whole foods 2

Kelley ParriginKat Keivens

Bo GhassemiKathy Flores

Miranda NiederleSheridan SandsJessica NelsonSeda McCarthy

Whole Foods Market

• Customers are considered the #1 stakeholder

• Takes a longer view of financial health rather than the quarterly model

• Helped develop standards for organic foods and more humane treatment of animals

• Fortune’s 100 Best Companies to Work For: #22

Whole Foods Vision

• Our vision of a sustainable future means our children will be living in a world that values human creativity, diversity, and personal choice.

Mission

• Whole Foods — We search for the highest quality, least processed, most flavorful and natural foods possible .…

• Whole People — Our people are our company. They are passionate about healthy food and a healthy planet….

• Whole Planet — We are committed to helping take care of the world around us….

Values

• Selling the highest quality natural and organic products available

• Satisfying and delighting our customers

• Supporting team member happiness and excellence

• Creating wealth through profits & growth

• Creating ongoing win-win partnerships with our suppliers

• Caring about our communities & our environment

The General Environment

• Demographic

• Economic

• Political/Legal

• Socio/Cultural

• Technological

• Global

The General Environment

Demographics -

• Only one demographic governs WFI:

• Each store is located in a neighborhood where 40% have a college degree.

• This ensures being in an area where people know about nutrition.

The General Environment

Economic – • WFMI has grown

with the rising trend of health and fitness consciousness.

• It depends on this trend to continue and to grow.

The General Environment

Political/Legal –

• In the U.S, Japan, and the European Union “Organic” standards are certified by legislation.

• In other countries laws or standards may not exist.

The General Environment

Socio/Cultural –

• Representative on the National Organic Standards Board

• Health conscious

• Consumer awareness-health education

• Sustainable agriculture

The General Environment

Technological –

• Business Processes– Website– Paperless ordering system

• Green Mission– Power monitors– Wind power– Solar and Biomass

The General Environment

Global –

• More than 270 stores in North America and the United Kingdom

• Increase in global trade– Opportunity to expand into new markets– Food standards are not uniform

• Emergence of China as superpower

Industry Environment Analysis

Whole FoodsWhole Foods

Threat of New Entrants

• Other organic supermarkets or competitors

• Effects on Whole Foods market

Bargaining Power of Suppliers

• The greater bargaining power of Whole Foods Market could also squeeze existing suppliers who will have fewer market options

• Supplier challenges– Number of suppliers

• Supplier loyalty– Different manufacturers

Bargaining Power of Buyers

• Buyer dominance– Wal-Mart

• Grocery market insensitivity to economic conditions – For example, Wal-Mart vs. Whole Foods

Threat of Substitutes

Rivalry Among Firms

Internet Grocers

Local Farmers’ Markets

Restaurants and Fast Food Chains

Wholesale clubsConvenience

stores

Supermarkets

Mass Merchandisers and

Super Centers

Whole Foods

Internal Capability Analysis

Strengths

• Quality food

• Customer “experience”

• Store and corporate culture

• Image and branding

• Loyal customer base

• Great store locations for target market.

Weaknesses

• Prices are high- “Whole Paycheck”

• Lacking on international operations

• Narrow target market

• Marketing relies on- “word-of-mouth”

Opportunities

• Expand private label brand– Possibly work with large chains for generic distribution

• Expand food selection

• Expand its investment in marketing about the benefits of eating healthy and organic

