Whole Foods Market, 2005 : Will There Be Enough Organic Food to Satisfy the Growing Demand

LEMAY Gauthier

Neptune code : AIT163

Whole Foods Market, 2005 : Will There Be Enough Organic Food to Satisfy the Growing Demand

1. What about related products?

The company is the world’s leading retailer of naturel and organic food industry. It offers a wide range of products certificated organic conforms to the standards of the U.S. Department of Agriculture. In addition to these supermarkets, the company operates several subsidiaries and it’s now the largest natural food supermarket in the United States.

1. What of the general environment segments and which factors therein are most relevant to WFM?

• Socio cultural: A growing percentage of women working have led to an increase in singlehood and ready-to-eat meal. As more people becoming health conscious, demand for organic food increases as well.
• Ecological: climate change and global warming, more complicated standards
• Legal: labor laws in developing countries and environmental protection laws
• Economical: economic stability and the increasing of labor costs in developing countries

1. In which industry does WFM compete and what are the dominant characteristics of this industry?

There is more and more competition in this sector because people are becoming aware that they must change their habits so more and more people want to change the way they consume. Due to this fact, companies want to seize the opportunity of this emerging market. WFM must compete with natural grocery chains. First, with the quality/price ratio of Trader Joe’s: it adopts price leadership strategy without sacrificing its product quality and its margin.  More, WFM must compete with the number of store of Trader Joe’s: 215 stores located primarily in the west and east coast of the United States. Then, the second biggest retailer in the industry is Wild Oats. They are competing with the same offer: range from organic products to traditional grocery merchandise and they have now 100 stores located in 24 states and Canada. Now, competition does not come only from large companies because traditional stores incorporate natural food sector in theirs stores like Stop’N Shop for example.

1. Is this an attractive industry in which to compete (Porter)?

• Bargaining powers of suppliers (moderate threat):

• The limited farmlands of organic foods in the United States can’t meet the increasing demand in the future. However, natural food supplies pose no threat.
• Lot of suppliers
• Large size of individual suppliers

• Bargaining power of buyers (high treat):

• Consumers have a strong buying power as they are the main buyers in this industry. With increasing ageing baby boomers, singlehood and health conscious adults, demands for better quality of natural and organic foods are likely to increase
• The quality/price ratio is important for consumers and it’s very easy to compare the price of the products thanks to internet
• Market shares are divided with companies

• Competitive rivalry (high treat):

• Rivalry in the industry is intense as firms continuously try to promote their presence and products
• High numbers of firms
• Quality of the products proposed
• Increasing resellers attracted by the demand

• Threat of substitutes (low threat): 

• High availability of substitute products
• Low switching costs

• Threat of new entry (moderate threat):

• Relative ease of doing business in the US
• High difficulty to find the good location
• Moderate cost of doing business

1. What factors are critical to the success of WFM?

Whole food market has established strong reputation with customers and suppliers, so they must keep it to succeed. Furthermore, they will expend their business and open new stores in countries where consumers pay attention to what they eat. In Europe for example because no company has yet seized the market and the demand of this kind of products keep growing while in the United States, the market will start to be saturated. They also must communicate more to prove at customers that high prices are justified.