Whole Foods Market's Growth Strategies and Future Prospects

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Case Details:

Case Code : BSTR244
Case Length : 22 Pages
Period : 1978-2006
Pub Date : 2007
Teaching Note : Available
Organization : Whole Foods Market
Industry : Retail
Themes: Growth Strategy
Countries : The US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Traditional supermarkets don't have a driver to get customers in. Whole Foods has the one thing that's lacking in the food retail business: creativity."

- Jason Whitmer, analyst at FTN Midwest, in 2005.¹

"We are a lifestyle brand and have created a unique shopping environment built around satisfying and delighting our customers."

- John Mackey, co-founder and CEO of Whole Foods, in 2006.²

Whole Foods Buys Wind Energy

In January 2006, Whole Foods Market Inc. (WFM), the largest organic and natural products³ retailer in the world, became the biggest corporate consumer of renewable energy in the US, when it announced that it would purchase 458,000 megawatt-hours of wind energy credits⁴ that year from Renewable Choice Energy, a Colorado-based wind power company. These credits reportedly covered the company's entire energy requirement for 2006 (they were also thought to be enough to power 44,000 homes for a year⁵). WFM did not disclose the cost of the purchase, but said that it was "in line with the company's current utility budget"⁶ (Refer to Exhibit I for a note on organic food).

The purchase underlined WFM's commitment to the environment, and enhanced the company's image among its target consumers, most of who were also committed to natural products and environmental causes.

"From a branding perspective, it's a stroke of genius. It shows they understand where their customers are coming from not only nutritionally, but environmentally,"said Barbara Brooks, president of the Strategy Group, a Florida-based consulting firm.⁷

The impact was strengthened by the fact that WFM's purchase of renewable energy was not motivated by gain, as the company did not receive tax concessions or any other benefits from its action.

WFM announced that it did not view the wind energy purchase as a cost, but as a sales driver.

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1] Mark Matson, "The Whole Foods Market Shopping Experience,"USA Today, March 10, 2005.

2] Marc Hogan, "Whole Foods: A Little Too Rich?"BusinessWeek, July 21, 2006.

3] Natural food and organic food are produced without the fundamental nature of the product being altered. In other words, the food, whether it is raw or processed, contains no artificial additives. However, for food to be called 'organic', it needs to be certified by a government approved agency. Therefore, all natural food is not necessarily organic.

4] It is technically not possible to supply wind energy directly from a wind farm to the buyer of wind energy. Therefore, when an individual or company buys wind energy credits, the amount of energy purchased is replaced on the general electric grid by wind power to the same extent. Thus, certified wind energy credits make purchasing wind power possible. (http://sustainablog.blogspot.com/2006/11/closer-look-at-whole-foods-wind-power.html)

5] http://en.wikinews.org/wiki/Whole_Foods_moves_to_renewable_energy

6] Steve Quinn, "Whole Foods Commits to Wind Energy,"ABC News Money, January 10, 2006, http://abcnews.go.com

7] Bruce Horovitz, "Whole Foods Goes with the Wind,"USA Today, January 9, 2006.