Whole Foods Market in London

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Case Study Whole Foods Market in London 1 Case Study Whole Foods Market in London On June 4, 2007, John Mackey, founder and CEO of Whole Foods Market, looked out the airplane window headed towards London with a mixture of eagerness and anxiety. Reviewing his notes, he pondered this critical moment: 48 hours until the debut of the first Whole Foods Market in London. Over the past few decades, Mackey saw his unique concept of an organic supermarket chain transform the food retail industry in North America. Whole Foods Market led the organic craze sweeping the continent and reaped high profits as a result. By 2007, Whole Foods was the leader of the industry and a symbol of high quality and healthy living. Mackey aspired to expand the chain beyond its continental borders. Mackey looked towards global expansion and identified London as an attractive market opportunity. Now headed for the opening of the 80,000 square foot outlet in Kensington neighborhood, Mackeys mind was filled with doubts. Would British consumers accept or reject the Whole Foods Market experience in comparison to established UK competitors? Would a successful opening bring opportunities for more stores and supplier relationships? Would the UK be the end of European expansion? These questions remained unclear as Mackey sat patiently, debating the future of his beloved company. Whole Foods Market History From its humble beginnings to its status as market leader, Whole Foods Market had taken an unconventional path in food retailing. Texans John Mackey and girlfriend Renee Lawson opened the small natural foods store SaferWay in 1978 as a part of a hippie college dream, later merging with Clarkson Natural Grocery. The first official Whole Foods Market opened in September 1980 in Austin, Texas. At the time, the natural foods industry in the United States was virtually none existent with less than a half dozen competitors. With 19 employees and 12,500 square feet of store space, Whole Foods Market was larger than industry standards from the beginning. This case was written for ESADE Business School by exchange student Elizabeth Yurkevicz under the supervision of Associate Professor Josep Franch and it is entirely based on published sources. The authors developed this case for class discussion rather than to illustrate either effective or ineffective handling of the situation. 2007 ESADE Business School. Last revision 2012. Case Study Whole Foods Market in London 2 Whole Foods Market grew via mergers and acquisitions of local natural food stores around the country (see Exhibit 1 for full history of acquisitions). The companys expansion plans were focused on strategic regional locations around major metropolitan and urban areas. Whole Foods Market expanded internationally in 2002 with the opening of a store in Toronto (Canada). In 2003, Whole Foods Market became North Americas first certified organic grocer. Whole Foods Market in 2007 Whole Foods Market had grown to become the worlds leader in natural and organic food retailing. In 2006, Whole Foods Market earned $203.8 million in profits on sales of $5.6 billion (see Exhibits 2 and 3), becoming the 4th largest US supermarket chain and the 5th most valued US public retailer. With 196 stores across North America (see Exhibits 4 and 5 for detail of store locations), each store averaged 34,000 square feet in size and $31 million in annual sales. For the past ten years, Whole Foods Market had also placed in the top 50 of Fortunes 100 Best Companies to Work For, most notably ranking #5 in 2007. Mackey expected to reach $12 billion in sales by 2010, by adding 25-30 new locations each year. The Whole Vision From the start, Whole Foods Market had been driven by one mission, defined by its slogan: Whole Foods, Whole People, Whole Planet. The company was committed to selling the highest quality products from local and international suppliers. Whole Foods Market believed food in its purest state was the most nutritious and most flavorful. Whole Foods Market maintained strict standards which certified organic quality, defined as: Carefully evaluating each and every product. Featuring foods that were free of artificial preservatives, colors, flavors, sweeteners, and hydrogenated fats. Being passionate about great tasting food and the pleasure of sharing it with others. Being committed to foods that are fresh, wholesome and safe to eat. Seeking out and promoting organically grown foods. Providing food and nutritional products that supported