Members of the Group:
Whole Foods Market, Inc. Fights to Get Back on Top of the Organic Industry
Clarksville Natural Grocery and Safer Way Natural Foods joined to form Whole Foods Market® (WFM) on September 20, 1980. (Whole, Timeline, 2014) The total number of staff members between the two stores equaled 19 people. After three decades of growth, mainly through mergers and acquisition, WFM operates 367 stores located throughout North America and the United Kingdom according to its most recent quarterly report (Hem, 2014). WFM is recognized as a global leader in the natural and organic foods retail sector (Whole, 2012, Annual, p. 4).
WFM became the first nationally ‘Certified Organic’ grocery in America and has successfully accomplished leading the trends in the organic foods and sustainable practices sectors though out its history. The same year the company presented the “365 Organic Everyday Value” brand, “the first national commodity-priced, all organic product line in the U.S. (Whole, 2014, History) And then in 2013 the company gave itself a deadline to become the first national grocery chain to meet the goal of full (genetically modified organisms (GMO) transparency by 2018 (Whole, 2014, History).
The company has very strong roots in ethical values and actions. Not only will their products be labeled for GMO content, but they purchase food from suppliers that agree with their commitment to organic products and sustainability.
WFM has a distinctive way of behaving very differently from other chain stores that are carbon copies of each other. The company is serious about learning about the community where a new store will be located. They do their research on the culture of the place and local vendors that offer meat, vegetables and other products appropriate for the store. The stores range in location from large urban areas to smaller cities like Boise, Idaho. After the decision was made to locate a grocery in Boise, Matt Collins, marketing specialist, and Bruce Green, the Boise’ store’s team leader, were busy learning about Boise as well as introducing Whole Foods to the community (Strom, 2013). The process started with introducing themselves to the civic leaders, meeting suitable vendors and learning about the city’s relationship with food (Strom, 2013). The next step was to organize an advisory board of community members. On particular days 5 percent of sales are donated to nonprofits or to sponsor events. The job of the advisory board is to decide who (local vendors or nonprofit groups) or where (civic events) will be supported (Strom, 2013).
Another distinguishing characteristic of the company is its decentralized infrastructure which causes Business Week and other traditionally conventional sources to scoff (Moore, 2005). John Moore, a former WFM National Marketing Director, on the other hand, praises the strategy because it encourages innovation from the bottom to the top of the business infrastructure (Moore, 2005). Moore (2005) explained the ten concepts the business and marketing sector of the company thrives upon.
- The one all encompassing rule that all stores must adhere to is that “all food sold at WFM must be free from artificial preservatives, colors, flavors, sweeteners, and hydrogenated oils (Moore, 2005).
- Teams are the main employee unit at WFM. Each time is linked to the other teams so one team’s success is a success for the whole company. WFM is organized from a single employee, a team member, to each department in a store which is a team, to every store, which is a team and to each of the corporate/regional departments that are also teams. No one person at the top dictates operations because the teams handle operations as is appropriate for the community where their store is located.
- Decision making is decentralized so that most decisions are made at the regional level, the level that is closest to the customers.
- Moore (2005) compares the experience of shopping at a WFM as a theatrical experience. The stores are especially sensitive to providing an aesthetically pleasing environment for all five senses.
- The most successful advertising for WFM is by happy shoppers sharing their satisfaction with the products and the store’s service.
- WFM store team members communicate the virtues of organic and natural foods so that people become better educated on their advantages.
- Detailed adherence to the authentic organic composition of the products allowed WFM to gain the certification of “Organic” from Quality Assurance International (Moore, 2005).
- WFM has the opposite attitude to the WalMart method of buying in bulk in order to compete for the lowest price. WFM sells high quality products and charges for their value.
- On the other hand, WFM is highly competitive about gaining profits. The company takes the attitude that profits are good for everyone, from shareholders to customers to the vendors.
- The individual team member is considered WFM’s most valuable asset and the part of their business concept that gives WFM a competitive advantage.