Threats

• Economy- downturn leads to less disposable income and less luxury

• Market intrusions and competition

• Lax regulations on organic foods

Internal Capability Analysis

Value Chain Analysis

Primary Activities • Partnering with vendors

– Owns and operates downstream suppliers

– Low interest loans – New store inventory

Value Chain Analysis

Primary Activities• Purchasing goods

– Stringent quality standards*

– Regional and national suppliers

– Local suppliers

• Managing and distributing inventory– JIT delivery

Value Chain Analysis

Primary Activities• Store operations

– Duplication– Customization*

• Marketing and sales– Full service – Rich sensory

experience*

Value Chain Analysis

Support Activities• Human resources

– Motivational and respectful work environment

– Elaborate team environment

Value Chain Analysis

Support Activities• General administration

– Prime store locations– Leveraged

culture/reputation– Excellent relationships

with stakeholder groups

Resources and Capabilities

Tangible Resources• Financial

– Capacity to raise equity

• Physical– Stores– Distribution centers– Support facilities

Resources and Capabilities

Tangible Resources• Organizational

– Strategic planning process

– Innovative evaluation and control systems*

Resources and Capabilities

Intangible Resources• Human capital

– Strong bench strength

– Widespread involvement & knowledge transfer

– Trust and commitment

• Innovation– Strong innovation capacity*

• Reputation– Brand name

– #1 natural food chain

Resources and Capabilities

Organizational Capabilities• Highly adaptive business

model• Leveraging supplier

relationships• Outstanding customer

service• Ability to hire, motivate

and retain human capital

Sustainable Competitive Advantage?

• Challenging because….– Exit barriers are low– Market is being infiltrated by lower priced, more

readily available stores– People looking for one stop shop– Direct competitors are making it even harder for

Whole Foods to differentiate themselves

Stakeholder Agenda

Business Strategy

• Expansion– Whole Foods is expanding internationally– Expects to have a sizeable market position in Europe

20 years from now– Hopes to become a global company

• Roping in customers– Captive banners– Giving customers a sense of “virtue”

Business Strategy

• Information sharing– Collects and distributes sensitive information to

everyone.

• Community giving– Donate food and money to fight poverty worldwide

Organizational Strategy

• Caps on executive compensation– No exec. makes more than 14x the employee

average

• Teams– Whole Foods is committed to self managing teams

which do their own hiring and scheduling– To be hired, individual must be voted on by 2/3 of

their team during “trial” period

Ethical Issues

• Treatment of Animals– Existing standards for humane animal treatment can

always be improved– Thrives to help animals flourish and do it in a way that

is cheap enough for customers to buy

• 14 page code of conduct– Addresses expected and desired employee behavior

Financial Analysis

• NASDAQ since 1992• Retail Grocery Business segment• Ranked 26th according to revenue• 2008 Sales just under $8B• Acquisitions $700M loan

Financial Analysis

Financial Analysis

Ratio Measures 2008 2007 2006 Kroger Safeway Industry

Net Profit MarginNet profit / Revenues

Profitability1.4% 2.8% 3.6% 1.71% 2.16% 3.65%

Return on Equity (ROE)Net Income / Total Equity

Profitability7.75% 12.56% 14.76% 24.40% 13.29 17%

Current RatioCurrent Assets/Current Liab.

Liquidity.93 .85 1.22 .94 .88 1.15

Total Debt/ Equity ratio Debt/EquityFunding .62 .52 .01 1.56 .81 N/A

Interest Coverage Debt Mgnt 6.49 70.69 9,969.03 5.05 5.17 N/A

Financial Analysis

        Less than 1   1-3   3-5   More than 5      Total   Year   Years   Years   Years  Long term debt obligations   $ 897,698  $ —  $ —  $ 897,698  $ — Estimated interest on long term debt obligations

  126,956  40,591  64,010  22,355  — Capital lease obligations (including interest)

  41,125  2,089  4,179  4,179  30,678 Operating lease obligations(1)   6,017,763  261,467  627,483  641,428  4,487,385 Total   $ 7,083,542  $ 304,147  $ 695,672  $ 1,565,660  $ 4,518,063 

The following table shows payments due by period on contractual obligations as of September 28, 2008 (in thousands):

Due before Sept 28, 2009

Due After 9/2009 and Before 9/ 2011

Due 9/2011 and 9/2013

Due After 9/2013

Net income   $ 114,524  $ 182,740  $ 203,828

2008 2007 2006

Glimmers of Hope

• Rise in same store sales

• Customer attrition over

• Beat profit expectations

• Shares have soared

• Attacking their

inefficiencies