health and well-being. Whole Foods Market offered a wide variety of natural products and services to fulfill this philosophy. Their product categories encompassed grocery, bakery, body care, floral, household items, meat and poultry, nutritional supplements, pet products, prepared foods, produce, seafood, specialty (beer, wine, and cheese), coffee, textiles, and services such as catering and cooking instructions. They featured private-label brand lines such as 365 Everyday Value, 365 Organic, and Whole Foods Premium (see Exhibit 6). Private labels made up 1,900 SKUs at Whole Foods Case Study Whole Foods Market in London 3 Market stores and accounted for 17% of grocery and whole body sales. Each store focused on perishable foods, which accounted for two thirds of annual sales. Whole Foods Market was dedicated to forming lasting relationships with their 42,000 employees or team members. The company recognized team members were key to success and thus, promoted mostly from within the company. No executive could earn more than 14 times the employee average. Recently, Mackey cut his annual salary to $1, claiming that he earned enough money. In addition to fair wage practices, employees were offered stock options, purchase plans, and educational seminars on nutrition and health. Employees were encouraged to meet regularly in self-directed teams and were paid to volunteer in their free time. Finally, Whole Foods Market was committed to making the world a better place by supporting sustainable agriculture and local communities. They strove to eliminate the use of pesticides, maintained fair treatment of wildlife, and practiced recycling. Not only a third of Whole Foods Markets stores composted their waste, but many used solar power and recycled materials for store layouts. The company had created charities such as the Animal Compassion Foundation and the Whole Planet Foundation, for providing funding to impoverished countries and animal welfare. Whole Foods Market supported the local communities around each store by getting involved in food banks, volunteer organizations, and neighborhood events. Whole Foods Market contributed 5% of their total profits to non-profit organizations each year. Purchasing and Distribution Whole Foods Market bought products from a combination of local, regional, and international wholesale vendors, specializing in reputable small-scale suppliers. All suppliers were subject to quality-driven, organic standards. Whole Foods Markets own distribution empire in North America included 9 regional distribution centers, 11 bake house facilities, commissary kitchens, 3 seafood processing facilities, produce procurement centers, a national meat purchasing office, and a specialty coffee procurement and roasting facility. Positioning and Marketing Whole Foods Market had been one of the first niche players in the organic foods industry. A focus on perishable, local foods had allowed Whole Foods Market to differentiate stores from conventional supermarkets and to attract a broader customer base, according to the corporate annual report. Whole Foods Market justified quality with a premium pricing strategy, selling their products at prices 35% higher than conventional supermarkets. The company supported higher prices with aspirational positioning, as consumers were willing to pay a premium for healthful, organic products and unparalleled customer service. Premium pricing combined with Case Study Whole Foods Market in London 4 massive corporate expansion led to negative nicknames such as Whole Checkbook and the Wal-Mart of wheat-germ, according to an article published at The Observer. On the positive side, Whole Foods Market positioned itself as a lifestyle brand and as more than just food. Along with the companys mission-driven values, each Whole Foods Market store had a neighborhood feel that aimed to create a third place between home and office, where consumers could feel comfortable shopping and sharing food. North American stores were located in major shopping centers in upscale suburban and urban locations, where consumers could afford to pay for quality luxury goods. Going to a Whole Foods Market store was an experience in itself with soft lighting and an attentive staff (see Exhibit 7). Upon entering, consumers were astounded by the colorful array of fresh produce, informative displays, free samples of new products, and delicious smells wafting from a live kitchen. Whole Foods Market went beyond the limits of a normal supermarket by offering a talking store in which consumers could learn about