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Whole Foods Market


Final Paper

By:
Maddy Bellard, Michelle Bratmeyer,
Jessica Gallagher, Carl Valentine,
Melissa McCabe

12/12/2017
Principles of Marketing
31200-04
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Business Model

By bringing Whole Foods to Ithaca we strive to make their product line more accessible,

enticing and cost beneficial for the demographic we are marketing to. As a result of the take-over

by Amazon, Whole Foods can now have a greater variety in its product line, allowing us to

adjust its business model. While still remaining a grocer, it will be less traditional, making it

more inviting to the younger demographic that is being targeted.

Currently, the average Whole Foods shopper earns around $100,000-$125,000+ annually

(Infoscout Whole Foods) whereas the average household income in Ithaca is $48,088 (Census).

With this in mind we must select a product line that consumers will be able to afford. With

discounts that Amazon has already implemented, as well as additional discounts when shoppers

have an Amazon Prime account, this is more achievable. At our store in Ithaca, the vast majority

of food products that are carried will be the Whole Foods line of “365 Everyday Value

Products.” These products are described as:

“Our 365 Everyday Value® products can fill your pantry without emptying your

pocketbook. With value prices every day of the year, our products are formulated to meet

all our quality standards, come in both natural and organic selections, and will change the

way you shop at Whole Foods Market®. That's because we have it all — from whole

grain flours and shade-grown coffee to organic milk and frozen veggies. We make it easy

to stock up on the best products for the best price” (Whole Foods Market 1)

With a focus on the everyday value products, consumers will be able to get more for less. With

our emphasis on marketing to college students as well as lower income residents, shoppers with
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the smaller budget will be attracted to the organic, natural food products without having to go

over budget or omit items from their grocery list.

Additionally, Whole Foods will start carrying products from Amazon’s line in store. In

standard Whole Foods Market retailers, they have already started to carry a range of smaller

products including the Amazon Echo systems. Our Ithaca store will also carry a variety of

Amazon’s discounted kitchen products so that shoppers can make Amazon their one stop shop

for each kitchen need. In addition to kitchen items, the product line will expand to include lower

cost cosmetics, toiletries, and pharmaceuticals that maintain Whole Foods emphasis of natural

and organic with the low costs aided by Amazon.

At the Whole Foods Market in Ithaca, we will offer the option for customers to order

their groceries online for in-store pickup. This will enable customers to be both cost and time

efficient. With this in mind, as well as the inventory planned, its best for us to have a 10,000

square foot store; while we do not want to have a super store, we want to provide enough stock

that Whole Foods will be the ideal one stop shop for consumers natural, organic and healthy

needs.

Customer Profiles

There are 3 customer profiles that we are focusing on that can be found within the Ithaca

area that are not necessarily the typical Whole Foods Market customer. These profiles include

Striving Selfies, Boomtown Singles, and Generation Web. Each of these segments is younger,

without kids and has a lower income bracket which aligns with both the price bracket of Ithaca

as well as the individuals we are focusing in on marketing to.


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Striving Selfies

Striving Selfies are categorized as “younger singles and couples that show signs of

greater potential. They are more often renters, living in suburban neighborhoods and second

cities, and frequent video game and accessory stores” (Claratis). These individuals have a

median income of $20,812 (Claritas) which means they are on a budget when it comes to grocery

shopping. With the discounted healthy products at Whole Foods Markets, we can attract the

individuals on a budget but with the additional selections of technology products like the

Amazon Echo dot being displayed in store, it is likely that based on their consumer trends, they

would be enticed by the different offerings at Whole Foods market.

Boomtown Singles

Boomtown Singles greatly align with our target demographic as they are typically

“[l]ower mid(scale) middle age (<55) without kids who live in affordable housing...single and

working-class, these residents pursue active lifestyles amid sprawling apartment complexes,

bars, convenience stores and laundromats” (Claritas). With a large majority of the Ithaca

population being composed of students, as well as recent graduates a large portion of those
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individuals would fall into this category. What is enticing about this segment is that despite their

median income being $37,086 (Claritas) they strive to live healthy lifestyles which makes them a

perfect consumer for Whole Foods Markets natural, organic products at a discounted price.

Generation Web

Those who fit into the Generation Web segment are ideal to market to based on the

option to order Whole Foods groceries online as these individuals “[have] grown up in the age of

the internet [and are] younger families with above average technology use” (Claratis). By

providing the option to order your groceries online with either in-store pickup or delivery service

we are attracting this segment that is drawn to technology. These individuals are under the

median household income of Ithaca, which makes them shoppers on a budget as they annually

earn about $20,812 per year. While they are not focused on healthy living, they will be enticed

by the technology that Whole Foods offers through online grocery shopping as well as in store

product offering.
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Competitor Analysis

Whole Foods opening in Ithaca, NY will come with the task of having to deal with

multiple primary competitors. These industries include: WalMart, Wegmans, and Green Star.

