Whole Foods Introduction and SWOT Analysis

 

Whole Foods

Whole Foods (Photo credit: bookgrl)

Company Introduction

Whole Foods Market is a natural and organic supermarket chain that was established in Austin, Texas in 1980.  Four businesspeople in Texas decided that that natural foods industry was ready for a supermarket strategy.  Whole Foods grew through acquisitions of other natural and organic supermarkets like Food For Thought and Wild Oats Markets.  Whole Foods Market now has locations outside of the United States, in Canada and the United Kingdom.

The Supermarket and Grocery Stores industry is extremely competitive.  However, Whole Foods is able to compete in this market because many consumers are interested in the natural and organic foods that Whole Foods offers.

In 2011, Whole Foods recorded sales of $10,107. 79 million, up 10.9% from 2010, and net income of $342.6 million, up 28.2% from 2010.

SWOT Analysis

Information from DATAMONITOR

Strengths Broad Product Offerings 

- Perishable foods to appeal to natural and organic foods and gourmet shoppers

- Produce, seafood, grocery, meat and poultry, bakery, prepared foods and catering, specialty (beer, wine, and cheese), coffee and tea, and much more

- Catering services with made-to-order foods available for purchase

- Fresh foods provide competitive edge

- Address multiple customer segments

Focused Growth Strategy

- Opened 16 new stores in FY2010 and 18 new stores in FY2011

- FY2012: 6 stores in first quarter, 3 stores expected in second quarter

- Opened a store in Glasgow and London

- Plans to open 28-32 stores by FY2013

- Compounded annual growth rate (CAGR) of 26% during 1991-2011

Strong Focus on Right Sizing of Stores

- Right size store for locations: Downsized 20 leases by average of 13,000 sq. feet each

- Larger-format stores in dense urban areas, and smaller stores have potential to earn high returns

Weaknesses Product Recalls Affect Brand Image 

- Recalls due to contamination

- 2012 – Whole Foods Market Dairy Free bakery products recalled because they contain milk which is not on labels

- 2010 – Whole Foods Market of Austin, Texas recalled seven types of cheddar cheese due to possible risk of E. coli or listeria contamination

- 2009 – Whole Foods Carob Energee Nuggets recalled due to potential Salmonella contamination

Weak International Operations

- Only seven stores in Canada and five stores in the UK

- Intends to open new stores, but its operations in these markets are not large enough to derive economies of scale

- Competitors receive benefits because of global operations

Increasing Rental Expenses

- Rental leases increasing significantly

- 2011 = $321,6 million, 2010 = $303.5 million, and 2009 = $281.9 million

Opportunities Increasing Demand for Organic Products 

- Rising awareness about importance of natural foods in diets

- Sales of organic foods increased three fold since 2000 exceeding $28.6 billion

- Rose 7.7% in 2010

Increasing Popularity of Private Labels will Improve Margins

- Private label popularity increases as price becomes a concern

- Private label brands accounted for 17.4% of US food products sales in 2010 (was 15.2% in 2006)

- Private-label branded products industry is worth $90 billion in the U.S.

Trends Support Increased Demand for Food Products

- Eating healthy and at home is an increasing trend

- 92% of grocery shoppers view home-prepared foods as a much healthier meal

Threats Intense Competition May Have an Adverse Effect of Profitability 

- Food retailing is an extremely competitive industry

- Competitors: local, regional, national, and international conventional and specialty supermarkets, natural foods stores, warehouse membership clubs, smaller specialty stores, farmers’ markets, restaurants

Stringent Regulations Impose Additional Liability

- Laws and regulations related to health, sanitation and food labeling

- Failure to comply with standards results in penalties

Whole Foods Market

Whole Foods Market (Photo credit: Wikipedia)

Conclusion
The rising popularity of natural and organic foods has led to the success of Whole Foods Market.  After looking at their SWOT analysis, some suggestions for Whole Foods would be to expand more globally.  There are many grocery retailers that have a high presence in the global market, and if consumers outside of the U.S. are considering the importance of natural and organic foods, then Whole Foods would do well in the global market.  Whole Foods also needs to be careful with some of their products.  Product recalls can have a negative affect on their brand image.  In conclusion, Whole Foods does have many strengths in the grocery industry, as well as many opportunities.
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Strengths and Weaknesses Comparison of Apple Inc., Google Inc., and Hewlett-Packard