organic foods and environmental issues through interactive brochures, weekly cooking classes, and themed food festivals. Because the appeal of Whole Foods Market came from the in-store experience, Whole Foods Market spent less on traditional advertising than other chains. They allocated 0.4% of total revenues to the annual marketing budget. To generate buzz and excitement in communities where new stores opened, Whole Foods Market focused its marketing budget on local advertising and publicity for store openings. Whole Foods Market also spent on nation-wide public relations campaigns to maintain a socially responsible image. In-store marketing included signage and special events such as fairs, product samples, classes, and tours. To raise brand awareness outside of stores, Whole Foods relied on word-of-mouth recommendations and customer testimonials from in-store experiences. Whole Foods Market aspired to continue high growth in spite of market leadership. Their ultimate goal was to become an international brand synonymous with not just natural and organic foods, but also with being the best food retailer in every community in which we are located, as stated in the annual report. An Eye for Britain As the company grew larger in North America, executives searched for opportunities in new markets. Whole Foods Market expressed interest in the British market with their purchase of the UK natural food chain Fresh & Wild in January 2004, comprised of 7 stores, a central kitchen, and warehouses. The chain was popular in London due to its friendly and informative style of retailing. Critics believed Whole Foods Market acquired this company to obtain a firsthand glimpse into the British market and test the water before opening a main outlet. The chain had succeeded due to a large base of loyal customers and a reputable brand image in the UK. Case Study Whole Foods Market in London 5 The British market for organic foods had become more attractive in the past decade. Similar to the US, organic food was the fastest growing sector in food retailing. The UK market for natural foods had grown by 50% in the past 4 years as consumers became more health conscious and globally aware. Recent food scares, such as mad cow, salmonella, and bird flu, had led to higher concern with food safety ethics (see Exhibit 8). The organic craze was spearheaded by Prince Charles, who advocated natural farming methods and a ban on genetically modified foods. Mintel estimated that by 2011, the UKs organic and natural food market would be worth more than $3.8 billion. The British government supported the organic movement by aspiring for 70% of domestically sold organic food to be produced within the UK by 2010, as published in the New Statesman. Competitive Landscape in the United Kingdom The European food retail market was dominated by European players (see Exhibit 9) and some of its trends were somewhat different from the trends observed in the United States (see Exhibit 10). The UKs food retail industry was the second largest market in Europe after France (see Exhibit 11), claiming 19.4% of the total European industry value and a growth above 3% (see Exhibit 12). Supermarkets accounted for two thirds of the UK food retail market, making this the preferred retail channel for selling food (see Exhibit 13). However, other retail forms, such as convenience stores, had gained popularity due to governmental restrictions on land use by major chains. Another important aspect of the UK food retail industry was the proliferation of private label products by food chains. The penetration of store brand products in the UK was the highest in Europe, according to Datamonitor. All the major supermarket chains offered their own premium, health, and childrens line of private products (see Exhibit 14) to adapt to increased consumer interest in cooking and food preparation. Despite attempts, major chains had struggled with organic lines due to fragmented suppliers and difficulties in maintaining organic standards. Instead of starting from scratch, stores had acquired niche brands that served the organic market. Other trends included an increase in fair trade offerings and expansion into non-food concept stores. The UK supermarket industry was extremely competitive and concentrated, with the four major grocery chains Tesco, ASDA, Sainsburys, and Morrison. In 2007, these four major players controlled 75% of the domestic market worth 125 billion pounds, equivalent to $246 billion. Reports noted that 90% of the urban population in Britain had access to three or more