Each of these grocery stores have their share of strengths, weaknesses, and apparent strategies.

WalMart is a popular, well-known grocery store whose low prices act as their main

strength. Their strategy matching their positioning statement of “Everyday Low Prices” certainly

attracts the low income population surrounding the town of Ithaca. Although their low prices

attract consumer flow, WalMarts main weakness is that they sacrifice their quality for their low

prices, and customers are beginning to notice. Whole Foods recent drop in prices have been

affecting grocery stores across the country, including WalMart. 24% of new shoppers at Whole

Foods expressed that they previously used to shop at Walmart (Thasos). Although WalMart’s

strategy of everyday low prices does attract some customers, a better grocer with better quality

food and similar prices is more appealing to most customers.

Another primary competitor of Whole Foods is the grocery store Wegmans. Wegmans’

main strength is the fact that they are a one stop destination for a variety of foods, with a product

line of healthy and unhealthy options. Wegmans also partners with local family farms which
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allows them to provide organic foods with no artificial flavors or preservatives (About Us). This

relates to one of Wegmans apparent strategies of having a major emphasis on the quality of their

food and ingredients. Their positioning statement, “Every Day You Get Our Best”, rings true for

their wide range of quality products. Another apparent strategy of Wegmans is their focus on

customer service. Establishing a strong customer service team keeps customers wanting to return

to relive their amazing shopping experience. However, like every grocery store, Wegmans has

weaknesses. The demographic of Wegmans’ buyers consists of high income households who

shop less frequently and buy in large bulks (Infoscout Wegmans). Their buyers aren’t looking for

smaller, more frequent trips. This is a weakness of Wegmans because their demographic does not

100% pertain to the demographic of Ithaca. Buyers of Wegmans within Ithaca are mainly college

students or lower income residents; they are looking for a smaller shopping excursion to work

with their lower budget. This could potentially drive Wegmans shoppers to other grocery

destinations with lower prices for the same or better quality of products.

Green Star is the final primary competitor of Whole Foods. Their leading strength is that

they are the leader of natural, organic, and local foods in the town of Ithaca. They are also

slightly less expensive than Wegmans without sacrificing their food quality (Palmateer 39).

Green Star also allows their customers a “Bulk Food” option. Customers can bring their own

containers and fill with bulk-type foods. There is a discount incentive as well for customers who

use their own container versus a bag from the store (Palmeeter 39).

Green Star has multiple apparent strategies. They are a “member owned, community

consumer cooperative” (Membership). This means that the food they serve reflects the values of

the community. Green Star also prioritizes being on top by their constant drive to meet various

food allergy needs and dietary restrictions. They offer many variations of ingredients including
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vegan, non-sugar, and non-wheat (Membership). However, a main weakness of Green Star is

that they are extremely similar to Whole Foods, but do not have the benefits associated with

Amazon. Whole Foods recently underwent a major change when Amazon bought the company

for $13.7 billion. According to business insider, “customers will enjoy lower prices on products

like Whole Trade bananas, organic avocados, organic large brown eggs and many more” (Lutz,

2017). Amazon Prime members will also be receiving special discounts, which will replace the

loyalty program, since it is estimated that half of American households already have an Amazon

Prime membership. All in all, “the two companies will invent in additional areas over time,

including in merchandising and logistics, to enable lower prices for Whole Foods Market

customers” (Lutz, 2017). This will raise major red flags for Green Star due to their potential

buyers relocating their “go to” shopping destination to Whole Foods due to their new benefits.

Positioning Statement

The positioning statement for a company is a crucial representation of the brand. It

summarizes the company brand and showcases it as a representation of its values. We felt a

positioning statement for Whole Foods should encompass the idea that they offer the fresh,

affordable food a consumer has been looking for their entire life. “To people looking for fresh

food with great taste, Whole Foods paves the way for all to find the affordable food of their

dreams”. This positioning statement highlights the key benefits of Whole Foods: fresh, quality

products and affordable costs. This positioning statement also convinces the consumers that the

search is over: Whole Foods has everything they could dream of.

Pricing Strategy
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When considering which pricing strategy to choose, there are many internal and external

factors that go into a pricing decision. The internal factors are the overall marketing strategy and

the company objectives, whereas the external factors to be considered are the market, demand,

economy, and the impact on other parties in the environment. A general pricing strategy that

Whole Foods Market should use is good value priced goods. Good value pricing is usually less

expensive, but retains the same quality. It is a pricing strategy that attempts to offer customers

the desirable combination of both the features and benefits.

