Since John Mackey opened the first Whole Foods Market in 1980, Whole Foods has grown into one of the largest supermarkets chain in the nation. In the 80s, Whole Foods expanded mostly through acquisition. By late 90s and early 2000s, Whole Foods expanded more through opening their own new stores. By 2006, it became the nation’s largest natural foods retail chain and was listed on the Fortune 500 list. This paper is going to discuss Whole Foods’ strategy, the resources of Whole Foods that leads to its success, their social missions, as well as the challenges the Whole Foods is facing.
Whole Foods’ Strategy: Transform the organic food stores shopping experience Whole Foods made a breakthrough in the natural food markets because it has transformed the image of organic food store from unreliable and inferior grocery shopping to the opposite. Whole Foods did that through two strategies: educating customers and creating an engaging and interesting shopping experience at their stores. It displays their food in attractive and exciting layouts, renovates their stores with modern and clean designs.
It gives out pamphlets and put up signs in stores that explained concepts like sustainable, free range, and certified organic. The education makes customers feel comfortable with their buying. By educating the public on natural food concepts and providing transformative shopping experience, Whole Foods attracts mainstream customers and has popularized nature food. There are three key resources that give Whole Food a sustainable competitive advantage over its direct competitors: (1) size and scale; (2) employees with experiences in conventional grocery stores; (3) Distribution efficiency and decentralized management.
These resources create an unique and integrated system that reinforce fit among the company’s business operation and technology skills, allowing it to derive the most out of the value it created. (1) Size and Scale Whole Foods managed to spread their stores across the nation by going through numerous successful acquisitions of its competitors in the natural food retailing industry. Some examples include the acquisition of Bluebonnet Natural Foods Grocery in Dallas and Whole Food Company based in New Orleans in the 80s, as well as the acquisition of Wellsprings Grocery in North Carolina and The Bread & Circus in New England in the 90s.
In each acquisition, Whole Food incorporated the successful practices of its competitors into its other stores. For example, Whole Foods incorporated the produce, meat, and seafood departments from The Bread & Circus. Therefore, the acquisition not only allowed Whole Foods to cut down competition, but also expanded its clientele in other stores by installing the successful practices with the knowledge acquired from its competitors. Through acquisition and adopting new practices, Whole Foods becomes the first nationwide natural food retail chain that offers a wide variety of organic food. 2) Employees with experiences in conventional grocery stores Whole Foods has been repeatedly listed on Fortune list of the 100 best companies to work for. The company offers full time job and benefits to store employees, which is not a conventional practice in the competitive grocery market.
Whole Foods is also known for their open-book policy in performance evaluation and friendly team working environment. By offering these favorable compensation and work condition, Whole Foods draws experienced employees from conventional supermarkets and improves their operation with their expertise. 3) Distribution efficiency and decentralized management To meet its customers’ demand for non-local foods, Whole Food built its own distribution centers that are organically certified. Yet to be consistent with its decentralized management policy, Whole Foods allow stores to select at least 10% of their products without national approval, as long as the sources are qualified. By meeting the demand for non-local foods along with consistent management policy, Whole Foods continues to out-perform its competitors financially.
At the same time, Whole Foods is willing to take the trade-off of losing some “high mission valence” employees and customers – people who value the mission of providing local food highly. Whole Foods’ Social Missions and the challenges it faces Whole Foods supports local and organic farming because they believe it is the best way to promote sustainable agriculture and protect farm workers and the environment. One example of Whole Foods’ efforts in protecting the environment is their Local Producer Loan Program.
This program provides loans to small, local producers who sell their products to Whole Foods and need the loans to continue or improve their operation. Other examples of its environmental protection efforts include their environmentally friendly store maintenance programs and building its stores that meet the environmental standards of the LEED (Leadership in Energy and Environmental Design). Whole Foods also carry other social missions, like promoting healthy diets and alternative energy sources. As Whole Foods continues to grow in scale and profits, many people begin to challenge how wholesome Whole Food is.
As mentioned before, Whole Foods built distribution centers to transport organic foods across the nation which is not coherent with its support for local foods. In response to the demand for non-local organic food, Whole Foods also purchases from industrial organic farm which defeat the locally focused and sustainable values. It also lost some of its supporters when it started selling sugary snacks, beer and wine, specialty cheeses and chocolates and other items that violated its spirit of providing natural, organic, and healthy food.
In short, Whole Food receives plenty critics on their “industrial organic” model. Is it possible to stay growth in scale and profits while stay true to one’s social missions? John Mackey, CEO of Whole Foods, believes that “there is no inherent reason why business cannot be ethical, socially responsible, and profitable. ” Yet it is apparent that Whole Foods has slowly deviated from its founding spirit. The need to build distribution centers implies that large volume of organic food is being transported across the country.
This process involves massive amount of energy consumptions on food transportation, preservation and pre-packaging that could be avoided if Whole Foods sell organic food locally only. Cornell ecologist David Pimental calculated that it took 57 calories of fuel energy per every 1 calories of produce to ship an organic salad from California to the East Coast. To get back on track and hold true to its missions, Whole Foods should focuses on supporting local sustainable farming and long distance shipping of organic food. However, the latter practice is economically impractical.
If Whole Foods stop providing non-local organic food, other supermarkets will pick up those sales transactions and Whole Foods will eventually lost its competitiveness. Therefore, it is unrealistic to stay growth in scale and profits and stay completely true to social missions. Yet Whole Foods can still achieve its social missions on a relative basis. The key for achieving social missions and profitability is again education. Whole Foods should assume the responsibility to educate the public on the energy involved in transporting non-local food.
It may consider putting up “energy tags” that indicating the estimated energy involve in the transportation of the product next to its price tag. It may raise public awareness on non-local food and eventually set a healthy trend of buying local. However there are potential downsides in this practice. First, it could be costly to develop the calculation of calories used in transporting each product. Secondly, Whole Foods may risk its current profitability as sales from non-local organic food decreases. These two economic costs would be the trade-offs for staying true to its social mission, which not all Whole Foods stakeholders may welcome.