Whole Foods Market

In

Argentina

Susana Perez

Dr. Predmore

International Marketing

April 25, 2015

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Table of Contents Argentina: Brief History and Facts…………………………………………………..……3 Whole Foods Market: History and Facts…………………………………………….……4 Social Transportation……………………………………………………………………..5

Communications………………………………………………………………..…6 Energy…………………………………………………………………………..…7 Political Major Political Trends………………………………………………………….…7 Government Structure, Organizations and Operation……………………………..8 Prevailing Political Philosophy……………………………………………………8 Principal Government Activities which affect Whole Foods……………………..9 Annual National Budget…………………………………………………………..9 Policies…………………………………………………………………………….9 Economic Gross National Product…………………………………………………………..11 Agricultural Production……………………………………………………….…11

Incomes and Standards of Living………………………………………………..12 Natural Resources………………………………………………………………..12 Target Market…………………………………………………………………….12 Competition Domestic Production……………………………………………………………..13 Legal Tariffs, Taxes, and Import-export regulations affecting the product…………….13 Currency and Exchange Control…………………………………………………14 S.W.O.T. Analysis……………………………………………………………………….15 Summary…………………………………………………………………………………16 Appendix…………………………………………………………………………………17 References………………………………………………………………………………..21

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Argentina: Brief History and Facts

“Land of Silver,” or better known as Argentina, is the second largest country,

after Brazil, within the South American continent. Its surrounding countries are Chile,

Bolivia, Paraguay, Uruguay and Brazil (National Geographic, n.d.). Before getting to a

place where it is now, it went through a lot of hardships.

Between the years of 1438-1535, it was known as The Inca Empire and when

civilization occurred. The first European to enter Argentina was Juan Diaz de Solis when

he was searching for gold in 1516. While many Europeans were arriving to the land, they

bought a variety of things with them including diseases. Many of the natives of the land

died due to these diseases. Buenos Aires, the capital of the country, was establish in 1580

as well as a trading post across the Rio de la Plata (the River of Silver) from Buenos

Aires by the Portuguese in 1680. Spain, in 1776, encircled all of its territories in South

America to create one large colony called the Viceroyalty of the Rio de la Plata.

Colonized by Spain and desiring independence, Jose de San Martin led the Argentinean

fight against them in 1812 and after 4 years on July 9, 1816, Argentina officially declared

their independence. Argentina becomes a republic after adopting a constitution in 1853.

A man named Juan Peron rises to power and is elected in 1947 as President and his wife

as First Lady of Argentina. His wife, Evita, dies of cancer and the army and navy rebel in

1955 and Juan Peron fleas the country. Juan marries his second wife, Isabel Martinez,

and is reelected as President again in 1973. Isabel becomes President when her husband

dies in 1974 (History Timeline of Argentina, 2015). From then until 1989, Argentina

suffers a lot of fighting, defeats, rejection and many changes that made the country how it

is today.

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Known as Argentines, the country has a population of 43,024,374 million people

as of July 2014. Out of those 43+ million people, the age structure is as follows and in a

population pyramid (Appendix 1): 0-14 years: 24.9% (male 5,486,989/female

5,233,968), 15-24 years: 15.7% (male 3,445,086/female 3,301,168), 25-54 years: 38.9%

(male 8,345,893/female 8,391,445), 55-64 years: 9.1% (male 1,895,965/female

2,017,330), and 65 years and over: 11.4% (male 2,036,545/female 2,869,985) Most of

the natives and people living in the country are white skinned (mostly Spanish and

Italian), 97%, mestizo (mixed white and Amerindian ancestry), Amerindian, or other

non-white groups is 3%. The labor force in Argentina is 17.31 million and by occupation,

5% is agriculture, 23% is industry and 72% in services. The dominate religion in

Argentina is Catholicism where 92% of the population is practicing this religion, only 2%

are Protestant, 2% Judaism and the other 4% practice other religions. The majority of the

population lives in urban areas, 91.6%. Some of the major urban areas are as follows:

Buenos Aires with 15.024 million people, Cordoba 1.504 million, Rosario 1.367 million,

Mendoza 999,000, San Miguel de Tucuman 899,000, and La Plata 835,000 (CIA, n.d.).

Argentina has a very high literacy rate compared to its surrounding countries. It has

97.9% of people who can read and write and an education index of 0.815 (Find the Data,

n.d.).

