CASE STUDY 2:

WHOLE FOODS
MARKET

P R E S E N T E D B Y: G R O U P 4
C A S E S T U D Y:
Founded in 1980, Whole Foods Market had evolved from a local supermarket for natural and health foods in Austin, Texas,
into the world’s largest retail chain of natural and organic foods supermarkets. In 2008, the company had 276 stores in the United
States, Canada, and Great Britain and 2007 sales of $6.6 billion. Revenues have grown at a compound annual rate of 30 percent since
1991 and 20 percent since 2000. Management’s near-term growth objectives for Whole Foods were to have 400 stores and sales of $12
billion in fiscal year 2010.

During its 27-year history, Whole Foods Market has been a leader in the natural and organic foods movement across the
United States, helping the industry gain acceptance among growing numbers of consumers concerned about the food they eat. The
company sought to offer the highest quality, least processed, most flavorful, and naturally preserved foods available. John Mackey, the
company’s co-founder, and CEO, believed Whole Foods’ rapid growth and market success had much to do with its having “remained a
uniquely mission-driven company—highly selective about what we sell, dedicated to our core values and stringent quality standards
and committed to sustainable agriculture.”

STRAMA
 Mackey’s vision was for Whole Foods to become an international brand synonymous with not just natural and organic
foods, but with being the best food retailer in every community in which Whole Foods stores were located. He wanted Whole Foods
Market to set the standard for excellence in food retailing. Mackey’s philosophy was that marketing high-quality natural and organic
foods to more and more customers in more and more communities would over time gradually transform the diets of individuals in a
manner that would help them live longer, healthier, more pleasurable lives. But as the company’s motto “Whole Foods, Whole People,
Whole Planet” implied, its core mission extended well beyond food retailing. On its website, the company proclaimed that its deepest
purpose as an organization was helping support the health, well-being, and healing of people—customers, team members, and business
organizations in general—and the planet.

Whole Foods stores were highly appealing places to shop. Management put considerable emphasis on attractive stores,
colorful décor, and appealing product displays. The company got very high marks from merchandising experts and customers for its
presentation—from the bright colors and hand-stacked fruits to the quality of the foods and customer service to the wide aisles and
cleanliness. Most stores featured hand-stacked produce, in-store chefs and open kitchens, scratch bakeries, prepared foods stations,
European-style charcuterie departments, sampling displays, and ever-changing selections and merchandise displays. Whole Foods’
merchandising skills were said to be a prime factor in its success in luring shoppers back time and again. The company’s newest and
biggest stores were generating average weekly sales in excess of $600,000 (over $30 million annually).

STRAMA
 The focus of the case is on Whole Foods’ strategy and operations in the rapidly developing natural and organic foods
segment of the roughly $850 billion food retailing industry in the U.S. The company is interesting in several important respects: it is an
up-and-coming grocery chain—one that is making a name for itself and starting to move into the ranks of the industry leaders; it
“walks the talk” in striving to live up to its core values (which are pretty impressive and are featured in the case); it is deservedly
ranked among the best companies to work for in America (the only grocery chain to make the list each of the past 9 years); it has a
pretty impressive strategy; and until 2008 when the economy soured, its financial performance was quite good.

But in late 2008, the company’s rapid growth strategy and the recent acquisition of rival Wild Oats Market had strained the
company’s financial resources; moreover, deepening recessionary conditions had caused the once buoyant sales at Whole Foods stores
to stagnate. Can and should the company cut back on new store openings, despite having signed leases for the facilities? Are other
strategy changes needed? And was the acquisition of Wild Oats proving to be as good a move as had originally been thought?

STRAMA
QUESTIONS
QUESTIONS
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1 . W H AT A R E T H E C H I E F E L E M E N T S O F
THE S T R AT E G Y T H AT WHOLE FOODS
MARKET IS PURSUING?
ANSWER:

The chief elements of the strategy that Whole Foods Market is pursuing are:

Offering high-quality natural and organic foods. Whole Foods Market aims to differentiate itself by offering high-quality natural and
organic foods. They focused on providing products that were minimally processed, flavorful, and naturally preserved.

Expansion and growth. Whole Foods Market is rapidly expanding its store base globally. The company aims to become the leading natural
and organic food retailer in every community it serves. This reflected their ambition to grow and allowed them to benefit from cost efficiencies
and potentially offer competitive prices.

Mission-driven. As the company’s motto implies, “Whole Foods, Whole People, Whole Planet," the company remains highly selective about
what it sells and is committed to sustainable agriculture. Its mission extends beyond food retailing to support the health, well-being, and
healing of people and the planet.

Attractive stores and appealing product displays. Whole Foods Market puts considerable emphasis on creating highly appealing shopping
environments. The company focuses on attractive stores, colorful decor, and appealing product displays.
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2 . I S T H E S T R AT E G Y W E L L M AT C H E D TO
RECENT DEVELOPMENTS AND CONDITIONS
IN THE N AT U R A L AND ORGANIC FOODS
SEGMENT OF THE FOOD R E TA I L I N G
INDUSTRY?
ANSWER:

Yes, the strategy of Whole Foods Market is well matched to recent developments and conditions in the natural and organic foods
segment of the food retailing industry. In recent years, there has been a growing consumer demand for natural and organic foods due to
increasing health consciousness, concerns about food quality and safety, and a desire for sustainable and ethical food choices. Whole
Foods Market has successfully tapped into this trend by aligning their product offerings and values with these consumer preferences.