large supermarkets within 20 minutes of driving. Even the UK was not the most concentrated market in Europe (see Exhibit 15), the dominance of such major players had come under the question of governmental authorities. All four chains were being investigated for the third time in six years Case Study Whole Foods Market in London 6 by a Competition Commission after complaints from local farmers and independent grocers of monopolistic practices, such as predatory pricing and eliminating smaller competitors (see Exhibits 16 to 18). According to an article published in The Glasgow Herald, consumers have to start talking about a moratorium on changing laws so that local communities can stop supermarkets. As it is, if we keep going in the direction we are headed in, we're going to end up with the retail equivalent of a one-party state Tesco As Europes second largest food retailer (see Exhibit 19), Tesco led the UK market with a 30% share of the UK grocery market and $83 billion (43 billion GBP) in worldwide profits. The companys 2,318 locations dominated in two-thirds of UKs postal code areas and had a higher market share than ASDA and Sainsburys combined. Founded in 1919 by Jack Cohen in East London, Tesco remained consumers preferred brand due to quality, convenience, and good service. Tesco had adapted to the competitive market by expanding into non-food areas, such as clothing, electronics, and financial services. The company operated in 13 countries outside of the UK and offered multiple trading formats, including Tesco supermarkets (averaging 31,000 square feet and located in suburbs or large towns), Tesco Express (neighborhood convenience stores), Tesco Extra (103,000 square foot hypermarkets), Tesco Metro (central convenience stores), and online grocery delivery (tescodirect.com and tesco.net) (see Exhibit 20). Tescos positioning revolved around the slogan Pile it high, sell it cheap, emphasizing a lower pricing strategy than competitors. However, the company strived for an all inclusive offer where upper, middle and lower income consumers could shop in one store. Since 1995, Tesco had operated a loyalty program called Tesco Clubcard that had gained over 11 million members. Cardholders could earn points for coupons, discounts, and free gas. Tesco pioneered the phenomenon of private label products in the UK, with three ranges called economy/value, mid and finest, according to Datamonitor. Tescos own products accounted for 50% of total product sales. Tescos other lines included Healthy Living (lower fat and lower sugar diet products), Organic (range of organic foods, including non-food items), Wholefoods (natural and unprocessed products), and Best of British (local specialties). Another project for Tesco had been their expansion into locally produced products such as LocalChoice milk and contributing 1.9% of pre-tax profits to local organizations. Tesco was aware of Whole Foods Markets entry into the British market and planned to respond with an aggressive entrance into the US by the end of 2007, starting in western states such as California under the brand name Fresh and Easy Neighborhood Market. Their pilot store in Phoenix (Arizona) would be about 10,000 square feet, smaller than an average American supermarket. The company said they aimed to give Americans a faster, easier shopping experience, as reported by Agence French Presse. Case Study Whole Foods Market in London 7 ASDA In 2007, the supermarket chain ASDA had a 15% market share of the UK retail grocery market, being number 2 behind Tesco. Owned by the American company Wal-Mart, ASDA operated only in the UK with 243 super centers, 37 supermarkets, an online retail store and financial services. The chain offered food, clothing, and general merchandise at Wal-Marts famously low prices. Private brand accounted for 40 to 50% of total chain sales, according to Mintel. ASDA recently opened ASDA Essentials, a discount store offering 95% of its products as private labels. The company also launched ASDA Living, a non-food lifestyle store selling general merchandise such as clothing, electronics, health and beauty items. ASDA Living featured caffe Ritazza coffee shops in some locations. ASDAs marketing was done through advertising campaigns which emphasized their position as the lowest priced British supermarket. Each store was encouraged to support one local charity chosen by store employees. Sainsburys Sainsburys controlled a 15% market share of the UK retail grocery market. The company was comprised of Sainsburys Supermarkets, and Sainsbury Bank (financial