Whole Foods Market: History and Facts

Founded in 1978 in Austin, Texas by four local business people, the foods

industry was ready for a supermarket format. The founders were john Mackey, Renee

Lawson, Craig Weller and Mark Skiles. The first official Whole Foods Market was

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opened on September 20, 1980 with a staff of only 19 employees. It began expanding in

19484 from Austin to Houston and Dallas, Texas to later New Orleans in 1988. In 1989,

Whole Foods started expanding out in the West Coast with its first store in Palo Alto,

California. Through the 1990’s, Whole Foods experience a rapid growth by acquiring

with other natural foods chains.

Now, they have 416 stores; 397 in the U.S., 10 in Canada and 9 in the U.K.

Currently, they are employing more than 88,000 people and the average hourly wage for

full-time workers was $19.16 in fiscal year 2014. The have been ranked number 18 out of

100 for Best Companies to Work For, made the Fortune 500 list and are known as eighth

largest food and drug store in the U.S. (Whole Foods Market, 2015).

Social

a. Transportation

In Argentina, there are many different ways to transport people and products

throughout the country. They all come down to three modes of transportation: land, air

and water. Through land, it includes public transport like buses, railways, subways and

personal cars. Trucks mostly transport Argentina’s goods even though railways are

becoming increasingly important and popular in the transportation of domestic cargo.

Aerolineas Argentina is the most widely known national airline, which has been

operating for more than 60 years. It covers nearly all the domestic routes and has an

important continental and inter-continental network. There are numerous coastal and

international ocean and river companies that offer freight and passenger transport

(Argentina in Brief, n.d.).

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There exists a total number of 231,374 highways in Argentina as of 2014. There is

a greater number of unpaved roadways than there is paved. In 2014, there were 161,962

km of unpaved and 69,412 of paid roadways. For the railway miles, there is 36, 966 km,

have 1,138 airports within the country, 8 major seaports and river ports and have 11,000

km of navigable rivers (CIA, n.d.).

By having three different modes of transportation is an advantage for Whole

Foods. They are able to rely on different types of transportations and have more than one

option. There will always be a way for them to receive things and gather tons of fresh

produce all at a similar time. Since we plan to open a Whole Foods in Buenos Aires first,

we don’t run into much problems. As you can see in the map below (Appendix 2), all

railways met in the capitol ad pass through there. The same goes with the road map

(Appendix 3). All the major roads have an intersection with Buenos Aires. This is good

for Wholes Foods because other than having their products delivered by these modes,

there is constant movement by people going in and out of the city. It is home to 12.9

million people so of course there exists an extensive system of public transportation.

B. Communication

Whole Foods Market does not have one specific target market. They produce

healthy, organic products to everyone within the family household despite the age.

However, if there were to put a title, it would be anyone who wants a healthy/ fit lifestyle,

and adults who want to starts caring for themselves.

The way we will specifically target these people is through Argentina’s modes of

communication. They have four different types of modes, which are telephones,

broadcast media, internet hosts and internet users. With the telephone system, there

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exists 10 million main lines in use and the general assessment is that in in 1998 Argentina

opened its telecommunications market to competition and foreign investment

encouraging the growth of modern telecommunications technology; fiber-optic cable

trunk lines are being installed between all major cities; major networks are entirely digital

and the availability of telephone service is improving.

With broadcasting media, the government owns a TV station and radio network,

there are more than 2 dozen TV stations and privately owned radio stations, and there is a

high rate of cable TV subscriber’s usage. Argentina has more than 1,000 radio broadcast

stations and 486 television broadcast stations. There are 11.232 million internet hosts and

13.694 million internet users (CIA, n.d.).

Due to the large numbers of participative and active internet usage, one of the best

ways to reach our desired target market will be via social media and online ads. This will

allow use to have control of what we want to emphasize as a store. We want who ever is

on the other end to enjoy our pictures, posts, facts ad information about Whole Foods.

C. Energy

Argentina produces 123.2 billion kWh of electricity. It consumes 114.2 billion kWh

according to 2011. This entry consists of total electricity generated annually plus imports

(8.116 billion kWh) and minus exports (506 million kWh) (CIA, n.d.).

Political

a. Major Political trends

The main thing that affects Argentina is corruption. There is much bribery and not

enough strength to stand firm. Argentina has adopted many things from the U.S.

