Kelley Parrigin

Kat Keivens
Bo Ghassemi
Kathy Flores
Miranda Niederle
Sheridan Sands
Jessica Nelson
Seda McCarthy
 Whole Foods Vision

• Our vision of a
sustainable future
means our children
will be living in a
world that values
human creativity,
diversity, and
personal choice.
 Mission
• Whole Foods — We search
for the highest quality, least
processed, most flavorful and
natural foods possible .…
• Whole People — Our people
are our company. They are
passionate about healthy food
and a healthy planet….
• Whole Planet — We are
committed to helping take care
of the world around us….

• Selling the highest quality
natural and organic
products available
• Satisfying and delighting
our customers
• Supporting team member
happiness and excellence
• Creating wealth through
profits & growth
Values
• Creating ongoing win-win
partnerships with our
suppliers
• Caring about our
communities & our
environment
 General Environment
• Demographics
• Economic
• Political / Legal
• Socio / Cultural
• Technological
• Global
 The General Environment

Demographics -
• Only one demographic governs WFI:
• Each store is located in a neighborhood
where 40% have a college degree.
• This ensures being in an area where
people know about nutrition.
 The General Environment
Economic –
• WFMI has grown
with the rising
trend of health
and fitness
consciousness.
• It depends on this
trend to continue
and to grow.
 The General Environment

Political/Legal –
• In the U.S, Japan, and the European
Union “Organic” standards are certified by
legislation.
• In other countries laws or standards may
not exist.
 The General Environment
Socio/Cultural –
• Representative on the National Organic
Standards Board
• Health conscious
• Consumer awareness-health education
• Sustainable agriculture
 The General Environment
Technological –
• Business Processes
– Website
– Paperless ordering system
• Green Mission
– Power monitors
– Wind power
– Solar and Biomass
 The General Environment
Global –
• More than 270 stores in North America
and the United Kingdom
• Whole Planet Foundation
• Whole Trade Guarantee program
 Threats of new Entrants
• Other Organic supermarkets or
competitors

• Effects on Whole Foods market

 Bargaining power of
suppliers
• The greater bargaining power of Whole
Foods Market could also squeeze existing
suppliers who will have fewer market
options
• Supplier challenges
– Number of suppliers
• Supplier loyalty
– Different manufacturers
 Bargaining power of
buyers
• Buyer dominance
– Walmart

• Grocery market insensitivity to economic

conditions
– For example Walmart vs Wholefoods
Threat of Substitute
Products
 Rivalry Among Competing
Firms

Internet Grocers

Mass
Local Farmers’
Merchandisers and
Markets
Super Centers

Whole Foods
Restaurants and
Supermarkets
Fast Food Chains

Convenience
Wholesale clubs
stores
 Internal Capability Analysis

• SWOT Analysis
• Value Chain Analysis
• Resources and Capabilities
• Sustainable Competitive Advantage
 Strengths
• Quality food
• Customer “Experience”
• Store and Corporate Culture
• Image and Branding
• Loyal Customer Base
• Great Store locations for target market.
 Weaknesses
• Prices are high- “Whole Paycheck”
• Lacking on International Operations
• Narrow target market
• Marketing- rely on word-of-mouth
 Opportunities
• Expand private label brand
– Possibly work with large chains for generic
distribution
• Expand food selection
• In store classes
• Invest in marketing about the benefits of
eating healthy and organic.
 Threats
• Economy- downturn leads to less
disposable income and less luxury
• Market intrusions and competition
• Lax regulations on organic foods
 Value Chain Analysis
Primary Activities
• Partnering with Vendors
– Owns and operates
downstream suppliers
– Low interest loans
– New store inventory
 Value Chain Analysis
Primary Activities
• Purchasing Goods
– Stringent Quality
Standards
– Regional and
National Suppliers
– Local Suppliers
• Managing and
Distributing Inventory
– JIT operations
 Value Chain Analysis
Primary Activities
• Store Operations
– Duplication
– Customization
• Marketing and Sales
– Full service
– Rich sensory
experience
 Value Chain Analysis
Support Activities
• Human Resources
– Code of conduct
– 100 Best Companies
– 90% Employee
Satisfaction
 Value Chain Analysis
Support Activities
• General Administration
– Best Corporate Citizen
– Top-notch mgmt
– Talented real estate team
 Resources and Capabilities

