T Whole Foods Co-Founder and CEO John Mackey From D R Whole Foods Macro Environment Recommendations Recommendations

TO: Whole Foods Co-Founder and CEO John Mackey FROM: DATE: 11/24/2013 RE: Whole Foods Macro
Environment Recommendations Recommendations

The economy is stagnant and the growth rate of the market could drop off at any time. Whole Foods should develop a low cost house brand product line. New competitors are looking to capitalize on the opportunity of the growing market. This includes start-up companies but more importantly, well established grocery stores. rganics could be a fad as the !merican "ietetic !ssociation says that organics are no more nutritious than other foods. Whole Foods should consider adding non organic products to their product line. The added cost of the #$"! organic certification could drive some suppliers out of business giving leverage to others to charge more. The development of a backwards vertical integration, like the fish supply, to stabilize the supply line and reduce costs, should be considered. With its affluent customer base, Whole Foods should develop a program to compete with $top%$hop&s 'eapod service.
Current Situation The growth rate of natural foods has dropped from double digits in the mid ())*s to +.,- in .**( and is running in the single digits for .**.. /owever, the rganic Trade !ssociation predicted the sales of organics would rise from the .**( figure of about 0(* billion to reach near 0.* billion by .**1. 2egardless, the growth rate of natural food sales remains considerably larger than the conventional grocery store growth rate of (-.-. The .**. stagnant economy is one reason for the dip in the organic segment growth rate. /owever, the government&s economic stimulation efforts should increase the monetary supply and therefore spending. .*** was the first year 3*- of conventional grocery stores selling organics outsold all .*,*** natural food stores. 4onventional grocery stores& organic sales will continue to increase in total sales. The number of conventional grocery stores selling organics will also increase. Wal-5art and 6roger, the two largest conventional grocery chains, made large investments in selling organics. The ())* rganic Food 'roduction !ct established national standards for organically grown food products. 7n .**., the #$"! established labeling standards for organic products, ridding the market of inconsistencies. btaining #$"! organic seal approval is costly. The additional costs prohibited some small producers from continuing to sell and increased the cost for all organically produced and labeled products. 7n .**., the number of acres of land dedicated to the production of organic products grew at a rate of appro8imately (.- a year, but comprised only (- of #$ farmland. 'eople are living longer and the population&s average is increasing. 9oung and old people are looking to eat healthier due to an overall wellness trend. 'eople have become better educated on healthier foods and aging, affluent people are the market segment most likely to be interested in organics. 'eople are increasingly concerned about the use of pesticides, growth hormones and other chemicals in traditional grocery items. 'eople are more concerned about environmental
factors that organic products avoid and eliminate. The Nutrition :usiness ;ournal estimated *.,- of #.$. adults were heavy users of organics< spending 0.** or more a month. )*- of !merican adults never buy organics. Analysis and Conclusion The growing market and complementary societal values provide an opportunity for e8pansion and a threat of new entrants to the market. The threat of new entrants to the market comes from new companies or e8isting conventional grocery stores like supermarkets. The supermarkets are the greatest threat with their already large customer base and great capital. Whole Foods should continue to e8pand in urban and suburban areas and needs to be very aware of the risk the grocery stores pose with their ability to offer low cost one-stop shopping. "espite confident predictions to the contrary, there is a =uestion of whether or not organic food is >ust a trend. The !merican "ietetic !ssociation says that organics are no more nutritious than non-organics and they have not been proven to be any healthier than other foods. 7t is risky to base the company entirely on a fad. With conventional grocery stores offering both regular and organic goods, it is easy for the customer to do all their shopping there< leaving Whole Foods out of the picture. $ince there are so few people that buy all organics, and so many that buy a mi8 of goods, there is a definite opportunity for Whole Foods to offer regular goods in their stores. Whole Foods should consider positioning itself as an upscale, healthy, one-stop grocery store. The company should also consider the fact that sales may be rising now but the trend is showing the growth rate is falling and will undeniably flatten out at some point. The current state of the economy is not good< it is stagnant and people may look to substitute higher priced organic foods with cheaper conventional grocery store foods. Whole Foods should establish a cheaper priced brand under their own name to meet this demand and keep people coming to their stores in tough times. The #$"! rganic certification is e8pensive but it increases buyer confidence and =uality assurance which will increase the customer base and therefore total sales. /owever, the additional cost of meeting the standard is a clear threat. Whole Foods needs to be aware that the standard will force some of its smaller suppliers to go out of business or not comply and will increase costs for the suppliers that do comply. With the smaller companies going out of business, the ones who do survive will have leverage to charge more as well. Whether or not Whole Foods passes the increased cost on to its consumers is only a =uestion of whether the gross profit - or total sales will be hurt. Whole Foods should look into stabilizing its supply line by investing in a backwards vertical integration platform, similar to what the company did with its fish supply, for a broad range of their goods. n the technology side, Whole Foods has done little to take advantage of an older affluent customer base. 4ompetitors like $top%$hop have developed online delivery programs mainly targeted at older people who don&t want to leave the house and younger people who are >ust too busy. Whole Foods should take advantage of their great service and knowledgeable staff to develop an upscale online delivery program for their older and busy affluent customers. 'ossible distinguishing Whole Foods services to be included with the program include the Whole foods associate unloads the groceries upon delivery and e8plains the benefits of certain foods while offering recipes. For non computer literate customers the Whole Foods !ssociate could set
the order up and make ad>ustments on visits. ther advance in technology like self checkout lines seem to contradict the Whole Foods approach and are therefore not recommended.

T Whole Foods Co-Founder and CEO John Mackey From D R Whole Foods Macro Environment Recommendations Recommendations

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TO: Whole Foods Co-Founder and CEO John Mackey FROM: DATE: 11/24/2013 RE: Whole Foods Macro

Environment Recommendations Recommendations

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