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Whole Foods Market


Foundedin1980asalocalsupermarketfornaturalandhealthfoodsin
Austin,Texas,WholeFoodsMarkethadby2006evolvedintothe
worldslargestretailchainofnaturalandorganicfoodssupermarkets.
Thecompanyhad179storesintheUnitedStates,Canada,andGreat
Britain and 2005 sales of $4.7 billion; revenues had grown at a
compoundannualrateof20percentsince1998.JohnMackey,the
companyscofounderandCEO,believedWholeFoodsrapidgrowth
and market success had much to do with its having remained a
uniquely missiondriven companyhighly selective about what we
sell,dedicatedtoourcorevaluesandstringentqualitystandardsand
committedtosustainableagriculture.Thecompanysstatedmission
wastopromotevitalityandwellbeingforallindividualsbyoffering
the highest quality, least processed, most flavorful and naturally
preservedfoodsavailable.
ButasthecompanysmottoWholeFoods, Whole People, Whole
Planetimplied,itscoremissionextendedwellbeyondfoodretailing.
John Mackeys vision was for Whole Foods to become a national
brandsynonymouswithnotjustnaturalandorganicfoods,butwith
beingthebestfoodretailerineverycommunityitserved.Inpursuitof
thisvision,thecompanysstrategicplanaimedatexpandingitsretail
operationstoofferthehighestqualityandmostnutritiousfoodsto
more andmore customersand promotingorganically grownfoods,
foodsafetyconcern,andsustainabilityoftheentireecosystem.The
companyslongtermobjectivesweretohave400storesandsalesof
$12billionby2010.
Whole Foods stores were highly appealing places to shop.
Managementputconsiderableemphasisonattractivestores,acolorful
dE9cor,andappealingproductdisplays.Thecompanygotveryhigh
marksfrommerchandisingexpertsandcustomersforitspresentation
fromthebrightcolorsandhandstackedfruitstothequalityofthe
foodsandcustomerservicetothewideaislesandcleanliness.Most
stores featured handstacked produce, instore chefs and open
kitchens, scratch bakeries, prepared foods stations, Europeanstyle
charcuterie departments, sampling displays, and everchanging
selections and merchandise displays. Whole Foods merchandising
skillsweresaidtobeaprimefactorinitssuccessinluringshoppers
backtimeandagain.Thecompanysnewestandbiggeststoreswere
generating average weekly sales in excess of $600,000 (over $30
millionannually).
ThefocusofthecaseisonWholeFoodsstrategyandoperationsin
therapidlydevelopingnaturalandorganicfoodssegmentofthe$775
billionfoodretailingindustryintheU.S.Thecompanyisinteresting
inseveralimportantrespects:itisverymuchanupandcoming
grocerychainonethatismakinganameforitselfandstartingto
moveintotheranksoftheindustryleaders;itwalksthetalkin
strivingtoliveuptoitscorevalues(whichareprettyimpressiveand
arefeaturedinthecase);itisdeservedlyrankedamongthebest
companiestoworkforinAmerica(theonlygrocerychaintomakethe
listeachofthepast8years);ithasaprettyimpressivestrategy;andits
financialperformanceisexcellent(overthelastseveralyearsWhole
FoodshasbeenoneofthebestperformingstocksontheNasdaqandit
hasattractedsubstantialinvestorattention).
What are the chief elements of the strategy that
Whole Foods Market is pursuing?
ThecentralelementsofWholeFoodsMarketsstrategyare:

Thecompanysgrowthstrategywastoexpandviaacombinationof
openingitsownnewstoresandacquiringexistingstores.
Aboutonethirdofthecompanysstorebasehadcomefrom
acquisitions(since1991,thecompanyhadacquired67stores
through 14 acquisitions). But the acquisition phase is now
pretty much overfuture store expansion is coming almost
exclusivelyfromopeningitsownnewstores(chieflybecause
the company is concentrating on opening new stores in the
40,000 to 60,000 squarefoot range and there are almost no
naturalfoodscompanieswithstoresofthissizetoacquire).