Apple Inc.
(AAPL)

Google Inc.
(GOOG)

Hewlett-Packard Company
(HPQ)

Strengths

Strong brand image provides an edge over competitors- Brand ranked 20th position in 2009 from 24th in 2008 and 35th in 2007
- In 2008, brand value improved to $15,433 from $13,724 million in 2008 and $11,037 million in 2007
- April 2010, the company sold 300,000 iPads on the first
day of its launch in the USRobust financial performance strengthens investors’ confidence and provides capital for future growth avenues- Total revenue
increased to $42,905 million in FY2009 from $24,578 million in 2007, annual growth rate (CAGR) of 32.1%
- Operating profits of $11,740 million in FY2009, $8,327 million in FY2008 and $4,407 million in FY2007
- Operating profit margin has improved to
27.4% in 2009 from 22.2% in 2008 and 17.9% in 2007
- Net income
margin improved to 19.2% in 2009 from 16.3% in 2008 and 14.2% 2007Focused R&D driving innovation and consolidating its market position
-R&D expenditure was $1,333 million in 2008, $1,109 million in 2008, and $782 million in 2007
- Focused on future development of its existing Mac products
Significant brand image- Brand valued at $100 billion making it the world’s first $114,260 million brand
- Ranked Google 7th in 2009, up from 10th in 2008 in Interbrand’s Top 100 Global Brands
- Interbrand valued Google at $31,980 in 2009Strong infrastructure base- Advertising revenues from Google websites accounted for 67% of its total revenues in FY2009, compared to 66% and 64%, respectively in 2008 and 2007
- Revenue contribution of $15,722.5 million in FY2009, $14,413.8 million in FY2008, and $10,624.7 million in FY2007
- IT assets base of $3,868.3 million in FY2009, compared to $3,573.5 million in FY2008Robust financials

- Revenues increased from $16,594 million in FY2007 to $23,650.6 million in FY2009
- Annual growth rate (CAGR) of 19% for 2007-09
- Net profit margin increased from 30.6% and 25.3% in FY2007 to 35.1% and 27.6% in FY2009
- FY2009, cash and cash equivalents was $10,197.6 million compared to $6,520.4 million in FY2007
- Stockholders’ equity increased from $22,689.7 million in FY2007 to $36,004.2 million in FY2009

Strong market position- Took market leadership from Dell in global PC market in 2006 and kept position through 2010
- 2010, 18% market share of global PC market followed by Dell (13%), Acer (12%), and Lenovo (10%)
- Shipped approximately 64 million in PCs in 2010Successful inorganic growth- Merger with Compaq Computer in 2002 resulted in revenue increase from $48.8 billion to $87 billion
- Acquisition of Mercury Interactive in 2006 valued at approximately $4.5 billion
- Acquisition of EDS valued at $13.9 billion made HP leader in IT services market
- April 2010, acquired 3Com, valued at approximately $2.7 billion
- September 2010, acquired Fortify Software for approximately $2.35 billionSignificant brand recognition- Ranked 10 in the list of top 100 Best Global Brands 2010
- Valued at $26,867 million in 2010, increase of 12% over 2009
- Future 500 ranking, HP ranked 10th in 2010

Weaknesses

Patent infringement lawsuit may affect financial condition and operating results- 2010, Nokia filed a revised suit against Apple claiming Apple infringed Nokia’s patents on almost all mobile phones, portable music players, and computers
- Motorola Mobility filed complaints against Apple for patent infringement of certain productsProduct recalls may harm Apple’s reputation and add significant warranty and other expenses- 2010, antenna problems in iPhone 4 smartphone demands for product recall
-2008, Ultracompact USB Adapter Exchange Program because the adapter’ metal prongs broke off and remained in power outlet, causing risk of electric shock
Lack of product integration- Company has focused more on launching new products than integrating products
- Many new products, but few of them have anything in common with the others
Lack of significant presence in various market segments- Company’s portfolio of offerings lack significant software product or management consulting services
- Way behind competitors, including Apple, Samsung Electronics, and Acer
- Google Android and Chrome OS capture 36% of the smartphones and tablet-style devices by 2015. Apple’s iOS with 35%
- May affect competitiveness and make it dependent on othersDATA ACQUIRED BY DATAMONITOR
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