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Whole Foods Market
Founded in 1980 as a local supermarket for natural and health foods in
Austin, Texas, Whole Foods Market had by 2006 evolved into the
world’s largest retail chain of natural and organic foods supermarkets.
The company had 179 stores in the United States, Canada, and Great
Britain and 2005 sales of $4.7 billion; revenues had grown at a
compound annual rate of 20 percent since 1998. John Mackey, the
company’s cofounder and CEO, believed Whole Foods rapid growth
and market success had much to do with its having “remained a
uniquely mission-driven company—highly selective about what we
sell, dedicated to our core values and stringent quality standards and
committed to sustainable agriculture.” The company’s stated mission
was to promote vitality and well-being for all individuals by offering
the highest quality, least processed, most flavorful and naturally
preserved foods available.
But as the company’s motto “Whole Foods, Whole People, Whole
Planet” implied, its core mission extended well beyond food retailing.
John Mackey’s vision was for Whole Foods to become a national
brand synonymous with not just natural and organic foods, but with
being the best food retailer in every community it served. In pursuit of
this vision, the company’s strategic plan aimed at expanding its retail
operations to offer the highest quality and most nutritious foods to
more and more customers and promoting organically grown foods,
food safety concern, and sustainability of the entire eco-system. The
company’s long-term objectives were to have 400 stores and sales of
$12 billion by 2010.
Whole Foods’ stores were highly appealing places to shop.
Management put considerable emphasis on attractive stores, a colorful
dE9cor, and appealing product displays. The company got very high
marks from merchandising experts and customers for its
presentation—from the bright colors and hand-stacked fruits to the
quality of the foods and customer service to the wide aisles and
cleanliness. Most stores featured hand-stacked produce, in-store chefs
and open kitchens, scratch bakeries, prepared foods stations,
European-style charcuterie departments, sampling displays, and everchanging selections and merchandise displays. Whole Foods’
merchandising skills were said to be a prime factor in its success in
luring shoppers back time and again. The company’s newest and
biggest stores were generating average weekly sales in excess of
$600,000 (over $30 million annually).
The focus of the case is on Whole Foods’ strategy and operations in
the rapidly developing natural and organic foods segment of the $775
billion food retailing industry in the U.S. The company is interesting
in several important respects: it is very much an up-and-coming
grocery chain—one that is making a name for itself and starting to
move into the ranks of the industry leaders; it “walks the talk” in
striving to live up to its core values (which are pretty impressive and
are featured in the case); it is deservedly ranked among the best
companies to work for in America (the only grocery chain to make the
list each of the past 8 years); it has a pretty impressive strategy; and its
financial performance is excellent (over the last several years Whole
Foods has been one of the best performing stocks on the Nasdaq and it
has attracted substantial investor attention).
What are the chief elements of the strategy that Whole
Foods Market is pursuing?
The central elements of Whole Foods Market’s strategy are :
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The company’s growth strategy was to expand via a combination of
opening its own new stores and acquiring existing stores.
 About one-third of the company’s store base had come from
acquisitions (since 1991, the company had acquired 67 stores
through 14 acquisitions). But the acquisition phase is now
pretty much over—future store expansion is coming almost
exclusively from opening its own new stores (chiefly because
the company is concentrating on opening new stores in the
40,000 to 60,000 square-foot range and there are almost no
natural foods companies with stores of this size to acquire).
 Going forward, Whole Foods management expected that
acquisitions would play a smaller role in expanding the number
of store locations, partly because there were very few
competitors that operated stores in the 40,000-60,000 squarefoot range that Whole Foods was now opening. Whole Foods’
newly opened 58,000 square-foot store on Columbus Circle in
New York City was the largest grocery in Manhattan and the
company’s biggest revenue producer in 2005; Whole Foods’
opened a three-story 48,500 square-foot store in the Union
Square area of Manhattan in March 2005. Whole Foods had a
new 74,500 square foot store in Columbus, OH; a flagship
78,000 square-foot store in Austin, TX; a 62,500 square-foot
store in Princeton, NJ; a 62,200 square-foot store in Plano, TX;
a 61,000 square-foot store in Omaha, NE; a 56,000 square-foot
store in Bellevue, WA; a 53,000 square-foot store in Torrance,
CA, and was on the verge of opening a 75,000 square-foot
store in London, a 60,000 square-foot store in Chandler
(outside Phoenix), and a 65,000 square-foot store in Plymouth
Meeting (a suburb of Philadelphia).
 In November 2005, the company had 64 stores averaging
55,000 square feet in varying stages of development (the new
stores of supermarket chains like Safeway and Kroger averaged
around 55,000 square feet).
 In early 2006, 113 of the company’s 180 stores were 30,000
square feet or larger. It was the company’s practice each year
to relocate some of its smaller stores to larger sites with
improved visibility and parking.