Ben Blatt (2014) a journalist for Slate asked the question “How many of the groceries sold at Walmart would be banned at Whole Foods?” WFM bans 78 ingredients categorizing them as ‘unacceptable ingredients for food.’ Artificial flavor is one of the unacceptable ingredients. Every type of food stuff sold at Walmart has some artificial flavor added. (See fig. 1). Eighty four percent of the candy for sale and 30 percent of the milk has artificial flavor as an ingredient. High fructose corn syrup is another food ingredient considered unacceptable at
Figure 1 Walmart Groceries containing Artificial Flavors (%)
WFM. Grains, rice and eggs are the only food products that do not contain high fructose corn syrup (See fig. 2) Sixty percent of the soft drinks, 51 percent of the sandwich breads, 40 percent of the cookies and 33 percent of energy drinks and juices contain it. In the soda drink category 97 percent of the products contain WFM unacceptable ingredients. Interestingly, even water sold at WaMart contain ingredients that are banned at WFM (Blatt, 2014). Fifty four percent of the food sold at WalMart would be banned from WFM (Blatt, 2014).
Figure 2 Walmart Groceries containing High Fructose Corn Syrup (%)
Purchasing and product distribution at WFM is based on finding a good, reliable vendor with high-quality, fresh organic products. Organic can be applied to a wide range of food stuffs such as beef, pork, turkey, vegetables, fruit, and bakery goods. Customers can do all their grocery shopping each week at WFM because of the diverse variety of foods available. Individual stores purchase local products to please the customers of the region, as well as to reduce transportation costs and ensure freshness (New York Times, 2013). Eleven regional distribution centers are located within practical distances from WFM stores in the U.S., Canada and the U.K, with a special concentration on the distribution of perishables (Whole, 2014, Annual).
Advertising costs are low because of the high degree of customer satisfaction; customers act as WFM ambassadors when they share their opinions about the store, its products and services with their friend and family. In 2013, WMF budget only 0.4% of its sales revenue for advertising (Whole, 2014, Annual). The company relies heavily on word-of-mouth advocacy and that strategy has been very successful. WFM also has a presence on Internet social media such as Facebook (with a following of approximately three million) and a following of about seven million on Twitter (Whole, 2014, Annual). Communication with customers is highly interactive on these platforms.
The sales revenue for Fiscal Year (FY) 2013 was $12.9 billion reflecting an increase of from FY 2012 of 10.4% (53 weeks per year) to 12.6% (52 weeks/year) (Whole, 2014, Annual). Diluted earnings per share demonstrated a 16.5% (53 weeks per year) to 18% increases (52-week/year) based on $1.47 per share (Benzinga, 2014). The company realized a total gross profit of $ 4.6 billion, a 0.4 billion increase from FY 2012 and from $3.5 in FY 2011 (State of incorporation: Texas, 2013). Whole Foods Market Inc. has continuously increased in profits although other businesses were negatively impacted by the global recession.
Based on this research Whole Foods Market is a good investment and is likely to meet its goal of locating over 1000 WFM groceries throughout the world.
Benzinga.(2014). Top Stock: Investors hope for revenue growth at Whole Foods. Money MSN, 11 Feb 2014. http://money.msn.com/top-stocks/post--investors-hope-for-revenue-growth-at-whole-foods. 20 Feb 2014.
Blatt, B. (2014). Unacceptable Ingredients. Slate, http://slate.com
Moore, J. (2005). The Winning way of Whole Foods Market. Brand Autopsy, 16 October 2005. http://www.brandautopsy.com/2005/10/the_winning_way.html. 20 Feb 2014.
Strom, S. (2013). Whole Foods Finds Success in Smaller Cities. The New York Times. 17 December 2013. http://www.nytimes.com/2013/12/17/business/whole-foods-finds-success-in-smallercities. 20 February 2013.
Whole Foods Market®. (2014). Annual Report on Form 10-K. Annual Report Pursuant To Section 13 Or 15(D) Of The Securities Exchange Act Of 1934: For The Fiscal Year Ended September 29, 2013. State of incorporation: Texas. Washington D.C: United States Securities And Exchange Commission, 2013. Retrived from: http://www.wholefoodsmarket.com/sites/default/files/media/Global/Company%20Info/PDFs/WEM-2013-10-K.pdf
Whole Foods Market®. (2014). History and Timeline. Newsrooom blog, Whole Foods Market. http://media.wholefoodsmarket.com/history/. 20 Feb 2014.