services sector). Retail formats included 455 regular supermarkets with an average size of 35,000 square feet and 297 Sainsburys Local (convenience stores) (see Exhibit 21). About 50% of the 50,000 of products offered in Sainsburys were store brand. Product lines included Basics (economy range of 500 products), Taste the Difference (premium food), Be Good to Yourself (reduced calorie and fat diet products), Sainsburys Organic (500 lines produced without pesticides or fertilizer), and Fair Trade. Sainsburys spent on advertising campaigns which revolved around a slogan such as Try something new today. Sainsburys had used local chefs such as Jamie Oliver as spokespersons in their radio and television advertisements and in-store promotions. To facilitate buying local and regional products, Sainsburys arranged competitions in communities to identify the best suppliers. In addition, Sainsburys led retail chains in terms of corporate generosity by contributing about 7% of pre-tax profits to local charities, according to company sources. Marks & Spencer Marks & Spencer was one of the most widely recognized chains in the UK with 450 locations and 12.5 million square feet of selling space. In addition to being the largest clothing retailer, the companys food retail segment had become a multi-billion pound business. The retail chain sold food in their flagship stores as well as in 187 concept stores called Simply Food located in railway and gas stations such as BP. Founded in 1884, Marks & Spencer had made Case Study Whole Foods Market in London 8 its reputation by selling premium products made locally, dubbed British Quality Goods. Unlike close competitors, Marks & Spencer carried 100% of its products as private store brands. Products were also available on the companys online retail store through an agreement with Amazon. The companys food business focused on four areas: fresh, natural and healthy food, special celebration products, ready made meals and everyday food. Marks & Spencer sub-brands included Eat Well (healthy foods with no artificial flavors, colors or sweeteners) and Marks & Spencer Cook! (additive-free raw foods for consumers to prepare). The company had removed hydrogenated fats from 90% of their products and was looking to do the same with salt in the future. The company did not engage in traditional advertising expenditures. Rather, they built brand awareness through reputation and word-of-mouth. The company focused on corporate responsibility by promoting a link between its sourcing policies and sustainability. Their recent marketing campaign entitled Look Behind the Label was introduced in 2006 to raise awareness of their fair-trade and environmentally friendly procedures. Marks & Spencer recently underwent a campaign for a balanced lifestyle for its consumers by hiring in-store nutritionists. The company contributed 1.5% of pre-tax profits to local charities. Decision to Enter London In November 2006, Whole Foods Market decided to open their first brand name outlet in Londons neighborhood of Kensington. The location on High Street in an old department store building was chosen based on the neighborhoods reputation for upscale shopping and high-traffic visibility. The 3 story, 80,000-square foot store would be the largest food store in Londons center, according to an article published at The Guardian. The retail outlet would feature an in-house bakery, chocolate shop, and restaurants in addition to the high level of services offered by any Whole Foods Market in North America. Whole Foods Market planned to establish relationships with British suppliers in order to successfully blend in with the local market. Rick Bonin, regional vice-president for Whole Foods Market in Britain, said: "Whole Foods Market will feature the freshest and finest natural and organic offerings, with a focus on procuring foods from local growers, food artisans and manufacturers". Whole Foods Market in London planned also contribute heavily to the local community by "sponsoring local events, donating food and money to local causes, and providing volunteer opportunities for team members". The Whole Foods Markets store concept should be adapted to fit local British tastes and habits. Billboards around the construction site had gained publicity and public interest (see Exhibits 22 and 23), especially with their slogan Its Not Something We Do, Its Everything We Do. One of Whole Foods Markets vice presidents on the London branch, David Doctorow, summarized Case Study Whole Foods Market in London 9 the companys marketing techniques