Whole foods case study real-2 PDF

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Whole Foods Market Analysis March 5, 2018

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Objectives The objective of Wholefoods is to provide natural and organic food to consumers at a premium price to help consumers overcome obesity in the United States. Whole Foods aims to become the champion of healthy living. Customer Scenario Whole Foods Market’s target market is individuals and families who are particularly health conscious, and concerned about preserving the earth’s natural resources. Identification of the Nucleus of Control and its management stance The CEO and co-founder, John Mackey, is focused on the growth of Whole Foods Market. In 1978, he took an entrepreneurial stance with “Safer Way”, in Austin, Texas, until it eventually merged with Natural Grocery in 1980 to become Whole Foods Market. “ You gotta catch the wave,” says John Mackey of Whole Foods. “If there’s no wave, you can’t surf.” Functional Analysis Top Management The Top Management Team, lead by CEO John Mackey, consists of CFO Keith Manbeck and Chairwoman Gabrielle Sulzberger. The management team has proven to work well as a unit through the expansion of the grocery store chain since 1980. However, the increase in competitors offering organic food hurt Whole Foods Market’s sales, which is an issue that the management team needs to address. Marketing Whole Foods relies on social media and positive word-of-mouth advertising for marketing. The social media footprint of Whole Foods Market across multiple platforms is over

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11 million. Whole Foods has now introduced its new “Take Action Centers” located in every store, which are meant to educate consumers. Company costs have increased due to the high end nature of Whole Foods products, including freshly cooked meals. The luxury products require more expensive in-store displays. In addition, Whole Foods Market has begun to offer sales on brand name items and group discounts. Finance and Accounting Whole Foods Market has a market share of only 1.6%, which is incomparable to Kroger’s 8.2% market share. This is not sufficient if they want long term success. With so many competitors, Whole Foods desperately needs to capture more of the market. Its current ratio of 1.23 and quick ratio of 1.29 show that Whole Foods can meet its short-term obligations. In 2015, the net income of Whole Foods was $536 million, a slight decrease from 2014. (Figure 1) Production and Operations Management Whole Foods sources its produce locally, with 5% of daily sales getting donated to a local group. Doing this, Whole Foods has reduced the high costs that are associated with organic agriculture. Perishables with short life expectancies accounted for 67% of products sold in 2016. The short life expectancy of organic food means that if produce is not sold quickly, it will go to waste. 5% of sales per day donated to local group Research and Development Whole Foods Market’s sales growth has declined from 2013-2015 to nearly zero. It is now refocusing its offerings by getting rid of unhealthy food products. It is working to focus on growing target market, and reducing costs with volume discounts, similar to Costco, in order to attract more customers who shop for an entire family or group of people. In addition, Amazon is

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in the process of purchasing Whole Foods Market for $13.7 billion, and plan to raise money for research and development on a large scale. Legal In 2015, Whole Foods was accused of a mislabeling scandal. Whole Foods mislabeled weights of several freshly packaged foods, which led to overcharges of these items. This reinforced the perception that Whole Foods is overpriced. Also, in June 2015, the FDA reported Whole Foods for food preparation violations, including “a failure to sanitize food prep surfaces, dirty dishes near food, sinks without hot water for hand-washing and a worker who sprayed an ammonium-based sanitizer on "an open colander of salad leafy greens." Human Resources Whole Foods Market offers a variety of benefits to its employees. This includes health benefits, a Personal Wellness Account, 25% discount in stores, and paid time off. The average pay for a full-time, long-term employee is about $19/hour. However, many employees do not see working at Whole Foods as a long term “career”. One employee was was interviewed by Business Insider stated, “I absolutely love working for Whole Foods Market. It is a really fun place to work and a place where you can grow quickly if that's what you put your mind to” Statement of the Basic Problem The basic problem of Whole Foods Market is lack of planning into the marketing decisions. Strategic Alternatives One alternative that Whole Foods can utilize is moving away from luxury items as primary source of revenue. This would make products more affordable for the average

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consumer, which would also help protect Whole Foods Market against economic crisis. However, it would also alter Whole Foods Market’s high end brand image, lowering its level of differentiation. A second alternative would be to invest more money into marketing and advertising. Although it would be more costly, brand recognition and awareness through celebrity endorsements can increase revenue from high end products. Recommendation Whole Foods should work to increase funding for marketing, which would help increase brand awareness and change its image from “expensive” to “high quality”. With all the new products and promotions that Whole Foods Market is coming out with, marketing needs to be increased. Improving brand presence within already existing stores rather than focusing on expansion is imperative to Whole Foods Market. This can be done by focusing on building relationships with low cost suppliers in order to make their products more affordable without sacrificing the high-quality. Implementation An increase in marketing will be costly, but will pay off in the long-term. Whole Foods Market needs to regain its unique image as a high-quality, but affordable brand, rather than an overpriced brand. The main long-term goal should be to reduce costs to lower prices to improve long term revenue and sales growth.

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Works Cited https://medium.com/@mounicav/whole-foods-market-marketing-strategies-and-programs-analys is-53d6f12b6055 http://www.businessinsider.com/what-its-really-like-to-work-at-whole-foods-market-2015-4 https://www.inc.com/magazine/201505/david-whitford/john-mackey-whole-foods-icons-of-entrep reneurship.html http://financials.morningstar.com/direct/ratios/r.html?t=XNAS:WFM®ion=usa&culture=en-US &productcode=MLE&cur= https://www.fool.com/investing/general/2015/12/02/3-core-issues-facing-whole-foods-market.as px http://www.annualreports.com/HostedData/AnnualReportArchive/w/NASDAQ_WFM_2015.pdf

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Current Ratio

1.23

Quick Ratio

1.29

Cash Ratio

.1893

Gross Ratio

.352

Operating Margins

.0559

Financial Leverage

1.52

Debt/Equity Ratio

.02

Figure 1 Symptoms: 1. Sales growth has declined to nearly zero 2. Costs are too high for average consumers who shop for families and groups 3. Mislabeling scandal in New York in 2015 4. Diluted brand due to the sale of “junk food” in stores 5. Competitors have more practical pricing 6. Growth has virtually plateaued 7. Many employees do not see working at Whole Foods as a long term “career” 8. The company is lacking in brand differentiation. 9. Increase in competitors offering organic food options at lower prices. 10. Organic produce will go to waste if not sold within a limited time frame. 11. Lack of investment into the marketing budget. 12. Decision to sell high-end luxury products 13. Food preparation violations reported by the FDA Management Functions (Structure) Planning Organization Control Top Management Marketing

6 4,8,9,11,12

Finance/Accounting

2

Operations Management

10

R&D Legal

1,5

3

13

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HR

7...