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Government wise, Argentina has a 3 branch government, it is republic, and the term of

presidency is 4 years. Because a lot of Argentina is structured like the U.S., Whole Foods

can easily adapt to its rules and regulations.

b. Government Structure, Organization and Operation

Like Washington, D.C., Buenos Aires is a federal district. It is home to the

President of the Republic and National Congress (Buenos Aires, 2000). According to the

information provided by the Central Intelligence Agency, Argentina has a constitution

and have civil law systems based on West European legal systems. As mentioned before,

they have the 3 branches of power, judicial, legislative and executive. Just like we have

Democrat and Republican parties, Argentina also has political parties and leaders.

Argentina is involved in many different international organizations like the World Trade

Organization, United Nations, World Federation of Trade Unions and Mercosur is a

regional economic group with the South American countries. Despite the fact that

Argentina and the U.S. are distant from each other, Argentina has as much pride as we

do. They have their national anthem, national symbol and flag description.

c. Prevailing Political Philosophy

Our marketing plans are very simple so they won’t get affected as much whenever

there is a political change. Whole Foods, at least here in the U.S., does minimal

advertising with posters, ads, or commercials. The way that they usually promotes is by

word of mouth. Their presence in social media will increase once we get in Argentina so

all the young adults can start noticing the brand. If there is a policy regarding social

media for companies in the future, then we might come to the conclusion to close all our

accounts and return to the ways in which it was done before.

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d. Principal Government Activities which affect Whole Foods

As of these days, the agricultural industry will be what will make Whole Foods

successful in Argentina. Unfortunately, Argentina’s agricultural sector has become very

aggressive with governmental control over the economy. Farmers, ranchers, growers and

producers are protesting primarily focusing on increased governmental intervention and

could take substantial action, such as taking to the streets or withholding soybean exports.

Unwilling to meet the protesters' demands, the government will likely try to fracture the

movement and increase government oversight over the agricultural sector (Growing

Unrest in Argentina's Agricultural Sector, 2013).

e. Annual National Budget (Totals)

There are two ways the Argentinian budget is broken down, revenues and

expenditures. It has a total of $117.2 billion in revenues and $130.5 billion in

expenditures (CIA, n.d.).

f. Policies

The labor force in Argentina is calculated to be 17.31 million as of 2014. By

occupation, it is divided into three sections. Agricultural labor is 5%, industry labor 23%

and services 72% (CIA, n.d.). The national minimum wage is set at $215 per month

which does not provide a living wage for a family. However, most workers earn

considerably more. The average salary in the formal sector is around $550 per month.

The legal workweek has a maximum of 48-hours, at 8 hours a day. Overtime hours

worked in excess of those limits are subject to overtime rates of pay. Children under the

age of 14 are legally prohibited from full-time work, as they are required to attend school.

However, child labor continues to be a problem, particularly in the informal or

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underground economy. Children between the ages of 14 and 18 are allowed to work, but

only for limited hours and only in a limited number of occupations, and only if they have

finished compulsory schooling, which usually ends at 15. There are extensive

occupational and health and safety laws but they are not fully enforced because the

government has inadequate resources.

Many leading mercantile firms have their head offices in Buenos Aires and

branches or agents in the other large cities. Department stores, retail shops, and specialty

shops in Buenos Aires are on a par with similar establishments in most world capitals.

The number of supermarkets and large outlets is increasing as consumers are becoming

accustomed to such establishments and are seeking the greater convenience and lower

costs that these places afford. Business hours are generally from 9 am to 6 pm, Monday–

Friday, with a one-hour lunch break. Stores are usually open from 9 am to 9 pm,

Monday–Saturday; banks are generally open on week-days from 10 am to 3 pm.

Travelers checks are not widely accepted at business establishments. Domestic demand

absorbs most of the nation's industrial production.

Agricultural products from Argentina, including animal feed, vegetable oil, oil

seeds, wheat, maize, and produce, make up the majority of the country's commodity

export market (31%). Other important exports are petroleum, and motor vehicles and

parts. The top 10 exports for 2000 are as follows: In 2005, exports reached $40 billion

(FOB—Free on Board), while imports grew to $29 billion (FOB). In 2004, the bulk of

exports went to Brazil (15.4%), Chile (10.4%), the United States (10.2%), China (8.7%),

and Spain (4.4%). Imports included intermediate goods, capital goods, consumer goods,

and fuels, and mainly came from Brazil (36.2%), the United States (16.6%), Germany

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(5.7%), and China (4.3%) (Argentina, 2007).