for the opening when he commented: We want everyone to be wowed at the start. It will be unlike any food shopping experience the UK has seen to date. Signs of Trouble Despite an attractive market opportunity and the expertise and managerial competencies, Whole Foods Market would have to account for the reactions of all involved parties. Competitors were estimated to have a five year head start on developing natural products and finding organic suppliers over Whole Foods Market. Local supplies of milk and organic produce had become hard to secure, even for the countrys recognized chains. Suppliers might be unwilling to establish relationships with the company due to their limited purchasing power in Britain in comparison to giants such as Tesco. In combination with Whole Foods Markets unknown brand name, a lack of strategic suppliers could be detrimental to the companys market entry. Competitors had not ignored the threat of Whole Foods Market. Tesco had taken pre-emptive actions by copyrighting the Whole Foods brand name in Britain for one of their private brands. Whole Foods Market could not legally use this name on any store-branded products. Tescos legal action could harm Whole Food Markets ability to gain brand awareness. In addition to that, Tescos tendency to engage in price wars could be extended to their organic lines in the immediate future. All of these problems and concerns occupied Mackeys thoughts as the plane touched down at London Heathrow International and started taxing towards the terminal. How would UK consumers perceive Whole Foods Market retail concept? Would Whole Foods survive in the ferociously competitive UK market? Would this be the end or the beginning of Whole Foods international expansion in Europe? Case Study Whole Foods Market in London 10 Exhibit 1: Whole Foods Market History of Acquisitions Year Natural Food Chain Acquired Location1986 Bluebonnet Natural Foods Grocery Dallas, Texas1988 Whole Foods Company New Orleans, Louisiana1991 Wellspring GroceryChapel Hill and Durham, North Carolina1992 Bread & CircusMassachusetts and Rhode Island1993 Mrs. Goochs Natural Food Markets Los Angeles, CaliforniaBread of Life San Francisco, CaliforniaUnicorn Village South FloridaOak Street Market Evanston, Illinois1996 Fresh Fields MarketMajor Cities East Coast and MidwestBread of Life FloridaAmrion, Inc. Boulder, ColoradoThe Granary Market Pacific Cove, CaliforniaAllegro Coffee Company ColoradoThe Merchant of Vino Detroit, Michigan1999 Natures Heartland Boston, Massachusetts2000 Food 4 Thought Natural Market Sonoma County, California2001 Harrys Farmers Market Atlanta, Georgia2004 Fresh & Wild United Kingdom19951997 Source: WholeFoodsMarket.com Case Study Whole Foods Market in London 11 Exhibit 2: Whole Foods Market Summary of Financial Information Source: Whole Foods Market 10-K 2006 Exhibit 3: Whole Foods Market Store Growth (2002-2006) Source: Whole Foods Market 10-K 2006 Case Study Whole Foods Market in London 12 Exhibit 4: Map of Whole Foods Stores Source: Whole Foods Market 10-K 2006 Exhibit 5: Locations of Whole Foods Market Stores as of September 2006 Source: Whole Foods Market 10-K 2006 Case Study Whole Foods Market in London 13 Exhibit 6: Various Logos and Brands Used by Whole Foods Market in North America Whole Foods 365 Organic Store Brand Other Whole Foods Private-Brands and Logos Source: WholeFoodsMarket.com Case Study Whole Foods Market in London 14 Exhibit 7: Photos of Typical Whole Foods Market in US Source: WholeFoodsMarket.com Case Study Whole Foods Market in London 15 Exhibit 8: Changing UK Consumer Attitudes to Food (2001-2005) 2001 2003 2005 2001-2005 (%) (%) (%) (% change)Any Agree: It's worth paying more for organic food 25.0 26.1 33.2 +8.2 I buy fair trade products when available 25.5 28.2 34.4 +8.9 I don't have time to spend preparing and cooking food 21.3 18.8 15.2 -6.1 Base: Adults aged 15+ Source: Mintel US vs. European Retailers Exhibit 9: Europe vs. USA, Top Ten Retailers by Sales (2002), in millions. Europe USA Retailer Net sales Retailer Net sales Carrefour (France) 58,709 Wal-Mart USA 199,623 Tesco (UK) 38,623 The Home Depot 61,578 Intermarch (France) 38,400 The Kroger Co 54,720 Rewe (Germany) 29,970 Target Corporation 46,429 Edeka Group (Germany) 29,545 Albertsons Inc 37,664 Aldi (Germany) 27,125 Sears Roebuck and Co 34,461 Metro Group (Germany) 27,100 JC Penney 34,197 Auchan (France) 27,036 Costco USA 34,159 Schwarz (Germany) 23,200 Kmart 32,521 J Sainsbury (UK) 22,658 Safeway (USA) 30,576 Total of above 322,366 Total of above 565,928 As % of all European retail