Going forward, Whole Foods management expected that
acquisitionswouldplayasmallerroleinexpandingthenumber
of store locations, partly because there were very few
competitorsthatoperatedstoresinthe40,00060,000square
footrangethatWholeFoodswasnowopening.WholeFoods
newlyopened58,000squarefootstoreonColumbusCirclein
NewYorkCitywasthelargestgroceryinManhattanandthe
companysbiggestrevenueproducerin2005;WholeFoods
opened a threestory 48,500 squarefoot store in the Union
SquareareaofManhattaninMarch2005.WholeFoodshada
new 74,500 square foot store in Columbus, OH; a flagship
78,000squarefootstoreinAustin,TX;a62,500squarefoot
storeinPrinceton,NJ;a62,200squarefootstoreinPlano,TX;
a61,000squarefootstoreinOmaha,NE;a56,000squarefoot
storeinBellevue,WA;a53,000squarefootstoreinTorrance,
CA, and was on the verge of opening a 75,000 squarefoot
store in London, a 60,000 squarefoot store in Chandler
(outsidePhoenix),anda65,000squarefootstoreinPlymouth
Meeting(asuburbofPhiladelphia).
In November 2005, the company had 64 stores averaging
55,000squarefeetinvaryingstagesofdevelopment(thenew
storesofsupermarketchainslikeSafewayandKrogeraveraged
around55,000squarefeet).
Inearly2006,113ofthecompanys180storeswere30,000
squarefeetorlarger.Itwasthecompanyspracticeeachyear
to relocate some of its smaller stores to larger sites with
improvedvisibilityandparking.
ManyofWholeFoodsneweststoreswerelargerpartlytoprovide
the space needed for an assortment of attractive sections and
departments calculated to heighten the experience and thrill of
shopping at a Whole Foods store. For instance, the new 78,000
squarefoot Austin store had an intimate villagestyle layout, six
minirestaurantswithinthestore,arawfoodandjuicebar,more
than600varietiesofcheeseand40varietiesofolives,aselectionof
1800wines,aCandyIslandwithhandmadelollipopsandpopcorn
balls, a hot nut bar with an inhouse nut roaster, a world foods
section,awalkinbeercoolerwith800selections,14pastrychefs
making a variety of items, a natural home section with organic
cottonapparelandhouseholdlinens,aextensivemeatdepartment
withaninhousesmokerand50ovenreadyitemspreparedbyin
housechefs,andatheaterlikeseafooddepartmentwithmorethan
150 fresh seafood items and onthespot shucking, cooking,
smoking,slicingandfryingtoorder.TheColumbusCirclestorein
Manhattan had a 248seat caf where shoppers could enjoy
restaurantqualityprepared foodswhile relaxingin acomfortable
community setting; a Jamba Juice smoothie station that served

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freshly blendedtoorder fruit smoothies and juices; a full


Meatsandpoultry.
serviceSushiBarbyGenjiExpresswherecustomerssaton
Freshseafood.
barstoolswrappedinNoriseaweedenjoyingfreshcutsushi
Aselectionofdailybakedgoodsbreads,cakes,pies,cookies,
wrapped in organic seaweed; a walkin greenhouse
bagels,muffins,andscones.
showcasingfreshcutandexoticflowers;awineshopwith
Prepared foodssoups, ovenready meals, rotisserie meats,
morethan700varietiesofwinefrombothlargeandsmall
hearthfired pizza, pastas, pE2tE9s, salad bars, a sandwich
vineyards and family estates; and a chocolate enrobing
station, andaselectionofentrE9esandsidefoodsprepared
station in the bakery where customers could request just
daily.
aboutanythingcoveredinchocolate.
Aworldwideselectionofcheeses.