Economy

a. Gross National Product

As of 2014, Argentina has $927.4 billion. By the end use of composition,

household consumption had the highest percentage of 66.9%. Government consumption

is 16.3%, and a total of 17.3% of investments. For foreign trade, exports of good and

services are 16% but imports of goods and services is -16.6% as of 2014 (CIA, n.d.).

b. Agricultural Production

Although it has a low percentage in the labor force by occupation, agriculture is

the number one economic industry in Argentina. Some of the most popular products are

sunflower seeds, lemons, soybeans, grapes, corn, tobacco, peanuts, tea, wheat and

livestock (CIA, n.d.). Due to its richness in natural resources combines with its

geography and climate, it makes Argentina one of the best locations for forestry,

agriculture, fishing and mining. The annual production of cereals and a variety of seeds

surpasses 70 million tons. This is what makes Argentina the number one export of these

products. Where they gather their sheep is also known as one of the largest regions for

growing fruits and vegetables (Argentina in Brief, n.d.). Appendix 4 shows a map of

Argentina and how the different locations where the products are produced.

This is the main reason why we want to open a Whole Foods Market in

Argentina. Whole Foods is very committed to buying from local producers. They mostly

buy organic, high quality, natural food and like to keep them as fresh as possible. So why

not in a place where the majority of its economy and industry is agriculture? It will be

convenient for both, the country and the company, if they work together because they

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have the same product to sell.

c. Income and Standard of Living

The household income or consumption by percentage share is divided by lowest

10% and highest 10%. The lowest has an income of 1.5% while the highest has a

percentage of 32.3% (CIA, n.d.). The distribution of family income by the Gini Index is

45.8. This is very important when wanting to invest in another country. This shows us,

who want to open a Whole Foods in Argentina, the degree of inequality in the

distribution of family income in a country.

d. Natural Resources

Argentina is filled not only with an abundant products of agriculture, but it is also

rich with natural resources. Some of the most common ones are fertile plains of the

pampas, lead, zinc, tin, copper, iron ore, manganese, petroleum, uranium, and arable land.

14.36% of land used is arable land, which is land cultivated for crops like wheat, maize,

and rice that are replanted after each harvest (CIA, n.d.).

e. Target Market

As mentioned before, we do not have a specific demographic group that we want

to target. If we have to come down to one though, it will be more towards young, older

adults who are into having a healthy lifestyle. They would probably be in middle class

since Whole Foods is organic, fresh food and the price will be slightly higher. The person

would probably be in the age group of 19-35 with a sense of strength, strive and an

overall knowledge of what it is to be healthy. We will not decide to target only a specific

religious or political group. This will only cause us conflict and a loss of demographics

and sales. The first Whole Foods Market will be opened in Buenos Aires, Argentina. It

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is an extremely dense place where the energy is high.

Competition

a. Domestic Production

Opening up a new super market in Argentina can be very challenging. The

problem with opening up a Whole Foods Market is that there already exists competition.

Small grocery stores are already established and have customer knowledge and loyalty.

The biggest competitor that Whole Foods will have to deal with is known other than Wal-

Mart. Wal-Mart is already established and has a first mover advantage from Whole

Foods. Other than having the knowledge and experience of being in other Southern

American countries, both stores are very similar. They both have social, economic and

corporate responsibilities.

Legal

a. Tariffs, Taxes and Import/ export regulations

As part of the MERCOSUR organization, Argentina applies a common external

tariff (CET) imported from non-MERCOSUR countries. Meaning every country other

than Brazil, Paraguay and Uruguay, have to pay these tariffs. There is, however, a

number of exceptions in several categories.

