Kyra Kane Emily Lospennato

Brett Simon Kate Sinervo

Ashley Waxman

CO 700 Final Project: Strategic Plan for Whole Foods Market

May 2, 2012

Presentation Outline

I.  History & Leadership

II.  Current Market Position & Competitors

III.  SWOT Analysis

IV.  Strategic Plan

V.  Conclusion

Market Position: Whole Foods History

•  Whole Foods Market was founded in Austin, TX, in 1980. •  One of the first to bring natural foods to a supermarket format. •  Original aim: A simple and relatable grocery store featuring “good,

wholesome food; not a ‘health food’ store filled with pills and potions” (Our History, Whole Foods).

•  Began as a merger between two smaller natural foods stores and owes its continued success to expansion through mergers and acquisitions.

•  While growth began in the South/ Southwest, by the mid-90s, Whole Foods had coast-to-coast reach.

•  The mid-2000s saw movement to international markets, Canada and the United Kingdom.

Market Position: Organic Food

•  Sales of organic food & beverages increased from $1B in 1990 to $26.7B in 2010.

•  Highest growth = organic fruits and vegetables. •  Organic food comprises 4% of all food & beverage sales in

the U.S. in 2010 (therefore, there is room for growth). •  Growth in organic food market has been steady: 20% per

year over last seven years.

Market Position: Whole Foods Today

•  The world leader in natural and organic foods. •  More than 310 stores in North America and the UK. •  62,000+ employees. •  Always room for expansion. •  A mission-driven company:

“Whole Foods – Whole People – Whole Planet.” •  Listed on FORTUNE’s list of the “100 Best Companies to

Work For,” for the last 15 years. •  Retail Innovator of the Year Award from the National

Retail Federation. •  20 years as a publicly traded company (NASDAQ: WFM).

Leadership

•  The Visionary (innovative community & environmental sustainability initiatives): Walter Robb, Co-CEO

•  Co-founder/CEO: John Mackey •  Chairman of the Board: Dr. John B. Elstrott •  Director: Gabrielle Greene

Core 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 and growth. •  Caring about our communities and our environment. •  Creating ongoing win-win partnerships with our suppliers. •  Promoting the health of our stakeholders through healthy

eating education.

Preview to Strategic Plan

•  Primary core value is producing people with high quality organic and natural products.

•  But, there is a stigma around Whole Foods that it is luxurious and expensive, out of reach of lower-income consumers.

•  This stigma is not true in that Whole Foods has its 365 Everyday Value brand which provides hundreds of commonly used products at reasonable prices.

•  To shed the stigma and promote the benefits of healthy eating to wider audiences, we propose Whole Foods Corner stores (WF Corner), bodega-like convenience stores for customers to purchase healthy alternatives to other convenience store fare. These stores would be located in densely populated urban areas.

Competitive Landscape

•  Whole Foods is the current market leader in the organic foods market.

•  While it would seem that Whole Foods’ major competitors would be other organic markets, research shows that large supermarket chains that reach into the organic grocery realm and undercut Whole Foods’ prices are the main competitors.

Competitive Landscape

Whole Foods’ three main competitors are Safeway, Kroger, and SuperValu.

Competitors: Safeway

•  4th largest traditional food retailer, after Wal-Mart, Kroger, and Supervalu.

•  1,725 supermarkets under nine brand names: Safeway, Von’s, Pavilions, Randalls, Tom Thumb, Dominick’s, Genuardi’s, Eastern, & Carrs.

•  Most stores are located in the western half of the United States and Canada.

•  Currently consolidating its 70 private label brands into 10 power brands, including O Organics.

Competitors: Kroger

•  Largest traditional grocery store in the U.S. & second-largest food retailer after Wal-Mart.

•  Operates 2,400 supermarkets. •  Sells food under 24 of its own brands in three tiers:

Private Selection, “banner brands,” and Kroger Value.

Competitors: SuperValu

•  Operates 1,161 retail food stores. •  Some of the brand names include: Acme, Farm Fresh,

Hornbacher’s, Jewel-Osco, Shaws, Shop ’n Save, & Star Market.

•  Acquired Albertson’s in 2006 which expanded its market into Boston, Chicago, Philadelphia, & Southern California.

•  17% of the products sold at Supervalu stores are private label.

Competitive Chart

Company  (Fiscal  Year)  

Comp  Sales  Growth  

Gross  Margin    

Opera;ng  Margin  

Net  Profit  Margin  

Capital  Expenditures  

Whole  Foods  Market  (2010)  

7.1%   34.8%   5.9%   2.7%   2.9%  

Safeway  (2009)  

(4.90%)   28.6%   (1.54%)   (2.69%)   2.08%  

Kroger  Company  (2009)  

0.90%   22.6%   1.42%   0.07%   2.99%  

SuperValu  (2009)  

(5.1%)   22.5%   2.96%   0.97%   1.70%  

Potential Competitors

For the purposes of this project, Whole Foods has several potential small supermarket and convenience store competitors. These competitors include 7-Eleven and The Fresh Market.

