John Mackey and Walter Robb, current Co-CEOs of Whole Foods, both leaned back in their chairs as they sat facing each other. Silent, and deep in their own thoughts, they each reflected back to the “good old days” for Whole Foods – when the company was at the top of the ‘organic grocery game,’ could command a premium price for their products, and had no real competition to speak of.
Today however, that is not the case. Kroger, Trader Joes, The Fresh Market – even Walmart for heaven’s sake – has become a competitor in the organic arena. In addition, over and above offering brand name organics many of these companies have also moved – or are moving – to create their own private/store-label organic brands. As there continues to be uncertainty with respect to where the economy will really go next, both Mackey and Robb know that they will be facing even more competition from these lower priced alternative products.
That means that there will likely be more pressure than ever – and therefore more scrutiny – placed on their experiment with the new “365 by Whole Foods Market” store concept. The goal of these smaller foot-print stores is to apply some of the lessons they have learned in operating their larger stores, as well as the lessons they have learned by watching the competition. As they reflected today, Mackey and Robb are both wondering in particular about how this new store concept will be received … since just a few weeks ago, Walmart announced the closure of all of their smaller, experimental Walmart Express stores.
And that’s why they’ve called you in to the Austin headquarters today. They need your help in organizing their thoughts as to not only what the ‘problems’ really are – but also what the logical next steps are as a result. Before they fell silent, you had jotted down these questions …
What exactly is Whole Foods “product” – and does it deliver value to customers?
How has the competitive landscape changed in the last decade for Whole Foods – and how have these changes left the company in the position they find themselves in currently?
Do the new ‘competitors’ in the world of organics pose a true competitive threat to Whole Foods? Explain why or why not?
What other trends retailing trends in general are having/have the potential to impact Whole Foods competitive position? Explain.
Given the answers to these questions, what – specifically – is the biggest issue the Whole Foods organization has to address?
With respect to their targeting and positioning, what challenges will the company face in the future as it continues to grow and expand?
How (or can) the company work toward overcoming being known as ‘Whole Paycheck’ – due to their premium prices – and find a better balance in their overall marketing mix … especially in light of the new 365 store concept?
Knowing that Mackey especially – as one of the co-founders of the company – is possibly personally close to the situation, what options would you provide to the CEOs to address the issues they face?
What are the pros and the cons of each option?
How do/would these different options differentiate Whole Foods from its competitors?
Which alternative would you recommend – and why?
Identify and defend what you think is their best alternative
State the short-term or intended outcome of this plan
Discuss the long-term sustainability of this pricing strategy
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