Kelley Parrigin

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

• Customers are considered the

#1 stakeholder
• Takes a longer view of
financial health rather than the
quarterly model
• Helped develop standards for
organic foods and more
humane treatment of animals
• Fortune’s 100 Best
Companies to Work For: #22
 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….
 Values

• Selling the highest quality • Creating ongoing win-win

natural and organic partnerships with our
suppliers
products available
• Caring about our
• Satisfying and delighting
communities & our
our customers environment
• Supporting team member
happiness and excellence
• Creating wealth through
profits & growth
 The General Environment

• Demographic
• 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
• Increase in global trade
– Opportunity to expand into new markets
– Food standards are not uniform
• Emergence of China as superpower
Industry Environment
Analysis

Whole
Foods
 Threat 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
– Wal-Mart
• Grocery market insensitivity to economic
conditions
– For example, Wal-Mart vs. Whole Foods
Threat of Substitutes
 Rivalry Among 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
 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 relies on- “word-of-mouth”
 Opportunities
• Expand private label brand
– Possibly work with large chains for generic distribution
• Expand food selection
• Expand its investment 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
Internal Capability
Analysis
 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 delivery
 Value Chain Analysis
Primary Activities
• Store operations
– Duplication
– Customization*
• Marketing and sales
– Full service
– Rich sensory
experience*
 Value Chain Analysis

Support Activities
• Human resources
– Motivational and
respectful work
environment
– Elaborate team
environment
 Value Chain Analysis

Support Activities
• General administration
– Prime store locations
– Leveraged
culture/reputation
– Excellent relationships
with stakeholder groups
 Resources and Capabilities

Tangible Resources
• Financial
– Capacity to raise equity
• Physical
– Stores
– Distribution centers
– Support facilities
 Resources and Capabilities

Tangible Resources
• Organizational
– Strategic planning
process
– Innovative evaluation
and control systems*
 Resources and Capabilities

Intangible Resources
• Human capital
– Strong bench strength
– Widespread involvement &
knowledge transfer
– Trust and commitment
• Innovation
– Strong innovation capacity*
• Reputation
– Brand name
– #1 natural food chain
 Resources and Capabilities

Organizational Capabilities
• Highly adaptive business
model
• Leveraging supplier
relationships
• Outstanding customer
service
• Ability to hire, motivate
and retain human capital
 Sustainable Competitive
Advantage?
• Challenging 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
Stakeholder Agenda
 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
 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%

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, 9/2009 and 9/2011 and 9/2013
2009 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

2008 2007 2006

Net income $ 114,524 $ 182,740 $ 203,828

 Glimmers of Hope
• Rise in same store sales
• Customer attrition over
• Beat profit expectations
• Shares have soared
• Attacking their
inefficiencies