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Argentina: Tariffs (percent ad valorem) for Textiles, Apparel, Footwear and Travel Goods

Tariff Rate Range (%) Yarn- silk 4-16

• Wool 10-16 • cotton 14-16

Industrial Fabric 10-26 Apparel 35 Footwear 18-35

The chart above shows some examples of tariffs that are assessed on the value of the

imported merchandise. In addition to import tariffs, the following fees and taxes may

apply:

• 0.5 percent statistics fee on the c.i.f. value (a cap of $500 applies for textile

products)

• 21 percent VAT (value added tax) on the c.i.f. value plus tariff and statistics fee

• verification tax with a maximum rate of 2 percent on the customs value

Administrative mechanisms are import mechanisms meaning that they can restrict the

entry of products deemed sensitive. You must provide a certificate of origin which is

mandatory.

b. Currency and exchange control

The Argentina currency is called a peso. Although in every country its values is different,

many Spanish speaking countries call their currency a peso too. The exchange rates of an

Argentine peso per U.S. dollar is 8.22 in 2014. In other words, 1 Argentine peso equals

0.11 U.S. dollar

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S.W.O.T. Analysis

From the information above, we have gathered and created our S.W.O.T. Analysis for

Whole Foods opening up in Argentina.

Strengths:

• Experience in the industry and has been successful in the London and Glasgow

stores

• It offers a broad range of products

• Company has a set of foundations and programs that help out the local

community-Some support schools, families and children, bring fresh food to

underserved communities. The company has one of its foundations (Whole Planet

Foundation) where they create economic partnerships with the poor within the

communities of the country

• Are in 2 cities and whole foods sources its berries from there

Weaknesses:

• Price-higher than competitors-because it carries a lot of organic products, they are

priced at a higher price and even if it’s $1 or $2 more, people that go grocery

shopping, still notice

• Weak international operation system-Outside of the U.S., they are just in Canada

and the U.K.

• Unknown brand-Since there aren’t any whole foods in S. America, at the

beginning, the people will not know who they are

Opportunity:

• Job creation-Great thing about Whole Foods is that there isn’t a set number of

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square feet that the store has to be. They can open up one of 15,000 to 75,00, they

can and the store employees between approximately 50 to 650 people

• Boost local economy by decreasing tariffs and costs-By eliminating the

exportation costs, farmers, ranchers, growers and producers receive a maximum

return on their investment

• Create and establish their name in South America as a company that gives back

Threats:

• Fierce competition-Carrefour and Wal-Mart-Top supermarket chains in Argentina

is Carrefour and Wal-Mart

• Probability of a very high inflation rate-25.3%-As we all know, this is not good

for the economy because it weakens the currency, Peso, and there is a slow

growth in the economy

Summary

Other than both of them saving money by not paying costs, tariffs and quotas, they can

both benefit each other. Whole Foods is not only about making a profit. They really care

about the local community and try really hard to make sure that they also receive the

help. Argentina can benefit from Whole Foods by selling the majority of their products to

them. As mentioned before, they try to purchase all their products locally.

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APPENDIX 1 Population Pyramid of Argentina

Population Pyramid

A population pyramid illustrates the age and sex structure of a country's population and may provide insights about political and social stability, as well as economic development. The

population is distributed along the horizontal axis, with males shown on the left and females on the right. The male and female populations are broken down into 5-year age groups represented

as horizontal bars along the vertical axis, with the youngest age groups at the bottom and the oldest at the top. The shape of the population pyramid gradually evolves over time based on

fertility, mortality, and international migration trends.

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Appendix 2 Railway map of Argentina

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Appendix 3 Road map of Argentina

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Appendix 4 Map of Agricultural activity

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References

Argentina encyclopedia . Retrieved from

http://www.encyclopedia.com/topic/Argentina.aspx

Buenos Aires, Encyclopedia . Retrieved from

http://www.encyclopedia.com/topic/Buenos_Aires.aspx

Central Intelligence Agency . Retrieved from

https://www.cia.gov/library/publications/the-world-factbook/geos/ar.html

Embassy of Argentina in Australia . Retrieved from

http://www.argentina.org.au/economy.htm

Find The Data . Retrieved from http://country-facts.findthedata.com/l/7/Argentina

Growing Unrest in Argentina's Agricultural Sector . Retrieved from

https://www.stratfor.com/analysis/growing-unrest-argentinas-agricultural-sector

History Timeline of Argentina . Retrieved from

http://www.datesandevents.org/places-timelines/04-history-timeline-of-a

rgentina.htm

Maps of the world-Argentina http://www.mapsofworld.com/argentina/rail-map.html

Market Reports/ Tariffs . Retrieved from

http://web.ita.doc.gov/tacgi/OverSeasNew.nsf/alldata/Argentina

National Geographic . Retrieved from

http://travel.nationalgeographic.com/travel/countries/argentina-facts/

Whole Foods Market. Retrieved from http://media.wholefoodsmarket.com/fast-facts/