To: John Mackey & Walter Robb From: Subject: Executive Summary: Whole Foods Competitive Position Analysis Industry Analysis As the largest grocery chain of natural and organic foods in the United States, Whole Foods Markets competes within a specialized segment of the $557 billion (FMI, 2009) overall grocery retail industry. Its main competitors sit within various strategic groups encompassing specialized organic/natural food retailers, traditional grocers (especially those with dedicated organic food offerings), mass‐ merchandisers such as Wal‐Mart who have launched organic food lines, and even local co‐op markets or farmer markets. However, Whole Foods enjoys an enviable competitive position in this industry due to its scale and expansion, mission‐driven brand superiority, and premium shopping experience. In evaluating the industry, the environmental factors that are most important are market size, demographic trends, regulatory factors, technology developments, supplier channels, as well as consumer habits and social considerations (Exhibit 1). The effect of these factors are dramatically much more favorable for the natural/organic food retail industry than the overall grocery industry, due to greater market growth and increased consumer adoption due to perceived health and wellness benefits coupled with an affluent customer base willing to pay a price premium. The only adverse factor, the higher levels of regulation impacting the organic food segment, is counterbalanced by the ability of the segment to withstand more stringent food quality and safety regulations in the future. As Whole Foods is just 1.3% (Riddick, 2011) of the overall food retail market, it is well‐positioned to capitalize on these attractive industry fundamentals for natural and organic foods. A Porter’s Five Forces analysis (Exhibit 2) further solidified this reasoning. Whole Foods has already established a strong industry presence in the natural/organic food retail segment with over 300 stores nationwide, as well as six in Canada and five in the UK (Whole Foods Annual Report, 2010). With 30,000 SKUs, it has a broad product line that provides a comprehensive shopping experience for consumers. Furthermore, consumers are choosing higher margin products and spending more: in a recent survey of Whole Foods store managers, 64% said consumers were willing to trade up and 82% said that consumer spending had much improved over last year (Mushkin, 2011). Whole Foods is also able to capitalize on having a local community presence by working with local suppliers, farmers and growers while having the power of a national brand. Due to its strong industry positioning, Whole Foods is poised to capture additional share as it expands its retail presence both domestically and internationally and grows both within the natural/organic food retail segment and wins “converters” from the overall food segment who switch to natural/organic offerings. Strategic Groups & Positioning Whole Foods’ market positioning is challenges by a number of competitors who represent different retail formats. While it competes directly with natural/organic grocers such as Trader Joe’s and Fresh Market, it also faces competition from traditional supermarkets, and more recently, from mass‐ merchandisers such as Wal‐Mart and club stores such as BJ’s. Exhibit 3 shows a breakdown of the main competitors within each strategic group. As consumers continue to push for healthier food choices in
seeking out natural / organic foods, traditional grocery outlets have drastically ramped up their organic offerings. In 2009, mass market retailers representing mainstream supermarkets, club/warehouse ...
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