Competitors: 7-Eleven

•  National leader in convenience stores with 6,523 stores in the US and Canada, but also has stores all over the world.

•  7-Eleven was the first convenience store to be open 24 hours a day, sell fresh-brewed coffee in to-go cups, & have a self-serve soda fountain with several brands of soda.

•  Within the US, 7-Eleven sells the most USA Today newspapers, cold beer, bottled water, Gatorade, grilled hot dogs, and money orders.

•  One-third of 7-Eleven customers purchase foods to be consumed immediately.

Competitors: The Fresh Market

•  Headquartered in Greensboro, NC. •  Operates 115 stores in 21 states in the

Southeast and up the East Coast. •  Specialize in superior perishable groceries. •  Sells its own brand of products labeled as The Fresh

Market (T FM).

Competitive Landscape: Rationale

•  Our research shows there is a gap in the marketplace of a combination of affordable organic foods and convenience stores.

•  By filling this gap, we aim to reach an untapped audience, currently reached by 7-Eleven and other convenience stores, who are price-conscious or lead busy lifestyles (e.g., students, low-income urban households).

•  Whole Foods Corner Stores (WF Corner) would offer a an affordable outlet to grab a healthy bite on the go.

•  Rather than getting old, processed sandwiches or processed cereals from 7-Eleven, customers, can look to WF Corner for a healthy, quick alternative to meet their immediate grocery and on-the-go needs.

SWOT Analysis: Strengths

1.  Employee satisfaction – Whole Foods was ranked #24 on Fortune’s 2011 list of the “100 Best Companies to Work For,” and has been ranked on this list consecutively for 14 years. This supports one of our core values: “Supporting team member happiness and excellence.”

2.  Proven ability to weather economic strife – Despite the rocky economy, Whole Foods delivered 8.5% comparable store sales in 2011, the Company’s highest result in five years. The Company also increased sales by 12% and improved its operating margin to 5.4%.

SWOT Analysis: Strengths

3.  Excellence in Corporate Social Responsibility – Whole Foods has implemented a variety of platforms designed to give back to the community and improve sustainability. These include: 1) “The Whole Trade Guarantee,” which ensures that workers in developing countries are compensated fairly and are guaranteed suitable working conditions. 2) “Animal Welfare,” which is designed to improve the quality and safety of the meat and poultry sold in Whole Foods stores, and 3) “Eco-Scale,” a rating system, which allows customers to quickly identify a cleaning product’s ingredients and the impact it has on the environment.

SWOT Analysis: Weaknesses

1.  High prices – WF mostly sells locally grown and organic food products. Therefore, costs are significantly higher than at other grocery stores. Though the economy is recovering, many people are still looking to save money and may not have the means to shop regularly at our stores.

2.  Limited international exposure – WF has more than 310 stores in the United States, Canada, and the United Kingdom. This is limiting, as there are several other regions, especially in Europe, that would benefit from the products and services WF offers.

3.  Sustainability backlash – WF recently implemented a seafood sustainability plan, which bans gray sole and skate from all stores. Massachusetts fishermen (backed by Senator Scott Brown) are outraged by this policy, claiming WF is practicing forced “political correctness” rather than rational decision making. In April 2012, Senator Brown wrote a letter to WF asking to reverse the decision.

SWOT Analysis: Opportunities

1.  International growth – WF should seek opportunities in other countries, specifically wealthy regions in Europe. With social media platforms, such as Facebook, Twitter, and LinkedIn, WF could easily garner international excitement and enjoy immediate success overseas.

2.  Organic convenience stores - Smaller “bodega style” markets will appeal to students and individuals of lower socioeconomic status. The exclusivity of WF will be lessened and, as a result, the Company will reach a new, perhaps larger, customer base.

3.  Whole Foods Rewards – WF does not currently have a rewards program. WF could implement a customer rewards savings card, which will offer discounts and free products to loyal, repeat customers. These cards can be used at any Whole Foods, including the WF Corner stores.

SWOT Analysis: Threats

1.  Perishable foods - WF carries a significant amount of perishable food products. If such products are not sold in a timely manner, this could result in monetary loss.

2.  Unions - Unions may attempt to organize the Company’s team members. All WF team members are currently non-union. Occasionally, unions attempt to organize the team members, which can be detrimental to the Company’s financial positioning as well as overall employee morale.

SWOT Analysis: Threats

3.  Government regulations - Changes in government regulations could negatively impact the company. WF is responsible for complying with health and sanitation standards, appropriate food labeling, minimum wages, and licensing for the sale of food. A sudden change in such regulations could prevent new stores from opening or force existing stores to temporarily close.

