Whole Foods Market Analysis: Business Model, Strategy, and SWOT

This case study examines Whole Foods Market, a supermarket chain specializing in natural and organic foods. The analysis begins with a timeline of key developments, including its IPO, website launch, introduction of the 365 brand, environmental initiatives, and Amazon's acquisition. The business model focuses on product differentiation, targeting upper and upper-middle-class customers and those with niche dietary needs, offering a wide range of products not typically found in conventional grocery stores. The company operates through various store brands and provides customized online shopping experiences. The case study also addresses criticisms regarding pricing. A SWOT analysis highlights strengths like its established network, high product quality, and Amazon's backing, while acknowledging weaknesses such as negative price perception and overdependence on a single supplier. Opportunities include increasing market share and dominating online retail, while threats include intense competition and industry regulation. The case provides a comprehensive overview of Whole Foods Market's strategic position and challenges within the retail landscape.

Whole Foods Market is a supermarket chain founded in Austin, Texas. It sells natural and
organic food through its 465 stores across the US, Canada and UK. The following are the
timeline of the key development in the company over the years (Whole Foods Market, Inc. -
Strategy, SWOT and Corporate Finance Report , 2019).
1. 1992 - The company went public and issued its first IPO.
2. 1999 -The company launched its website, www.wholefoods.com.
3. 2003 - Whole Foods Market introduced the 365 Organic Everyday Value brand targeting
price sensitive customers. It also became America's first national certified organic grocer.
4. 2006 – Took initiative towards environmental sustainability by purchasing renewable
energy credits from wind farms to offset 100% of the electricity used in all of its facilities
across the US and Canada.
5. 2010 - Fortune magazine ranked Whole Foods Market among the list of the '100 Best
Companies to Work For.'
6. 2011 - The company adopted 5-Step Animal Welfare rating system to provide
transparency about the conditions of farm animals used in the company's products.
7. 2017 - Amazon acquired Whole Foods for US$13.7 billion.
8. 2018 - Amazon extended its Prime services to the stores in eight of the US cities.
Business Model
Its business strategy is primarily product differentiation by offerings a variety of natural and
organic products including non-Genetically Modified Organisms (non-GMO), vegan, gluten-
free, dairy-free and other special diet foods. Its point of distinction (POD) is to offer these
products in wide range not easily available in a normal grocery store (Whole Foods Market, Inc.
- Strategy, SWOT and Corporate Finance Report , 2019).

Its target customers belong to the upper and the upper middle class who are willing to pay extra
for healthy and natural foods. The other segment is the customer with a niche demand such as
vegan food.
The company operates through several store brands such as Whole Foods Market, 365 Everyday
Value, Whole Catch, Engine 2 Plant-Strong and Whole Trade each targeting a particular segment
of the customers. For instance, the last two brands specifically target customers which are health
conscious.
It provides customized online shopping experience through its website and app by giving options
based on dietary preference such as vegan, gluten free, sugar conscious, low sodium and low fat.
Further, a highly responsive prime service through Amazon provide it a POD from other online
grocery retails.
The business strategy of the company has been under scrutiny over the years for overcharging
the customers. A comparison by the US 2010 consensus data found that the grocery items were
charged 12% over the national average (Shaw, 2015). The company also had to pay fine of
$800k for overcharging the customers in California in 2014 (Whole Foods fine: Chain to pay
800K for overcharging in California, 2014).
SWOT Analysis – The company’s strength is its business strategy along with its association
with Amazon. The issues of product recalls, government regulation and overdependence on one
supplier threaten its operation. It has not fully exploited the advantage of amazon prime which is
a potential opportunity to exploit to increase its market share. (Appendix)

Strength
1. Established network of stores and
supply chain
2. High Product quality
3. Caters to niche demand
4. A subsidiary of Amazon
5. Online platform supported by prime
Weakness
1. Negative price perception
2. Product Recalls
3. Overdependence on one supplier – United
Natural Food Inc. which supplies one third
of the supply and has a contract to supply
till 2025 (Anya George Tharakan, 2017).
4. Weak International Presence
Opportunity
1. Increase its market share
2. Dominate online grocery retail
Threat
1. Intense Competition among grocery retail
2. Highly regulated industry