Whole Foods Market, Inc.
The Whole Foods Market, Inc. (“Whole Foods”) motto of “Whole Foods, Whole People, Whole Planet” rings true in every aspect of the company. As a premium food retailer, Whole Foods does an excellent job of aligning its business model with its operating model. The 2014 Bain & Company report, “Winning operating models that convert strategy to results”, states that companies with strong operating models aligned with business strategy consistently outperform their competition (1.2% higher revenue growth and 2.6% higher EBIT growth over five years). By empowering the customer, building selective supplier relationships, creating impact in the community, and investing in their employee base, Whole Foods has become a market leader in the U.S. based grocery store market.
Founded in 1980 by John Mackey and his then girlfriend Renee Lawson, Whole Foods was started as one small natural food store in Austin, Texas. As of September 15th, the company has expanded to over 430 stores and employs over 90,000 people across the United States, Canada and the United Kingdom. Whole Foods core value is to “support the health, well-being, and healing of both people — customers, Team Members, and business organizations in general — and the planet”. The company primarily executes this strategy by selling high quality organic, natural, and/or local-based grocery store products (food, health care items, cleaning supplies, etc.) to the increasingly health conscious consumer, and with annual revenues of $14.2bn, the company has a strong future ahead.
Whole Foods is able to succeed with this business model due to its focused and well executed operating model which focuses on improving everyone they interact with: customers, suppliers, employees, and their local community members.
Educating the Consumer – Whole Foods strives to sell top quality products to its customers, but the business model does not work unless you create systems to show the differences in quality and sustainability. The company has implemented rating systems on everything from meats and produce to beauty products, and it does not carry food items with certain types of ingredients, like MSG (monosodium glutamate). With meat, the company uses the 5-Step® Animal Welfare Rating Program designed by the Global Animal Partnership (see picture), and it also has similar methods to measure fish on quality and sustainability. Whole Foods creates its own systems for items like fresh produce and flowers (see pictures and video). By educating the customer, the company is not only helping the customer make the right decision in the store, but it is also making the business model more effective.
Purchasing from Suppliers – Whole Foods sources its food from local, regional and national wholesale suppliers, but it focuses regionally and locally where it can. Some stores even have a “forager” whose sole job is to source environmentally friendly foods from neighboring farms. One of the most successful programs in purchasing is the Whole Trade Guarantee. This program focuses on responsibly sourcing products in a way that is environmentally friendly without lowering the quality. 1% of the profits go to support the Whole Plant Foundation which focuses on community development (see video below). Improving the quality of the farms directly increases the quality of the products that Whole Foods can sell. Everyone wins.
Improving their Communities – Whole Foods Market donates up to 5% of its store profit to charity through a number of charities like the Whole Cities Foundation. This foundation focuses on bringing healthy eating habits and options to people in urban food deserts. Improving the lives of the people in its communities is crucial to it operating model, and it can also lay the groundwork for future customers. For more information, click here: https://www.wholecitiesfoundation.org.
Investing in its Employees – For over 15 years, Whole Foods has been ranked as one of the top companies to work for by Forbes, and it’s not hard to figure out why. The company does the following:
- Promotes healthy habits – 20% discounts off food in the store and more available if you meet health criteria (ex: improving blood pressure)
- Radical transparency – all employees receive the annual report and can see what everyone else is making in compensation; benefits are collectively voted on every 3 years
- Putting the team first – manager and executive promotions are done through peer panels and more senior positions go through a town hall review
- Employee idea generation – employees are encouraged to figure out solutions to different problems and even come up with new product ideas; there are systems in place to make sure these ideas are heard.
It is no accident that Whole Foods has been listed as the best company in its category, and it’s one of the strongest brands in the world. Going forward, the challenge will be to see if Whole Foods can compete with increasing competition from lower priced retailers without losing its way. It’s going to “get real in the Whole Foods parking lot”.