The good value pricing strategy will be implemented at the Ithaca Whole Foods Market

to give the store the flexibility to change prices to meet the Ithaca market’s demand. Allowing

the company to change prices will be beneficial when opening a store in Ithaca, based on the

three main competitors. Whole Foods will have the ability to base prices off Walmart, Wegmans,

and Green Star and analyze the consumer trends. The shopping basket analysis we completed

shows the price comparison to the three biggest competitors in Ithaca, NY. The prices for the

four different grocery stores varies by product. The stores were typically about equal or within a

few dollars. The biggest price difference we noticed was the non GMO olive oil. The item is

most expensive at Whole Foods (Class Lecture, Komaromi, 2017).

Shopping Basket Analysis

Grocery Items Whole Foods Wegmans Green Star Walmart

1.Pears $1.99 (per LB) $2.69 (per LB) $1.99 (per LB) $1.05 (per LB)

2.Pasta $1.49 (LB) $1.79 (per LB) $1.99 (per LB) $1.05 (per LB)
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3. All Purpose Flour $4.99 (5 LB) $.99 (5LB) $7.45 (5LB) $2.79 ( 5 LB)

4. Boneless Chicken $6.29 (per LB) $5.49 (per LB) $5.99 (per LB) $5.00 (per LB)

5.Lean Ground Beef $6.59 (per LB) $2.49 (per LB) $6.99 (per LB) $4.00 (per LB)

6.Non GMO Olive Oil $19.99 (32 $10.99 (32 $9.99 (32 $10.89 (32
Ounces) Ounces) Ounces) Ounces)

7. Multigrain Bread $4.99 $5.00 $2.99 $2.98


(loaf)

8. Medium Eggs $2.49 $1.89 $1.56 $.99


(dozen)

9. Butter (1 Pound) $3.49 $2.69 $3.49 $2.45

10.Black Beans $.79 $.65 $1.49 $.92


(can)

11. Flour Tortilla $2.49 $1.59 $2.49 $1.78

12. Wheat Crackers $2.99 $1.99 $2.99 $2.98


(8 OZ box)

Marketing and Promotion

One major obstacle that Whole Foods must overcome is persuading consumers to switch

from their current grocer, and shop at Whole Foods instead. The first step of this is to get the

consumer to try Whole Foods for the first time. One promotional strategy to accomplish this
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targets the thousands of college students on campus. Whole Foods can hire students at Cornell

University and Ithaca College to be brand ambassadors for their campuses. They can table at

events and on main parts of campus handing out coupons for items that college students typically

seek out. These coupons will provide incentive for students to go to Whole Foods for the first

time because they know that they will be getting a good deal. Also at these tables, the brand

ambassadors will hand out free samples of Whole Foods food because college students love free

food.

For this expense, Whole Foods will put aside $5,000 worth of food to be given out as

samples. Hiring the brand ambassadors will cost an estimated $124,800 per year because

minimum wage in New York will be $10.40/hour as of 2018 and the brand ambassadors would

work an estimated 10 hours per week for about 30 weeks per year. Ithaca College is a smaller

school, so there would be about 10 brand ambassadors on campus. Since Cornell University is

larger, there would be about 30. With 40 total brand ambassadors costing $3,120/year, it totals

out to $124,800.

Amazon Prime is popular among all age groups. Since Amazon now owns Whole Foods,

it would be wise to implement a rewards program connected to Amazon Prime accounts. This

rewards program can offer specials and discounts and prizes for when one reaches a certain

milestone in spending (for example, a free pastry once $200 is spent). The brand ambassadors

can promote this program on campuses, and in collegetown where there is heavy pedestrian

traffic. This rewards program will increase sales in the store because people will want to get

more rewards and to use their coupons, therefore choosing Whole Foods over their usual grocery

store.
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Finally, residents of the city of Ithaca love to be involved in the city. There are several

festivals and events per year that draws thousands of people. They also enjoy supporting one

another through purchasing from local businesses and hiring local bands. With this in mind,

Whole Foods can host their own event focused on supporting locals to promote their store. They

can have local bands to perform in the commons and invite the mayor to come speak. The event

can feature the specific premade foods that Whole Foods sells. There can be tables throughout

the events with different types of foods. For example, the tables can be arranged by country, so

one offers Chinese food, one offers Tai food, and so on. They can give out free samples of the

food along with coupons to incentivize people to go into Whole Foods on their next grocery store

run. Additionally, since residents of Ithaca like to support local businesses, Whole Foods can

make contracts with local farmers and other food providers to sell their foods at the Ithaca

location. Promoting this at the event and inviting the farmers to have their own tables would be

highly approved of by the locals and increase their likelihood of supporting Whole Foods.