sales 16.8% As % of all US retail sales 22.4% Source: Mintel US vs. European Retailers Case Study Whole Foods Market in London 16 Exhibit 10: Summary of Recent Trends in European and US Retailers EUROPE USA High level of international development, particularly in grocery, clothing and electrical sectors. Limited international development Continued decline of independent stores. Continued decline of the mom and pop stores Ongoing march of the multiples has led to a sense of sameness in many but not yet all countries. Ongoing march of the multiples has led to a sense of sameness in many retail centres. Popularity of hypermarkets spread from France into other parts of Western Europe and to Eastern Europe. Superstore the favoured format in the UK. Rapid growth in popularity of supercenters and warehouse clubs. Grocery operators generally among the strongest performing retailers in Europe. Grocery operators continue to fare poorly against the supercenters and warehouse clubs. DIY and health and beauty sectors strong performers across much of Europe. DIY and health and beauty sectors strong performers. Large number of privately run companies, as well as voluntary groups, buying groups, and co-operatives in continental Europe. Leading retailers are mostly publicly quoted companies. Continued supremacy of discount store chains in Germany but less pronounced in other parts of Europe Supremacy of the discount store chains. Developing convenience store sector Developed convenience store sector. Renaissance of traditional department stores in parts of Europe, most notably the UK. Struggling traditional department stores looking to reposition/reinvent themselves. Mainstream clothing specialists arguably struggling more than electrical and DIY specialists in face of growing competition from hypermarkets/superstores. Problems for traditional, full-price clothing chain stores. Clothing market leader (Marks &Spences) recovering after three years of falling profits. Clothing market leader (GAP) recovering after two years of falling profits. Some weakening of category-killer superstores. Some weakening of category-killer superstores. Growth of B2B and B2C e-commerce sales Growth of B-2-B and B-2-C e-commerce sales. Growth of bricks and clicks Growth of bricks and clicks. The customer is king, staying in tune is vital The customer is king, staying in tune is vital. Consumers have become increasingly demanding. Consumers have become increasingly demanding. Relevant fast fashion is a key feature of the clothing market. Relevant fast fashion is a key feature of the clothing market. Big advances in logistics and management information as technology costs have fallen Big advances in logistics and management information as technology costs have fallen Entertainment an increasingly important part of the retail environment Entertainment an increasingly important part of the retail environment Major shopping centres still draw big crowds Dwindling appeal of the major mall Growing factory outlet mall sector Mature factory outlet mall sector Source: Mintel US vs. European Retailers Case Study Whole Foods Market in London 17 Exhibit 11: European Sales by Food Retailers (1998-2002), in billion 1998 1999 2000 2001 2002 % growth (1998-2002) Latvia 0.5 0.7 0.8 0.9 1.0 104.1% Lithuania 1.1 1.1 1.5 1.7 1.9 73.1% Hungary 4.5 4.9 4.9 5.8 7.1 57.0% Estonia 0.5 0.5 0.6 0.7 0.8 56.3% Czech Republic 4.4 4.4 4.9 5.6 6.3 45.0% Bulgaria 1.4 1.4 1.7 1.8 2.0 43.2% Ireland 9.6 10.3 11.2 12.2 13.0 34.8% Norway 11.0 11.7 12.3 12.9 14.5 32.1% Slovak Republic 3.6 3.8 4.2 4.2 4.8 30.7% Poland 29.7 33.3 35.4 39.7 38.8 30.6% UK 118.7 127.1 141.6 148.4 153.5 29.3% Spain 55.6 58.4 62.4 66.6 70.5 26.8% France 149.1 158.6 166.9 173.7 184.3 23.6% Greece 11.3 11.7 12.2 13.1 14.0 23.4% Portugal 10.0 10.7 11.3 11.9 12.1 21.0% Netherlands 23.5 24.2 25.3 27.0 28.1 19.6% Switzerland 21.7 22.6 23.5 24.4 25.5 17.6% Italy 77.7 81.8 84.9 87.7 91.2 17.4% Luxembourg 1.2 1.2 1.3 1.4 1.4 15.2% Romania 3.5 3.0 3.5 3.8 4.0 12.7% Denmark 10.6 10.8 10.9 11.4 11.8 11.8% Finland 7.7 7.8 8.2 8.4 8.5 10.9% Sweden 16.9 17.5 18.8 18.0 18.7 10.7% Austria 11.7 12.0 12.5 12.2 12.9 10.5% Belgium 22.7 23.1 23.4 24.0 24.9 9.7% Slovenia 2.2 2.2 2.2 2.4 2.4 7.1% Germany 113.7 116.1 118.3 121.2 121.7 7.1% Total 724.1 761.0 804.6 840.7 875.6 20.9% Source: Mintel US vs. European Retailers Case Study Whole Foods Market in London 18 Exhibit 12: United Kingdom Retail Food Industry Value (2001-2005), in $ billion Source: Datamonitor Exhibit 13: UK Food Retail Market by Segmentation Source: Datamonitor Case