4.  Health epidemic – A widespread health epidemic could negatively impact the company. WF is a place for people to gather, socialize, and enjoy food. In the event of a major health epidemic, customers may avoid visiting the stores.

Strategic Plan: Vision

•  Convenience stores to rival 7-Eleven-type stores & offer healthier, fresher, organic fare.

•  Prepared sandwiches, salads, wraps, boxed lunches, & drinks delivered every morning from local WF Markets.

•  Small organic produce, dairy, frozen foods, & pantry items sections.

•  Would be placed in five of Whole Foods’ top markets, which are densely populated major metro areas.

Strategic Plan: Vision

Stock  room,  offices,  etc.  

Welcome  

WF Corner Floor Plan: approx. 3,500 square feet

Strategic Plan: Step 1 – Mission Statement

Our mission is to expand Whole Foods Markets by opening three natural/organic convenience stores named WFC | Whole Foods Corner in each of five regional markets across the United States in 12 months to increase total sales by 15%.

Boston New York

Boulder/Denver

Los Angeles Chicago

Strategic Plan: Step 2 – Inventory

Clients – One of our core values is “satisfying and delighting our customers,” which we do with our pleasurable store experience, outstanding customer service, high quality standards, and differentiated product mix. However, there is a customer sector we have yet to reach. These elusive customers believe that natural, organic food is always expensive, and thus do not ever enter our stores. We plan to tap into this customer group in search of affordable whole food with our new line of convenience marts.

Strategic Plan: Step 2 – Inventory

Products & Services – Our current product offerings are of top quality and run the gamut from very expensive to affordable. We plan to fill our WF Express stores exclusively with our economical Whole Foods brand of natural and organic products, Whole Foods Market Brand and 365 Everyday Value. Our commitment to customer service is priceless and would flow to these convenience marts.

Strategic Plan: Step 2 – Inventory

Financial Performance & Operations

Retrieved from Whole Foods 2011 Annual Stakeholders Report.

Strategic Plan: Step 2 – Inventory

Financial Performance & Operations (2011) Consistent financial growth and revenue •  Net revenue = $10.1 billion •  Operating income = $548 million •  Operating margin = 5.4%

Consistent growth in visibility •  32 new leases signed

Strategic Plan: Step 2 – Inventory

Competitive Advantage – WF is the market leader in organic foods. WF has the inventory and established value product line to launch this plan without having to create new products from scratch. There is currently no national convenience store chain of exclusively natural/organic foods. Environment – Currently no organic food chain has the inventory of WF to successfully implement a plan of this magnitude.

Strategic Plan: Step 3 – Goals

Qualitative – ü  Garner a new customer following. ü  Teach the American public that eating healthy,

organic food does not have to be expensive or difficult.

Quantitative – ü  Increase total sales by 15%. ü  Successfully open 15 new convenience stores in five

markets, and after these stores have been open for one year, expand to five more markets.

Strategic Plan: Step 4 – Scenario Planning

1. Alienation of loyal customers Customers may find convenience stores cheapen the brand, tarnishing brand image. If customers feel the brand is cheapened, then WF will implement a customer loyalty rewards program for WF Market customers (excluding WF Corner).

2. Economic times Current recession may prove sales projections are too high. If customers feel WF Corner is too expensive, then WF will implement a coupon book or weekly-themed discounts, and potentially reevaluate pricing structure.

Strategic Plan: Step 4 – Scenario Planning

3. Overestimation of target customers’ use of convenience stores If customers are not as receptive as anticipated, then we can shift the focus onto prepared food items for healthy, on-the-go meals.

4. Disruption of relationships with loyal vendors/suppliers If vendors of WF Markets feel slighted by not being represented in WFC stores, then we will

A) reaffirm their value and success in WF Markets B) Show that WFCs are not a target market for them 5. Increased competition

A current Whole Foods Market competitor or a new, independent brand may create a competing organic convenience mart. If another competitor surfaces in the convenient organic foods marketplace, then we will put more effort into marketing, advertising, and PR strategies.

Strategic Plan: Step 5 – Action Plan

•  Goal: Garner a new customer following by successfully opening 15 new convenience stores in five regional markets within one year. Projected increase in sales=15%.

•  Strategies: Secure locations and complete construction in under one year. Transfer managers and employees from WF Markets to WF Corner. •  Implement advertising, marketing, and PR

campaigns – create social media profiles, online advertising, posters in public transit stops, & billboards.