The driving concept of Whole Foods merchandising
Frozenfoods,juices,yogurtanddairyproducts,smoothies,and
strategy was to create an inviting and interactive store
bottledwaters.
atmosphere that turned shopping for food into a fun,
Awideselectionofbulkitemsinbins.
pleasurable experience. Management at Whole Foods
etc
wantedcustomerstoviewcompanystoresasathirdplace
Perishablesaccountedforabout65percentofsalesatWholeFoods
(besideshomeandoffice)wherepeoplecouldgather,learn,
stores(versusabout4050percentatconventionalsupermarkets).
andinteractwhileatthesametimeenjoyinganintriguing
WholeFoodsMarketsoldfoodsthatwerehighqualityintermsof
foodshoppingandeatingexperience.Storeshadacolorful
nutrition, freshness, appearance, and taste and that met strict
dE9cor, and products were attractively merchandised .
standards.WholeFoodsguaranteed100percentsatisfactiononall
Accordingtooneindustryanalyst,WholeFoodshadput
itemspurchasedandwenttogreatlengthstoliveuptoitscorevalue
togethertheidealmodelforthefoodiewhosapremium
ofsatisfyinganddelightingcustomers.
gourmetandthenaturalfoodsbuyer.Whenyouwalkintoa
WholeFoodsstockedconventionalhouseholdproductssoitsstores
WholeFoodsstore,youreoverwhelmedbyadesiretolook
could function as a onestop grocery shopping destination where
ateverythingyousee.
peoplecouldgeteverythingontheirshoppinglist.
Most stores featured handstacked produce, instore
WholeFoodsMarketdidnothaveastandardstoredesign.Rather,
chefs and open kitchens, scratch bakeries, prepared
each stores layout was customized to fit the particular site and
foodsstations,Europeanstylecharcuteriedepartments,
buildingconfigurationandtobestshowofftheparticularproduct
sampling displays, and everchanging selections and
mixforthatstorestargetclientele.
merchandisedisplays.
Storestypicallyincludedsitdowneatingareas,.
WholeFoodsgotveryhighmarksfrommerchandising
A few stores offered valet parking, home delivery, and
experts and customers for its presentationfrom the
massages.
brightcolorsandhandstackedfruitstothequalityof
WholeFoodswantedcustomerstoviewcompanystoresasa
thefoodsandcustomerservicetothewideaislesand
third place (besides home and office) where people could
cleanliness.
gather,learn,andinteractwhileatthesametimeenjoyingan
WholeFoodsmerchandisingskillsweresaidtobea
intriguingandenjoyablefoodshoppingandeatingexperience.
primefactorinitssuccessinluringshoppersbacktime
The company was continually experimenting with new
andagain.
merchandising concepts to keep stores fresh and exciting for
Thecompanysoughttolocateitsnewstoresintheupscale
customers.
areas/suburbsofmajormetropolitanareas86percentwere
Whole Foods spent less on advertising than conventional
locatedinthetop50statisticalmetropolitanareas.In2005,
supermarkets, relying primarily on wordofmouth
WholeFoodshadstoresin31statesand38ofthetop50
recommendationsfromcustomers.
U.S.metropolitanareas.
Competent,knowledgeable,andfriendlyservicewasahallmarkof
Most stores were in hightraffic shopping locations;
shoppingataWholeFoodsMarket.Theaimwastoturnhighly
somewerefreestandingandsomewereinstripcenters.
satisfiedcustomersintoadvocatesforWholeFoods,talkingtoclose
WholeFoodshaditsowninternallydevelopedmodel
friendsandacquaintancesabouttheirpositiveexperiencesshopping
toanalyzepotentialmarketsbasedoneducationlevels,
atWholeFoods.
populationdensity,andincome.Afterpickingatarget
Store personnel were encouraged to extend company efforts to
metropolitanarea,thecompanyssiteconsultantdida
encouragetheadoptionofanaturalandorganiclifestylebygoing
comprehensive site study and developed sales
outintothecommunityandconductingaproactivepublicrelations
projections; potentialsites hadto passEVA hurdles.
campaign.
Eachstorealsohadaseparatebudgetformakingcontributionsto
Newstoresopened12to24monthsafteraleasewas
philanthropicactivitiesandcommunityoutreachprograms.
signed.
Whole Foods stressed a wide selection of natural and
organic foods that appealed to both natural foods and
gourmet shoppersthe companys product line included
roughly26,000foodandnonfooditems:
Freshproduce.