Study Whole Foods Market in London 19 Exhibit 14: UK Supermarket Chains Private Label Brands (2007) Premium Health Economy Children OthersTesco Finest Healthy Living Value Kids OrganicWholefoodsNaturally GoodFree FromFair TradeSainsbury Taste the Difference Be Good to YourselfBasics Kids So OrganicASDA Extra Special Good for You! Smartprice Great Stuff GoCookMorrison The Best Eat Smart Bettabuy OrganicWaitrose Perfectly Balanced CookMarks & SpencerSpeciality Count on Us Eat Well for Kids Limited EditionCook!Simple OriginNutritionally BalancedSomerfield So Good Good Intentions Makes Sense Source: Mintel US vs. European Retailers Exhibit 15: Share of Top 5 Food Retailers by Country (2002) Top 5 food retailers share of all food retailers sales Sweden 98.0% France 61.1% Norway 90.8% Netherlands 55.0% Denmark 87.7% Belgium 51.2% Austria 85.8% Ireland 49.4% Finland 84.2% Czech Republic 49.4% Germany 77.9% Portugal 47.4% Switzerland 64.5% Spain 38.1% Hungary 64.4% Italy 30.4% UK 61.6% Greece 30.1% Source: Mintel US vs. European Retailers Case Study Whole Foods Market in London 20 Exhibit 16: UK Food Suppliers Main Customers Source: GFK Report for Competition Commission Case Study Whole Foods Market in London 21 Exhibit 17: Summary of Advantages of Smaller Customers for Grocery Suppliers Source: GFK Report for Competition Commission Exhibit 18: Summary of Disadvantages of Smaller Customers for Grocery Suppliers Source: GFK Report for Competition Commission Case Study Whole Foods Market in London 22 Exhibit 19: Top European Food Retailers by Sales and Market Share Rank CompanySales(in billion)Market share(in %)1 Carrefour 58.7 6.7%2 Tesco 38.6 4.4%3 Intermarch 38.4 4.4%4 Rewe 30.0 3.1%5 Edeka Group 29.5 3.4%6 Aldi 29.5 3.4%7 Auchan 27.0 3.2%8 Schwarz Group 24.8 2.8%9 J Sainsbury 22.7 2.6%10 E Leclerc 22.4 2.6%11 Wal-Mart Stores, Inc 21.4 2.4%12 Casino 18.4 2.1%13 Safeway Stores 13.7 1.6%14 Ahold Group 12.8 1.5%15 Systme U 11.6 1.3%16 Metro Group 11.0 1.3%17 Tengelmann 9.3 1.1%18 Migros 9.3 1.1%19 Coop Norden 9.2 1.0%20 Cora/Louis Delhaize Group 9.0 1.0%21 Coop Italia 8.7 1.0%22 Somerfield 7.4 0.9%23 Wm Morrison Supermarkets 6.8 0.8%24 Coop Schweiz 6.2 0.7%25 Dansk Supermarked 5.5 0.6%26 Laurus 5.5 0.6%27 Conad Group 5.3 0.6%28 Mercadona 5.3 0.6%29 Grupo Eroski 5.1 0.6%30 Marks & Spencer 4.8 0.6% Source: Mintel US vs. European Retailers Case Study Whole Foods Market in London 23 Exhibit 20: Tesco Store Data (2007) Source: Tesco.com Exhibit 21: Sainsburys Store Data (2007) 000 square feet +40 25-40 15-25 -15 TotalConvenience 290 290Supermarkets 169 166 93 51 479Total stores 169 166 93 341 769 Source: Sainsbury.co.uk Case Study Whole Foods Market in London 24 Exhibit 22: Advertisement for Whole Foods Market Opening in London Source: WholeFoodsMarket.com Exhibit 23: Photo of New Location in London Source: WholeFoodsMarket.com Case Study Whole Foods Market in London 25 Bibliography Arlidge, John. Peace, Love and Profit. Meet the Worlds Largest Organic Grocer. The Observer, January 29, 2006. Available at http://www.observer.co.uk Armstrong, Stephen. Make Way for Big Organic. New Statesman. April 2, 2007. ASDA Company Information. Available at http://www.asda.co.uk Britains Tesco to Launch US Retail Offensive. Agence French Presse. February 8, 2007. Devine, Cate. Which One Will Be the Future of Shopping? The Glasgow Herald. March 28, 2007. Food Retail in the United Kingdom. (May 2006). Datamonitor. Available at http://www.datamonitor.com Henderson, Damien. How Tesco Conquered the Entire Country. The Glasgow Herald. October 12, 2006. Katz, Gregory. Whole Foods Goes to London. The Houston Chronicle. March 11, 2007. Marks & Spencer Annual Report 2006. Available http://www.marksandspencer.com Norton, Kate. Whole Foods Prepares a British Beachhead. (November 9, 2006) Business Week Online. Available at http://www.businessweek.com/globalbiz/content/nov2006/gb20061108_440250.htm Renton, Alex. Ripe Target. The Guardian. March 27, 2007. Research on Suppliers to UK Grocery Market. Growth for Knowledge Report for Competition Commission. January 15, 2007. Sainsburys. Available at http://www.sainsburys.co.uk/home.htm Tesco Corporate Information. Available http://www.tesco.com US vs. European Retailers: A Strategic Comparison. Mintel. December 2002. Walker, Gaelle. Whole Foods Unveils Slogan for UK Assault. The Grocer. February 17, 2007. Wardell, Jane. UK Competition Watchdog to Analyze Local Supermarkets Competition. Associated Press London. January 23, 2007. Whole Foods Market Company Website. Available at http://www.wholefoodsmarket.com