Executive Summary Whole Foods Market, Inc. –25 Years Of Double Digit Revenue Growth –$4.7B...
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Transcript of Executive Summary Whole Foods Market, Inc. –25 Years Of Double Digit Revenue Growth –$4.7B...
![Page 1: Executive Summary Whole Foods Market, Inc. –25 Years Of Double Digit Revenue Growth –$4.7B Organic Supermarket Industry Leader Whole Foods Current Strategy.](https://reader036.fdocuments.us/reader036/viewer/2022062321/56649d9e5503460f94a88d28/html5/thumbnails/1.jpg)
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Executive Summary
Whole Foods Market, Inc.
– 25 Years Of Double Digit Revenue Growth– $4.7B Organic Supermarket Industry Leader
Whole Foods Current Strategy– Expand Through New Store Openings– Achieve $12 Billion In Sales By 2010
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Executive Summary
Competitive Strategy Analysis– Supplier Power Dominates This Industry– Current Strategy Lacks Aggressiveness
Recommended Strategy– Establish Partnerships With Traditional
Supermarkets– Achieve National Brand Equity
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Overview
• Porter’s Five Forces Analysis
• SWOT Analysis of Whole Foods
• Recommended Strategy
• Questions/Discussion
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Market Definition
Market History– Natural And Organic
Food Industry Began About 30 Years Ago
– Whole Foods Market Is A “Founding Firm”
– USDA Established The “Organic Rule” In 2002
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• All Products Sold As “Organic” Must Now Meet The Requirements Of The USDA Organic Rule
• Approximately $13 Billion In Sales In 2005
Market Definition
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Internal Rivalry
Threat To Profits: High
Sources Of Internal Rivalry:– Many Sellers In The
Market– Differing Cost Structures– Strong Exit Barriers
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Differing Cost Structures– Consider A Wal-Mart Supercenter:
• > 100,000 Square Feet • Average Supermarket Only 35,000 Square Feet
– Significant Economies Of Scale Difference And Wal-Mart Continually Drives Down Prices
Strong Exit Barriers– High Investment In Property, Distribution And Inventories
Internal Rivalry
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Entry
Threat to Profits: Medium
Originally, Health Food Stores Were Small, Expensive, And Unpredictable.
Some Health Stores Grew Into Supermarkets:– Sun Harvest – Whole Foods Market
Some Existing Supermarkets Re-Branded– Wegmanns – HEB: Central Market
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Segment Entry Types
Re-branded Supermarkets• H.E.B. (Texas) Created “Central Market”• Wegmans (New York) Upgraded Locations
New Supermarket Entrants• Growing Health Food Stores (GNC)• New Firms
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Barrier New Entrant Re-Branded
Economies of Sales Strong Moderate
Government Protection N/A N/A
Brand Loyalty Moderate Moderate
Access to Key Inputs Strong Weak
Experience Curve Strong Weak
Network Externalities Strong Moderate
Competition Expectations Strong Moderate
Overall Threat: Low High
Entrant Comparison
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Most Likely Segment Entrants
Based On The Barriers To Entry Analysis, The Most Likely Entrants Into The Organic Segment Of The
Supermarket Industry Are Established Firms
Who’s Next?Who’s Next?
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Substitutes And Complements
Substitutes– Threat To Profits:
Medium– Health Food Stores– Traditional
Supermarkets– Supercenters
Complements– Health Industry– Health Insurance
Companies– Health Care Specialists – Fitness Centers – Wellness Programs
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Threat to Profits: High
• Local Growers, Independent And Family Farmers, Large Corporate Farms, Co-ops And Food Brokers
• Organic Supply Chain Underdeveloped• Growing Number Of Organic Food Grocers
Supplier Power
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Buyer Power
Threat To Profits: Medium To High Buyers Have Options!
• Price • Convenience• Varying Levels Of Health Sensitivity• Mixed Consumer Messages
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Porter’s FiveForces Summary
Porter’s Five Forces Threat to Future Profits
Internal Rivalry High
Entry Medium
Substitutes/Complements Medium
Supplier Power High
Buyer Power Medium to High
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Whole Foods, Whole People, Whole Planet
• Corporate Culture
• Customer Experience
• Perishables
• Hip Image
• Double Digit Growth
• Largest Selection
Strengths
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Strengths
WholeWhole FoodsFoods:Reputation:
Healthy, Local Food
Whole PeopleWhole People: Branding For Affluent And Health Conscious
Positive Employee Environment
Whole PlanetWhole Planet:Environmentalist Reputation
Encourages Brand Loyalty, Holds Off Commoditization
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Whole Financing!Strong Cash Flow And Stock Position Provide Capital
For Growth In The Most Highly Desired Locations
– 4.7 Billion Dollar Revenues– Revenue Growth:
• 21.6 Percent From 2004 To 2005• 15.8 Percent From 2005 To 2006
– Returning Invested Capital (ROIC): 37% – Capitalization Increased To 6.8 Billion:
6th On The List Of All Grocery Chains
t
Strengths
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Weaknesses
• “Whole Paycheck”
• Whole Planet? Weak International Operations
• Low Employee Efficiency– Revenue per Employee = $138K versus Industry
Average of $309K
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Opportunities
Market Leadership in High Demand Segment– 2002 USDA Organic Rule – True Differentiation– Organic and Natural Food Industry Focus on
Consumer Education– Media Coverage
• Health benefits of organic foods• Suspicious of “contaminants” (e.g. hormones,
antibiotics, etc.)
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Opportunities
Private Label Brands– “Whole-X”, Where X = Kids, Ranch, Fields,
Catch, Creamery, Diary, Treat– Growth Of These Brands Is High Due To Lower
Price Versus Contemporary Organic Brands– Potential To Sell These Products In Traditional
Supermarkets
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Threats
Increased Competition– Re-branding Existing Supermarkets– Wal-Mart
Changes in Government Regulations
Changes in Economic Conditions– Impact of Consumer Spending
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CorporateStrategy
Whole Foods’ Current Strategy– Expand Through New Store Openings– ‘Build’ Versus ‘Buy’ New Stores
• Customized Stores To Local Preferences• Open To Acquisition Opportunities
– Grow Store Space At A “Controllable” Rate Of 14%
• Preserve Corporate Culture
– Achieve $12B In Sales By 2010
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Medium TermStrategy
Coordinated Campaigns To Enter New Markets– Prior To Store Opening, Establish Relationships
With:• Traditional Supermarkets Willing To Sell “Whole-X”
Products• Local Organic Suppliers And Growers
– Aggressive Advertising Upon Store Launch:• Emphasize “Whole Foods, Whole People, Whole
Planet”
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Long TermStrategy
Build National Brand Equity– Extend Partner Relationships Into Current
Markets– Increase Advertising Budget From 0.4% To The
Industry Average Of 1.5%• Focus On Building Brand Identity With Organics• When Consumers Think “Organic”, They Think “Whole
Foods”• Shed The “Whole Paycheck” Image
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Questions & Discussion