Industry Analysis Dominant Industry Characteristics Since going public in 1991, Whole Foods has focused on acquiring other small owner-managed natural and organic food stores as well as opening new stores of their own. However in 2002-2006, they decided that instead of making acquisitions, Whole Foods growth strategy would be based on opening new stores. Whole Foods chooses upscale, urban metropolitan areas to place their stores. These locations are high traffic shopping locations, some are freestanding, some are in strip centers, and some are in high-density mixed-use projects.
By the end of 1991 fiscal year Whole Foods had 10 stores and by the end of 2007 they had 276 stores. By 2008, Whole Foods had stores in 36 states. The most important industry characteristic would be the market size and growth rate. “The combined sales of foods and beverages labeled as ‘natural’ or organic – about 62 billion in 2007 – represented about 7. 3 percent of the roughly 850 billion in total U. S. grocery store sales. ” 7. 3 percent of 850 billion total grocery store sales seem like a small number for a large market but the market is still growing. According to the Organic Consumers Association, sales of organic foods in the United States hit 17 billion in 2006, up 22 percent from 13. 8 billion in 2005. When natural foods and beverages (defined narrowly as those with no artificial ingredients) were lumped in with organic foods and beverages, the U. S. retail sales total came to 28. 2 billion in 2006, up from 23 billion in 2005. ” All this information is a brief explanation on the industry’s position and the product life cycle.
By 2008 organic foods and beverages were available in nearly every food category and were available in over 75 percent of U. S. grocery stores. These numbers show that industry is most certainly in rapid growth concerning sales. Offering organic and natural food at most grocery stores other than specialty stores also shows growth. “While only about 1 percent of U. S. farmland was certified organic in 2005, farmers were becoming increasingly interested in and attracted to organic farming, chiefly because of the substantially higher prices they ould get for organically grown fruits, vegetables, and meat”. This shows that the industry is still in early development because farmers that are not growing organic crops are becoming interested and attracted to organic farming. Being able to charge a higher price and bring in more profit is an eye opener and it encourages farmers to start organic farming. Another industry characteristic in the organic and natural food industry is number of rivals.
An important industry driving force is marketing innovations. “In October 2002 the U. S. Department Agriculture (USDA) officially established labeling standards for organic products, overriding both the patchwork of inconsistent state regulations for what could be labeled as organic and the different rules of some 43 agencies for certifying organic products. ” By establishing labeling standards for organic products concerning what could be called organic insures that people are receiving pure organic products. The new labeling program was not intended as a healthy or safety program (organic products have not been shown to be more nutritious than conventionally grown products, according to the American Dietetic Association), but rather as marketing solution. ” By creating stricter standards it made it harder for growers, processors, exporters, importers, shippers and merchants to prove that their product were truly organic because they are required to provide a documentation verifying that they are certify to grow, process and handle organic products.
With the issue of obesity becoming a bigger and bigger issue in our country, people are taking more interest of their personal health. Many companies are trying to appeal to that population by making health changes to their products such as eliminating the use of MSG. To reduce the risk of obesity in children many schools are also making changes to their daily lunch menus such as cutting out carbonated beverages and providing the students with healthier menu choices. Food Network stars such as Rachael Ray are also aware societies growing desire to eat healthier food so they trying to express this to their viewers.
All of these examples reflect changing societal concerns, attitudes, and lifestyles. The new labeling system was not intended as a health or safety program but that is exactly what it is becoming. The association between natural and organic meant that it is safe to eat since these products are being held at a higher standard. Because of societal concerns there is a change in who buys the product and how they use it. For example more people are trying organic or natural food as a substitution to products that could be considered unhealthy. Instead of purchasing carbonated beverages consumers are trying different type of flavored water and teas
Industry Key Success FacDue to the growth of natural and organic food industry, the products are becoming more easily accessible. By making the products more easily accessible the industry is finding that consumers want more knowledge on the product features and benefits. One marketing key success factor would be courteous, personalized customer service. “Whole Food spent about 0. 5 percent of its revenues on advertising, a much smaller percentage than conventional supermarkets, preferring instead to rely primarily on word-of-mouth recommendations and testimonials from customers. Employees at Whole Foods stores take pride in being knowledgeable of their product and are eager to provide excellence customer care. Having good customer relations helps them build clientele. Whole Foods also ensures that each department is staffed with an employee that is knowledgeable about their products and always ready to answer customer concerns and give feedback on the products. To provide excellence customer care they offer personal attention in every department in the store and when customers asked where an item was located, team members would often take them to the spot.
The team members are quite knowledgeable and enthusiastic about their products and they take advantage of opportunities to inform and educate customers about natural and organic foods. Another success factor would be a talented workforce. Having team members that are skilled and capable of providing information about their product to consumers is very important. There are a couple sources consumers can gain knowledge on natural and organic foods and they are; the store, the internet and their peers.
Information found on the internet is usually not reliable because anyone can post anything on there. Even though a blog or website might be dedicated to the industry it is still not reliable because the information on there can be written by anyone. Information from your friends and family may or may not be reliable. Since the industry is still growing it might be a challenge for new customers to find someone to give them information and feedback on a particular product. This leaves consumers relying on the stores to give reliable knowledge on a product.