Kelley Parrigin

Kat Keivens
Bo Ghassemi
Kathy Flores
Miranda Niederle
Sheridan Sands
Jessica Nelson
Seda McCarthy
 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 natural and organic
products available
• Satisfying and delighting our customers
• Supporting team member happiness and
excellence
• Creating wealth through profits & growth
• Caring about our communities & our
environment
• Creating ongoing win-win partnerships with our
suppliers
 General Environment
• Demographics
• Economic
• Political / Legal
• Socio / Cultural
• Technological
• Global
 The General Environment

Demographics -
• Only one demographic
governs WWI:
• 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 –
 The General Environment
Political/Legal –
 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
• Whole Planet Foundation
• Whole Trade Guarantee program
 Threats 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
– Walmart

• Grocery market insensitivity to economic

conditions
– For example Walmart vs Wholefoods
Threat of Substitute
Products
 Rivalry Among Competing
Firms

• Internet
Grocers
• Mass • Local
Merchandiser
Farmers’
s and Super
Markets
Centers

• Whole Foods
• Restaurants
• Supermarkets and Fast Food
Chains

• Convenience • Wholesale
stores clubs
 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- rely on word-of-mouth
 Opportunities
• Expand private label brand
– Possibly work with large chains for generic
distribution
• Expand food selection
• In store classes
• Invest 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
 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 operations
 Value Chain Analysis
Primary Activities
• Store Operations
– Duplication
– Customization
• Marketing and Sales
– Full service
– Rich sensory
experience
 Value Chain Analysis
Support Activities
• Human Resources
– Code of conduct
– 100 Best Companies
– 90% Employee
Satisfaction
 Value Chain Analysis
Support Activities
• General Administration
– Best Corporate Citizen
– Top-notch mgmt
– Talented real estate team
 Resources and Capabilities

Tangible Resources
• Financial
– Capacity to raise equity
– High borrowing capacity
– Strong financials
• Physical
– Stores
– Distribution Centers
– Support Facilities
 Resources and Capabilities

Tangible Resources
• Organizational
– Just-in-time logistics
– Innovative evaluation
and control systems
 Resources and Capabilities

Intangible Resources
• Human
– Strong bench strength
– Widespread involvement &
knowledge transfer
• Innovation
– Creative solutions
• Reputation
– Brand name
– Competitive advantage
 Resources and Capabilities

Organizational Capabilities
• Highly adaptive business
model
• Leveraging supplier
relationships
• Outstanding customer
service
 
Stakeholder Agenda
 Sustainable Competitive
Advantage?
• Not Likely 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.
 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
 Organizational Strategy
• "Whole Foods is a social system,It's not a
hierarchy. We don't have lots of rules
handed down from headquarters in Austin.
We have lots of self-examination going on.
Peer pressure substitutes for bureaucracy.
Peer pressure enlists loyalty in ways that
bureaucracy doesn't.“ John Mackey,
Founder and Chairman
 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
 
Sept. 28, Sept. 30, Sept. 24,
    2008   2007   2006  
 

Consolidated Statements of Operations Data (1)           

 

Sales  $ 7,953,912  $ 6,591,773  $ 5,607,376 

 

Cost of goods sold and occupancy costs   5,247,207  4,295,170  3,647,734 

 

Gross profit   2,706,705  2,296,603  1,959,642 

 

Direct store expenses   2,107,940  1,711,229  1,421,968 

 

General and administrative expenses   270,428  217,743  181,244 

 

Pre-opening expenses   55,554  59,319  32,058 

 

Relocation, store closure, and lease termination costs   36,545  10,861  5,363 
 

Operating income   236,238  21% 297,451 7% 319,009 

 

Interest expense   (36,416) (4,208) (32)

 

Investment and other income   6,697  11,324  20,736 

 

Income before income taxes   206,519  304,567  339,713 

 

Provision for income taxes   91,995  121,827  135,885 

 

Net income  $ 114,524  37% $ 182,740  10% $ 203,828 

             
 

Basic earnings per share  $ 0.82  $ 1.30  $ 1.46 

 

Weighted average shares outstanding   139,886  140,088  139,328 

             
 

Diluted earnings per share  $ 0.82  $ 1.29  $ 1.41 

 

Weighted average shares outstanding, diluted basis   140,011  141,836  145,082 

             
 

Dividends declared per share  $ 0.60  $ 0.87  $ 2.45 

             
 

Consolidated Balance Sheets Data           

 

Net working capital  $ (43,571) $ (104,364) $ 114,211 

 

Total assets   3,380,736  3,213,128  2,042,996 

 

Long-term debt (including current maturities)   929,170  760,868  8,655 

 
Shareholders’ equity   1,506,024  1,458,804  1,404,143 
 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%

Revenue per employee Efficiency 151,056 123,527 135,816 232,184 216,669 367,217

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, 2009 9/2009 and 9/2011 and 9/2013
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 

$897,698 / $2,706,705 (Gross Profit 2008) = 33%

 Where Can Whole
Foods Improve???
• A more centralized strategy if they aim to
reach $10 billion in annual sales
Sources