Whole Foods Market – “Health Starts Here”

Abstract

Whole Foods has risen as a formidable opponent among the supermarket chains. I will examine Whole Foods using a SWOT analysis, while expounding how their organizational structure, corporate culture, values, and ethics translate into good business. Whole Foods’ motto is “Whole Foods, Whole People, Whole Planet.” Over the years, the entity has gone beyond a local food market and developed an extensive culture with an enormous customer base. Many consumers consider Whole Foods a way of life. Company environment has four focal points: economic, social, political, and legal.

Whole Foods continues to achieve their vision through organizational development, customer satisfaction, company culture and values, and local community support. This is clear in their merger with Amazon who closely aligns with the companies’ mission.

Whole Foods Market – “Health Starts Here”

John Mackey, Renee Hardy, Craig Weller, and Mark Skiles founded Whole Foods in 1980 in Austin, TX after successfully running Saferway and Clarksdale Natural. Family and friends invested forty-five thousand dollars to start their community supermarket chain and become a small local provider.

Mackey and Hardy, merged with the two partners from Clarksdale Natural, to build what would be a multi-million-dollar franchise.

Memorial Day in 1981 proved devastating when a massive flood caused four hundred thousand dollars in uninsured losses; the entire store’s inventory had to be disposed of and much of the equipment was unrepairable. However, with overwhelming support, the store was reopened in 28 days with the aid of creditors, investors, and staff members. After the humbling experience, Whole Foods rebuilt to expand to over four hundred and ninety stores with over eighty-nine thousand employees today.

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As the entity grew, they extended their market through dividing the labor among the four partners. Each partner headed a different group and handled the labor and productivity. Over time, the organization became more departmentalized, with the core values at the front of the expansion from the Unites States to the United Kingdom and Canada.

Whole Foods has become one of the largest and most popular supermarket chains in the United States, only rivaled by Kroger, Trader Joe’s, and Publix. Whole Foods has also a become a source for cleaner living and pursues the best in natural and organic foodstuffs and household supplies. On top of promoting a better lifestyle, they have also created programs that aid the poor, support nutrition education in schools, and offer low-interest loan to local producers.

Strategic Management and Leadership

Maintaining a “do it right” attitude has birthed some of Whole Foods’ best strategies. Whole Foods corporate leadership is defined by their commitment to their mission and core values. Leadership and management agree that “leading by example” is the most effective way to build superior teams, and facilities. This also translates into their business relationships with their vendors. Further, Whole Foods implements a combination of strategies, including, market development, and horizontal and vertical integration. In 2014, Whole Foods acquired four stores from New Frontiers National Marketplace.

Three are in Arizona and one is in California to continually expand the brand and bring convenient locations to consumers. This is an excellent example of lateral integration and merging the two companies within the same production process. As for vertical integration, Whole Foods also bought some of its smaller suppliers to insure adequate stock for the company and to escape the monopolized market among suppliers.

This eliminated an interdependence and allows Whole Foods to be self-sufficient. In 2017 alone, Whole Foods opened 24 new and/or acquired locations to increase their distribution channels and market to both old and new customers. With that increase, came a development cost of three hundred, and eighty-four million. However, it was well worth it as the store sales combined were sixteen billion dollars in 2017. Whole Foods continues to strategically purchase and build stores to increase their market.

Company Culture and Quality

Whole Trade Guarantee was launched in March 2007 as a “buying program that brings together a set of strict criteria for products from developing countries” to provide better wages for poverty-stricken areas and initiate environmental production practices that will benefit both man and Earth. Whole Foods CEO, John Mackey, advises the program aligns with Whole Foods values by committing to exceptional product quality and funds allocated to support producers.

Although this program may reduce immediate profitability by providing better wages to international workers, the investment in relationships, company reputation, and social responsibility will provide long-term profitability as Whole Foods can offer more diverse products and open lines to better mergers. Further, Whole Foods supports and improves sustainability of the agriculture industry by providing business opportunity to organic and natural food vendors. This also ensures customer satisfaction as Whole Foods is a staple in many households for wellbeing products.

Whole Foods has the advantage on competitors such as Walmart and Kroger who face higher supplier costs if the United States Department of Agriculture (USDA) or Food and Drug Administration (FDA) impose regulations that limit pesticide use or require crop rotation to lessen the effects of land degradation due to reusing the same land for years. These risks are not feasible for Whole Foods due to the quality standard required for suppliers and stocking almost exclusively from sustainable suppliers.

SWOT Analysis

Strengths

I identified several strengths that allow Whole Foods to thrive. The first is superior quality in their organic and natural products. Whole Foods has become a beacon in the wellness movement as all their products are made with consumer health and the environment in mind. They maintain rigid quality standards for all vendors and require inspections and intensive quality control procedures.

They also verify every non-GMO and organic product with the USDA. Further, Whole Foods provide excellence customer service, along with a pleasant shopping environment. There are tasting stands throughout the store and the employees are knowledgeable about their products to issue recommendations to consumers.

Weaknesses

When speaking of strengths, weaknesses must be addressed to produce better business results. While Whole Foods provides high-quality products, this often translates to unaffordable prices.  An average can of organic corn may be twice the price compared to other retailers like, Walmart or Kroger.  Continuing, many consumers complain locations are inconvenient and often are on busy streets, making accessibility difficult. There have also been murmurs about the lack of aisle space and narrow parking lots.

Opportunities

Expansion and marketing are two substantial opportunities available to Whole Foods.  There are thirteen stores in Canada and seven stores in the United Kingdom; which is minimal when looking at the hundreds of outlets that Walmart has in 26 foreign countries.  There is also a wasted opportunity in online retail expansion.  Many of Whole Foods’ websites are minimal.  There no search tool to check what items are in stock and the grocery pickup option is mediocre as it only allows for pre-packaged meals and catering for pickup.

Threats

While Whole Foods is a major competitor, it does face some threats as more supermarket chains start to add organic and natural lines. Wal-Mart has added many organic selections to its Great Value line to entice customers that are attempting to live a healthier lifestyle. Kroger took the challenge a step further and created Simple Truth and added organic/natural centers in their marketplace stores. Simple Truth exclusively markets lower-priced and healthier alternatives to the regular foodstuffs. They also implemented carrying bulk stock of non-GMO/organic products, much like Whole Foods.

Amazon Merger

Whole Foods shook the nation when it announced that Amazon had acquired the company for over thirteen billion dollars, including the company’s debt. Mackey ensured that by completing the merger, Whole Foods would be able to fully realize their commitment to rigid standards. Seemingly overpriced for most middle-class households, the merger saw grocery staples being lowered at least ten to fifteen percent of the original cost. Amazon CEO, Jeff Wilkes, touted that lower prices would be a minor change compared to the integration of Amazon Prime reward programs and the availability of Whole Foods’ private label products, 65 Everyday Value, Whole Foods Market, Whole Paws and Whole Catch, through Amazon.com, AmazonFresh, Prime Pantry and Prime Now.

Today, Amazon Echo kiosks can be found in many stores. And in select markets, Amazon Locker has been introduced for consumers to pick-up Amazon.com purchases while doing their routine grocery shopping. They can also send back returns. Whole Foods did retain operations under the Whole Foods Market Brand. They continue to expand and create jobs in their local communities for local producers and the public.