Tangible Resources
• Financial
– Capacity to raise equity
– High borrowing capacity
– Strong financials
• Physical
– Stores
– Distribution Centers
– Support Facilities
 Resources and Capabilities

Tangible Resources
• Organizational
– Just-in-time logistics
– Innovative evaluation
and control systems
 Resources and Capabilities

Intangible Resources
• Human
– Strong bench strength
– Widespread involvement &
knowledge transfer
• Innovation
– Creative solutions
• Reputation
– Brand name
– Competitive advantage
 Resources and Capabilities

Organizational Capabilities
• Highly adaptive business
model
• Leveraging supplier
relationships
• Outstanding customer
service
Stakeholder Agenda
 Sustainable Competitive
Advantage?
• Not Likely because….
– Exit barriers are low
– Market is being infiltrated by lower priced,
more readily available stores.
– People looking for one stop shop
– Direct Competitors are making it even harder
for Whole Foods to differentiate themselves.
 Business Strategy
• Expansion
– Whole Foods is expanding internationally
– Expects to have a sizeable market position in
Europe 20 years from now
– Hopes to become a global company
• Roping in Customers
• Captive banners
• Giving customers a sense of “virtue”
 Business Strategy
• Information Sharing
– Collects and distributes sensitive information
to everyone.

• Community Giving
– Donate food and money to fight poverty
worldwide
 Organizational Strategy
• Caps on executive compensation
– No exec. Makes more than 14x the employee
average
• Teams
– Whole Foods is committed to self managing
teams which do their own hiring and
scheduling.
– To be hired, individual must be voted on by
2/3 of their team during “trial” period
 Organizational Strategy
• "Whole Foods is a social system,It's not a
hierarchy. We don't have lots of rules
handed down from headquarters in Austin.
We have lots of self-examination going on.
Peer pressure substitutes for bureaucracy.
Peer pressure enlists loyalty in ways that
bureaucracy doesn't.“ John Mackey,
Founder and Chairman
 Ethical Issues
• Treatment of animals
– Existing standards for humane animal
treatment can always be improved
– Thrives to help animals flourish and do it in a
way that is cheap enough for customers to
buy
• 14 Page code of conduct
– Addresses expected and desired employee
behavior
 Financial Analysis

• NASDAQ since 1992

• Retail Grocery Business segment
• Ranked 26th according to revenue
• 2008 Sales just under $8B
• Acquisitions $700M loan
Financial Analysis
 Financial Analysis

Ratio Measures 2008 2007 2006 Kroger Safeway Industry

Net Profit Margin Profitability

Net profit / Revenues 1.4% 2.8% 3.6% 1.71% 2.16% 3.65%

Return on Equity (ROE) Profitability

Net Income / Total Equity 7.75% 12.56% 14.76% 24.40% 13.29 17%

Revenue per employee Efficiency 151,056 123,527 135,816 232,184 216,669 367,217

Current Ratio Liquidity

Current Assets/Current Liab. .93 .85 1.22 .94 .88 1.15

Total Debt/ Equity ratio Debt/Equity

Funding .62 .52 .01 1.56 .81 N/A

Interest Coverage Debt Mgnt 6.49 70.69 9,969.03 5.05 5.17 N/A
 

Financial Analysis
The following table shows payments due by period
on contractual obligations as of September 28, 2008 (in
thousands):
Due before Due After Due Due After
Sept 28, 2009 9/2009 and 9/2011 and 9/2013
Before 9/ 2011 9/2013

        Less than 1   1-3   3-5   More than 5  

    Total   Year   Years   Years   Years  
Long term debt obligations $ 897,698 $ — $ — $ 897,698 $ —
Estimated interest on long term debt obligations

126,956 40,591 64,010 22,355 —

Capital lease obligations (including interest)

41,125 2,089 4,179 4,179 30,678

Operating lease obligations(1) 6,017,763 261,467 627,483 641,428 4,487,385
Total $ 7,083,542 $ 304,147 $ 695,672 $ 1,565,660 $ 4,518,063

$897,698 / $2,706,705 (Gross Profit 2008) = 33%

 Where Can Whole
Foods Improve???
• A more centralized strategy if they aim to
reach $10 billion in annual sales
Sources