Whole Foods: Power to the People
Whole Foods empowers people through high quality, extraordinary service and competitive prices
Company Background:
Whole Foods Market was founded in 1980 in Austin, Texas when four small natural food store owners decided the industry was ready for a supermarket. Today, “America’s Healthiest Grocery Store” operates 412 stores in 42 U.S. states, 10 stores in Canada and 9 in the United Kingdom. With $15.4bn in total sales for fiscal year 2015, it is the largest natural and organic foods supermarket in the U.S., the 5th largest public foods retailer and the 10th largest food retailer overall. And Whole Foods has big aspirations – to the tune of 1,200 stores in the United States alone.
Business Model:
Whole Foods prides itself on being a mission-driven company where value is created through adherence to the following mission:
- We sell the highest quality natural and organic products available.
- We satisfy, delight and nourish our customers.
- We support team member happiness and excellence.
- We create wealth through profits and growth.
- We serve and support our local and global communities.
- We practice and advance environmental stewardship.
- We create ongoing win-win partnerships with our suppliers.
- We promote the health of our stakeholders through healthy eating education.
This mission is in essence a commitment to its people – its customers, its employees, its suppliers and its shareholders. In my opinion, this commitment is the secret sauce of Whole Foods and the very reason that Whole Foods has been so effective at aligning its business and operating models since 1980.
Operating Model:
Customer Satisfaction
While the U.S. supemarket industry grew at 3% in 2014, Whole Foods barreled ahead at almost 3x that pace. The company attributes its record sales to a shift in the consciousness of Americans who are becoming increasingly more aware of the connection between healthy eating and quality of life. During the 2015 Whole Foods Investor Conference, Co-CEO Walter Robb remarked, “In all my years of doing this, I’ve never seen a time where the customer has more interest in where their food comes from.” Importantly, customers trust Whole Foods because of the company’s emphasis on quality. It is these quality standards (animal welfare standards, sustainable seafood standards and responsibly grown standards) that differentiate Whole Foods and thus ultimtely create value for WFM stakeholders.
Employee Empowerment
Whole Foods has been voted one of Fortune’s “100 Best Companies to Work For” for 18 consecutive years. The reason is because Whole Foods gives employees a stake in the success of the business and, in return, employees take responsibility for delivering performance. Under this plan, each store is organized into ten self-managed teams –prepared foods, grocery, customer service, etc. When a team comes in under budget, a portion of the surplus is divided among team members while another portion is put into the team’s savings pool. When a team is over budget, on the other hand, the overage is taken out of the team’s pool, or paid back using future surpluses. All teams with a positive balance at year-end are paid out. Furthermore, employees are treated as fully-informed partners in the business, as books are open to everyone. Co-CEO John Mackey told Fast Company, “We have found that the more freedom and autonomy we give our people, the more we let them know about how the company works, the more committed and responsible they become.” As a result, 70% of Whole Foods’ 90,900 employees work full-time, with voluntary turnover at only 14%, an incredibly low number for the industry – and one that then creates value for WFM stakeholders.
Supplier Partnerships
Whole Foods proactively partners with its suppliers in order to ensure supply. First, the company believes in being fully transparent and sharing forecasts as early as possible and as far out as possible, thereby enabling its suppliers to accurately forecast their own demand. The company also helps suppliers grow through its local producer loan program. These loans – $18 million to date across 235 suppliers – enable partners like Coyote Creek, a Texas egg farm with the state’s only organic feed mill, to build additional mills and sell feed to other Whole Foods suppliers and Thompson Farms, a pork producer in Georgia, to build its own processing plant. Lastly, Whole Foods willingly shares its purchasing power. The Commodities Team purchases on behalf of both Whole Foods and many of its suppliers, thereby sourcing in bulk from all over the world at the best prices. The cycle comes full circle when Whole Foods is able to get the supply it needs for its stores – and creates further value for WFM stakeholders when the suppliers pass costs savings back to Whole Foods.
References:
http://www.wholefoodsmarket.com/mission-values/core-values
https://en.wikipedia.org/wiki/Whole_Foods_Market
http://www.freibergs.com/resources/articles/accountability/whole-foods-a-disciplined-democracy/
Thank you very much for sharing this post! Whole Foods has certainly captured the imagination and attention of many people who are in-sync with the latest health trends. Their bias towards organic, and better-for-you products is certainly catapulting them to the top which is clearly evident in their growth. However, their prices and specificity in business model does alienate the ‘middle to low American’ population in my opinion. You wont necessarily find the cheap products you can find in a ShopRite or Stop’n’Shop when you are at Whole Foods and hence the consumer will have to go to multiple stores to buy their groceries. For example, I never saw Oreos being placed in the Whole Foods aisle, and hence witnessed consumers going to Whole Foods for the healthy stuff, but also to other stores to buy Oreos and other cheaper treats. I would be interested to better understand Whole Foods’ consumer income demographic, and intrigued to see how they market themselves to this lower income segment, enabling them to become Whole Food loyalists in the future.
Great post! Whole Foods was definitely a first mover in the organic foods movement, but do you think they will be able to sustain their competitive advantage as more mainstream grocers such as Kroger and Costco move into the organic foods space? They are certainly one of the most expensive grocery store out there (let’s not forget about the $6 asparagus water scandal!) but as more grocers of scale begin to offer the same products and quality for less, will the company be forced to slash prices to stay competitive?