Porter’s Five Forces
Potential
Entrants
Suppliers
Heating Up
Cool To Warm
Competitive
Rivalry
Substitutes
Buyers
Porter’s 5 Forces – Whole Foods Market
Forces
Description
Conventional
Retailers
Threat of Substitute
Products
Easy switch to the conventional retailers. Specialty
stores built right in to their strategies.
High
Bargaining Power of
Suppliers
Largest food processors acquiring organic food
producers. Only 1% of farmland used for organics.
Medium to High
Bargaining Power of
Buyers
For the most part, conventional retailers determine
what we pay.
Low
Intensity of
Competition
Degree of commitment by the conventional retailers
will determine the intensity.
High
Threat of New
Entrants
Entrants are already there! Their intensity of their
pursuit of the natural/organic market is the question.
Low – Medium
Whole Foods Answer
Forces
Whole Foods Answer to the Competition
The Result
Threat of Substitute
Products
Acquisitions, taking on debt, reducing available
cash. Hoping to get into new markets. Plans for
new stores, varied floor plans.
Slowing growth since
2000.
Bargaining Power of
Suppliers
Use local suppliers. But only 1% of farmland being
farms as organic. The big retailers are in a better
position to deal with suppliers.
Struggling to find beef
and chicken suppliers.
Intensity of
Competition
Growing and marketing organic foods runs 25 to
75% higher than conventional. Conventional
retailers setting the price and gaining market share.
Spend less(%) than the
competition.
Bargaining Power of
Buyers
For the most part, conventional retailers determine what
we pay.
At will.
Threat of New
Entrants
Entrants are already there! Their intensity of their
pursuit of the natural/organic market is the question.
Already there.
Changes in the Competitive Landscape
Is it really to their benefit???
• Local, regional, independent, national, and specialty stores
are all competitors.
• CEO say it is a gateway for customers to try natural/organic
foods or opportunity for the competition?
Take a look at Store Sales Growth
2004
2005
2006
2007
2008
14.9%
12.8%
11.0%
7.1%
???
Sales growth has been cut in half since 2004!
Changes in the Competitive Landscape
Is it really to their benefit???
• We may be seeing a revolution in the food retailing
business.
• Supercenters – Marketplaces – Wholesale Clubs
2006
US Grocery Sales
# of Stores
Revenue in
Billions $
Conventional
Retailers
25%
5812
$377
Whole Foods
0.7%
188
$5.6
• Will the competition force Whole Foods to rethink
their strategy?