Many of Whole Foods newest stores were larger partly to provide
the space needed for an assortment of attractive sections and
departments calculated to heighten the experience and thrill of
shopping at a Whole Foods store. For instance, the new 78,000
square-foot Austin store had an intimate village-style layout, six
mini-restaurants within the store, a raw food and juice bar, more
than 600 varieties of cheese and 40 varieties of olives, a selection of
1800 wines, a Candy Island with handmade lollipops and popcorn
balls, a hot nut bar with an in-house nut roaster, a world foods
section, a walk-in beer cooler with 800 selections, 14 pastry chefs
making a variety of items, a natural home section with organic
cotton apparel and household linens, a extensive meat department
with an in-house smoker and 50 oven-ready items prepared by inhouse chefs, and a theater-like seafood department with more than
150 fresh seafood items and on-the-spot shucking, cooking,
smoking, slicing and frying to order. The Columbus Circle store in
Manhattan had a 248-seat café where shoppers could enjoy
restaurant-quality prepared foods while relaxing in a comfortable
community setting; a Jamba Juice® smoothie station that served
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freshly blended-to-order fruit smoothies and juices; a full
 Meats and poultry.
service Sushi Bar by Genji Express where customers sat on
 Fresh seafood.
bar stools wrapped in Nori seaweed enjoying fresh-cut sushi
 A selection of daily baked goods—breads, cakes, pies, cookies,
wrapped in organic seaweed; a walk-in greenhouse
bagels, muffins, and scones.
showcasing fresh cut and exotic flowers; a wine shop with
 Prepared foods—soups, oven-ready meals, rotisserie meats,
more than 700 varieties of wine from both large and small
hearth-fired pizza, pastas, pE2tE9s, salad bars, a sandwich
vineyards and family estates; and a chocolate enrobing
station, and a selection of entrE9es and side foods prepared
station in the bakery where customers could request just
daily.
about anything covered in chocolate.
 A world-wide selection of cheeses.
The driving concept of Whole Foods’ merchandising
 Frozen foods, juices, yogurt and dairy products, smoothies, and
strategy was to create an inviting and interactive store
bottled waters.
atmosphere that turned shopping for food into a fun,
 A wide selection of bulk items in bins.
pleasurable experience. Management at Whole Foods
 etc…
wanted customers to view company stores as a “third place”
Perishables accounted for about 65 percent of sales at Whole Foods
(besides home and office) where people could gather, learn,
stores (versus about 40-50 percent at conventional supermarkets).
and interact while at the same time enjoying an intriguing
 Whole Foods Market sold foods that were high quality in terms of
food-shopping and eating experience. Stores had a colorful
nutrition, freshness, appearance, and taste and that met strict
dE9cor, and products were attractively merchandised .
standards. Whole Foods guaranteed 100 percent satisfaction on all
According to one industry analyst, Whole Foods had “put
items purchased and went to great lengths to live up to its core value
together the ideal model for the foodie who’s a premium
of satisfying and delighting customers.
gourmet and the natural foods buyer. When you walk into a
 Whole Foods stocked conventional household products so its stores
Whole Foods store, you’re overwhelmed by a desire to look
could function as a one-stop grocery shopping destination where
at everything you see.”
people could get everything on their shopping list.
 Most stores featured hand-stacked produce, in-store
 Whole Foods Market did not have a standard store design. Rather,
chefs and open kitchens, scratch bakeries, prepared
each store’s layout was customized to fit the particular site and
foods stations, European-style charcuterie departments,
building configuration and to best show off the particular product
sampling displays, and ever-changing selections and
mix for that store’s target clientele.
merchandise displays.
 Stores typically included sit-down eating areas,.
 Whole Foods got very high marks from merchandising
 A few stores offered valet parking, home delivery, and
experts and customers for its presentation—from the
massages.
bright colors and hand-stacked fruits to the quality of
 Whole Foods wanted customers to view company stores as a
the foods and customer service to the wide aisles and
“third place” (besides home and office) where people could
cleanliness.
gather, learn, and interact while at the same time enjoying an
 Whole Foods’ merchandising skills were said to be a
intriguing and enjoyable food shopping and eating experience.
prime factor in its success in luring shoppers back time
 The company was continually experimenting with new
and again.
merchandising concepts to keep stores fresh and exciting for
The company sought to locate its new stores in the upscale
customers.
areas/suburbs of major metropolitan areas—86 percent were
 Whole Foods spent less on advertising than conventional
located in the top 50 statistical metropolitan areas. In 2005,
supermarkets,
relying
primarily
on
word-of-mouth
Whole Foods had stores in 31 states and 38 of the top 50
recommendations from customers.
U.S. metropolitan areas.
 Competent, knowledgeable, and friendly service was a hallmark of
 Most stores were in high-traffic shopping locations;
shopping at a Whole Foods Market. The aim was to turn highly
some were freestanding and some were in strip centers.
satisfied customers into advocates for Whole Foods, talking to close
 Whole Foods had its own internally-developed model
friends and acquaintances about their positive experiences shopping
to analyze potential markets based on education levels,
at Whole Foods.
population density, and income. After picking a target
 Store personnel were encouraged to extend company efforts to
metropolitan area, the company’s site consultant did a
encourage the adoption of a natural and organic lifestyle by going
comprehensive site study and developed sales
out into the community and conducting a proactive public relations
projections; potential sites had to pass EVA hurdles.
campaign.
Each store also had a separate budget for making contributions to
New stores opened 12 to 24 months after a lease was 
philanthropic activities and community outreach programs.
signed.
Whole Foods stressed a wide selection of natural and
organic foods that appealed to both natural foods and
gourmet shoppers—the company’s product line included
roughly 26,000 food and non-food items:
 Fresh produce.