Strategic Plan: Step 5 – Action Plan ROI for One Year

Total costs •  $150,000/store x 15 stores = $2,250,000 •  Additional costs (inventory, labor, etc.)/store x 15 stores

= $1,325,000 Total = $3,575,000

Total benefits •  Projected revenue/store x 15 stores

Total = $7,500,000

ROI = Net return (total benefits – total costs) Total costs

ROI = 109%

April May June July August September October

Present WF Corner to stakeholders

Scour locations to rent or purchase

Secure leases for all 15 locations

Start construction on locations

Develop marketing/advertising strategies

Plan design and layout of stores

Strategic Plan: Step 5 – Action Plan Timeline

November December January February March April

Stock non-perishable items

Opening week nationwide around Earth Day

Finish stocking/inventory Hire

managers

Hire employees

Implement advertising campaign

Finish construction

Establish connection with supplier/distributors

Strategic Plan: Step 5 – Action Plan Timeline

Strategic Plan: Step 6 – Communicate Plan to Team

•  Call executive staff meetings with corporate & regional managers to discuss any issues with WF Corner stores.

•  Arrange regional staff meetings with employees of each WF Market headed by all regional store leaders. •  For regions not implementing WF Corner stores, issue a memo

to employees about new expansion. •  Circulate literature about goals, objectives, operations, &

expected sales from new expansion. •  Beat the press: Our goal is to deliver the news to our

employees before they read about it in the media.

Strategic Plan: Step 6 – Communicate Plan to Team

•  Communicate with employees in each division about intraregional transfer opportunities, which may include promotions.

•  Provide online feedback forums for employees to offer suggestions and criticisms of new expansion.

•  Familiarize new WF Corner employees through staff meetings and literature concerning expectations, standards, and values of WF.

Strategic Plan: Step 7 – Execute

•  Open stores in all five regions during the week of April 22, 2013 (week of Earth Day).

•  Offer relevant Earth Day activities, including Bicycle Benefits, a toxic swap, & free samples.

•  In the words of WF team leaders, “Let’s have a great day!”

Thank you, and have a green day!

References

7-Eleven, Inc. (2012). About Us – Fun Facts. Retrieved from http://corp.7-

eleven.com/AboutUs/FunFacts/tabid/77/Default.aspx Agricultural Marketing Resource Center. (2012). Organic Food Trends.

Retrieved from agmrc.org/markets__industries/food/ organic_food_trends.cfm

Convenience Store News. (2010). Top 100 Convenience Stores. Retrieved from http://www.csnews.com/article- top_100_convenience_stores-953.html

Convenience Store News and Information. (2008). 7-Eleven Start-Up Costs. Retrieved from http://conveniencestorenews.wordpress.com/ 2008/09/08/7-eleven-start-up-costs/

Goodnough, A. (2012, April 21). A ban on some seafood has fishermen fuming. The New York Times.

Lipton, J. (2008, October 13). Gurus shop for value at Safeway. Forbes.com. Retrieved from http://www.forbes.com/2008/10/13/safeway-goodrich-dhi-pf-ii- in_jl_1013gurupicks_inl.html

Organic Trade Association. (2011). Industry Statistics and Projected Growth. Retrieved from www.ota.com/organic/mt/business.html

The Fresh Market. (2011). The Fresh Market: Experiencing the Food 2010 Annual Report. Retrieved from http://ir.thefreshmarket.com/ annuals.cfm

The Fresh Market. (2012). About Our Company. Retrieved from http:// www.thefreshmarket.com/Company/index.html

The Kroger Co. (2011). United States Securities and Exchange Commission form 10-K. Retrieved from http://www.sec.gov/Archives/edgar/ data/56873/000110465910017258/a09-36165_110k.htm

Safeway, Inc. (2008). Safeway 2008 Fact Book. Retrieved from http:// phx.corporate-ir.net/phoenix.zhtml?c=64607&p=irol-factbook

Safeway Inc. (2008). United States Securities and Exchange Commission form 10-K. Retrieved from http:// www.wikinvest.com/stock/Safeway_%28SWY%29/Filing/10- K/2008/F1267616#tx83929_2

SuperValu, Inc. (2007). United States Securities and Exchanges Commission form 10-K. Retrieved from http:// library.corporate-ir.net/library/93/932/93272/items/200164/ Final10K.pdf

Whole Foods Market, Inc. (2010). United States Securities and Exchange Commission form 10-K. Retrieved from http:// www.sec.gov/Archives/edgar/data/ 865436/000110465910059917/a10-19737_110k.htm

Whole Foods Market, Inc. (2010). Whole Foods Market 2009 Annual Report. Retrieved from http://www.wholefoodsmarket.com/ company/pdfs/ar09.pdf

Whole Foods Market. (2011). 2011 Annual Report. Retrieved from http://wholefoodsmarket.com/company/pdfs/ar11.pdf

Whole Foods Market. (n.d.). Our History. Retrieved from http:// www.wholefoodsmarket.com/company/history.php