The cost of handing out coupons at the event and having the brand ambassadors hand

them out will be about $1,050. This is because the coupons will cost about $0.07 to print six and

there will be about 90,000 coupons handed out in total. Another expense for the event includes

the cost of the local bands. On average, booking an amateur 4-person band costs about $1,000-

$1,500 and the event would book five, so the maximum for the bands would be about $5,000-

$7,500. Additionally, Whole Foods will give out about $10,000 worth of food at this event.

Financial Analysis

Pro forma income statement projections spanning the upcoming three-year period have

been forecasted based on square-footage data from the 2016 Whole Foods Market Annual
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Report. Our income statement projections for the Whole Foods Market location offering 365

products uses an assumed 10,000 square foot store.

In making projections for the income statement, a weighted average method was used for

revenue growth rate and cost of goods sold rate (COGS). The heaviest weight of 50% was

assigned to the 2017 fiscal year, with data from each preceding year ending at 2013 assigned

equal remaining weight. These rates are more conservative than the year-over-year rates

calculated for Whole Foods Market using data from 2013 to 2017. Conservative rates are more

logical to use due to the high concentration of competitors in the Ithaca area. These rates demand

strategic decisions to improve the profitability and competitiveness of the Whole Foods Market

location in Ithaca.

To project the figures on the income statement, the weighted average rates have to be

applied to square footage quantities to attain the gross profit of the branch. According to the

Annual Report, Whole Foods Market boasts an “industry-leading” sales per gross square foot of

$915, which can be used to solve for projected revenues (2016 Annual Report). To find COGS, a

constant variable that represented the COGS per square foot needed to be attained. Using

information from the 2016 Whole Foods Market Annual Report, the 2016 fiscal year COGS was

divided by the total square footage of Whole Foods Market stores, yielding a COGS per square

foot of $579.38. Revenue and Cost of Revenue for 2018 are therefore the products of the sales or
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COGS per square foot, the total square footage of the store, and 1 plus the weighted average

growth rate. The Revenue and Cost of Revenue values for 2019 and 2020 are the products of the

projection from the previous year and the weighted average growth rate plus 1. The Gross Profit

for each year was the difference between the Total Revenue and the Cost of Revenue (Total).

To calculate the selling, general, and administrative expenses (SGA expenses), the same

weighted method that was used to find the revenue and COGS growth rate was used to find the

average SGA expenses to profit margin percentage. This percentage was then applied to each of

the three projected years in the SGA Expenses row.

The Operating Income was derived by subtracting the SGA Expenses from the Gross

Profit. Operating Income decreases with each projected year due to the weighted average of the

COGS growth rate being slightly greater than the weighted average of the revenue growth rate.

Conclusion

It is our opinion that opening a Whole Foods Market in Ithaca, New York would be both

successful for our brand and the Ithaca Community. With the ability to market to our target

audience with our extensive product line, we anticipate being able to outperform current local

competitors.
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References

2016 Annual Report (Rep. No. 0-19797). (2016). Austin, TX: Whole Foods Market Inc.

doi:http://s21.q4cdn.com/118642233/files/doc_financials/2016/Annual/2016-WFM-Annu

al-Report.pdf

“365 Everyday Value.” Whole Foods Market, www.wholefoodsmarket.com/about-our-


products/product-lines/365-everyday-value.
"About Us." About Us - Wegmans. Wegmans, n.d. Web.

"American FactFinder - Community Facts." United States Census Bureau. United States Census
Bureau, 05 Oct. 2010. Web.
K. K. (2017, December 9). Pricing. Lecture.

Lutz, Ashley (August 24, 2017) Business Insider. Amazon is Official Buying Whole Foods –
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here’s everything that will change for customers.

http://www.businessinsider.com/amazon-buys-whole-foods-changes-2017-8/#whole-

foods-will-get-cheaper-for-everyone-starting-monday-1

Membership. (n.d.). Retrieved October 13, 2017, from https://greenstar.coop/membership/

Palmateer, Paige. "Food Co-op A Staple in Ithaca Community." The Business Journal- Central

New York 21.11 (2007): 39. ProQuest. Web.

"Thasos Reports on 'Competitive Impact of Lower Prices at Whole Foods'." Entertainment

Close-up 10 Oct. 2017. Business Insights: Essentials. Web. 13 Oct. 2017.

"Wegmans Shopper Insights and Demographics." Infoscout.co. InfoScout, n.d. Web.

"Whole Foods Shopper Insights and Demographics." Infoscout.co. InfoScout, n.d. Web.