The company has also maintained its competitive advantage as it says there that Whole Foods rapid growth and market success is
because it remained a mission driven company -- highly selective of what they sell, dedicated to their core values, and stringent quality
and standards and are committed to sustainable agriculture. Their strategy is obviously effective since it is ranked among the best
companies to work for in America because of their impressive strategy until 2008 when the economy soured, their financial
performance still was doing good with stores generating an average weekly sales of more than $600,000.
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3. HOW WELL IS WHOLE FOODS MARKET

P E R F O R M I N G F R O M A S T R AT E G I C P E R S P E C T I V E ?
DOES WHOLE FOODS ENJOY A COMPETITIVE
A D VA N T A G E OVER ITS R I VA L S ? DOES THE
C O M PA N Y H AV E A WINNING S T R AT E G Y ?
ANSWER:

Whole Foods Market is performing well from a strategic perspective. They continue adapting their growth strategy while maintaining
their commitment to providing high-quality foods that meet consumers' needs and preferences. Additionally, they prioritize
environmental responsibility and community engagement. Compared to its competitors, Whole Foods is performing well and enjoys a
competitive advantage due to its reputation for offering high-quality products and its well-known brand name, allowing it to maintain
its market position and grow its customer base. Furthermore, Whole Foods has implemented strategies to keep a competitive edge,
such as acquiring one of its rivals, Wild Oats - a good move that eliminated one of its competitors and gained a higher position in the
Market. Overall, these factors have contributed to Whole Foods' winning strategy.
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4. DO YOU APPROVE OF THE DECISION TO

A C Q U I R E W I L D O AT S M A R K E T ? W H AT P R O S A N D
CONS DO YOU SEE?
ANSWER:

It depends because it has several cons while it also has several pros. The success of the acquisition would depend on Whole Foods' ability
to effectively manage the integration, control costs, maintain product quality, and capture synergies. It's important to assess whether the
benefits of the acquisition, such as increased market share and customer base, outweigh the associated costs and risks. The economic and
competitive context at the time, as well as the execution of the post-acquisition strategy, would be crucial factors in determining the
wisdom of the decision.

Pros:

By eliminating a direct rival in the natural and organic food sector, the acquisition gave Whole Foods the chance to expand its market.
Through economies of scale, this market consolidation may have enabled greater operational efficiency and cost reductions. The expansion
of Whole Foods' client base and portfolio with the inclusion of Wild Oats' product line may have strengthened the company's position as
the market leader.

Cons:

Due to the acquisition's high cost as well as the 2008 economic crisis, there was a huge financial burden associated with it. Bringing
together two businesses with diverse operations and cultures can be difficult and complicated. Additionally, the acquisition was subject to
legal and regulatory investigation, which increased the risk.
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5 . W H AT R E C O M M E N D AT I O N S W O U L D Y O U M A K E T O J O H N
M A C K E Y R E G A R D I N G T H E A C T I O N S T H AT W H O L E F O O D S ’
M A N A G E M E N T N E E D S T O TA K E T O G E T T H R O U G H T H E
R E C E S S I O N T H AT B E G A N I N E A R N E S T I N 2 0 0 8 ? S H O U L D T H E
C O M PA N Y S E V E R E LY C U T B A C K O N O P E N I N G S O M A N Y N E W
S T O R E S ? S H O U L D T H E C O M PA N Y V I G O R O U S LY C O N T E S T T H E
R E O P E N I N G O F T H E F T C ’ S C H A L L E N G E T O T H E W I L D O AT S
A C Q U I S I T I O N ? A R E A N Y O T H E R S T R AT E G Y C H A N G E S N E E D E D ?
ANSWER:

RECOMMENDATIONS

1. Assess opportunities. Always go back to environmental scanning.

2. Through research and development, they have to invest more in studying which companies to acquire, especially looking at their
financial capability.

3. They have to set disposable financial resources to mitigate risks of financial loss.

4. The company should have forecasted the coming days, and planned what course of actions to take when recession penetrates.

5. Given the new economic situation, they should craft a new strategy in reaching out to new and current clientele.
Should the company severely cut back on opening so many new stores?

Given the current recession, the Whole Foods' management should cut down stores and focus on how to sustain the profitability of
their existing stores. It is, therefore, important that the company should cut back on opening until the economy gets better and should
not focus on any acquisitions, unless necessary. They should be focusing on keeping the business' stability and wait until there is a rise
in the ongoing economic downfall.

Should the company vigorously contest the reopening of the Federal Trade Commission's challenge to the Wild Oats
acquisition?

Yes. The company should contest this one because first and foremost, it was a strategy used by the company to really realize its
maximum potential in terms of profitability. In fact, it was a horizontal integration applied there, which was buying or acquiring your
competitor to maximize market share.

Are any other strategy changes needed?

Definitely.
THANK YOU
FOR
LISTENING

STRAMA – GROUP 4