180f8e4ea808

Phillips, K. & Connolly, A. J. (2017) When Amazon ate Whole Foods: big change for Big Food. International Food & Agribusiness Management Review. 2017 Vol. 20 Issue 5, p615-621. 7p.

Whole Foods Market (2019) Website. https://www.wholefoodsmarket.com/company-info/whole-foods-market-history