The main reason behind the international expansion is the desire to offset the risks presented by domestic competitors such as Wal-Mart, Kroger Company, Sprouts Farmers Marker, Trader Joe’s, and Costco among others. According to Basu (2015), both the company’s revenues and comps have been severely affected by the competitors trying to gain a foothold in the organic food segment. International expansion can become an effective solution for decreasing the risks associated with competition as well as provide the company with a good growth opportunity. WFMI has been operating in Canada since 2002; therefore, it is already familiar with the environment of the foreign market (Basu, 2015).
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Another factor that drives the company to increase its overseas exposure has to do with the fact that “international revenues for the 2010-2014 period have increased at a compounded annual growth rate (CAGR) of 14.74 percent” (Basu, 2015, para. 2) which is significantly higher in comparison with local CAGR sales that amounted to 11.96 percent. Therefore, it would be unreasonable to miss the opportunity to increase the store count in Canada. Furthermore, the expansion to Canada will help the company to add at least 30 new outlets, thereby reaching the objective of crossing the 500-facilities mark by 2017 formulated by its co-CEO, John Makey (Basu, 2015).
Whole Foods Market, Inc. (WFMI) is the U.S corporation headquartered in Texas. It owns the largest supermarket chain of natural foods without artificial coloring and preservatives. As of 2015, WFMI had 433 facilities across the U.S., Canada, and the United Kingdom and hired more than 90, 000 employees (Market Realist, 2015). Moreover, since 2012, the company “held the top retailer position in the organic food space until Costco took the top spot in 2015” (Market Realist, 2015, para 1).
WFMI is not just another chain of grocery stores; its vision goes deeper than being a provider of organic foods: the company is interested in the creation of sustainable agriculture, reducing waste, and promoting “environmentally sound cleaning and store maintenance programs” (Whole Foods, 2017, para. 11). WFMI’s slogan—Whole Foods, Whole People, Whole Planet—shows that the company is interested in the promotion of sustainable solutions (Whole Foods, 2017, para. 2). Moreover, according to the statement of the organization’s core values, it measures its success in terms of “customer, satisfaction, team member happiness and excellence, return on capital investment, improvement in the state of the environment and local and larger community support” (Whole Foods, 2017, para. 2).
Marketing objectives of WFMI are associated with establishing needs and requirements of Canadian consumers in order to align them with the company’s expectations from the marketing activities. By including marketing objectives in the overall strategic objectives of WFMI, it is possible to achieve better outcomes of the future expansion. The key marketing objective is to provide the company with preliminary information on local market trends. Additional objectives include the assessment of behavioral patterns, needs, and requirements of Canadian consumers. It will help WFMI to develop effective pricing and positioning strategies necessary for launching its business in the new geographical area. By doing so, the company will have a chance of distinguishing itself from other organic food sellers operating in Canada.
The company has several marketing objectives; however, in order to successfully carry out its expansionary actions, it is necessary to consider impediments and threats associated with the international expansion. Therefore, WFMI has to develop effective marketing strategies helping it to overcome all hurdles and to achieve its stated objectives. To this end, the company has to carefully examine their marketing mix in order to change the emphasis on all elements so they would better correspond to the requirements of the new market. A successful implementation of marketing strategies “could open a promising growth avenue for the company and its investors” (Basu, 2015, para. 6).
Vancouver is the largest city of British Columbia which is a province that promises the most traction for opening new facilities. Other locations for the expansion of WFMI stores include Toronto, Quebec, Montreal, and Vancouver. The large population of these cities will provide the stores with the maximum foot traffic.
In order to develop a marketing plan, it is necessary to assess the WFMI’s marketing mix and determine whether it enables the company to reach its consumers in the most effective manner.
At the level of products, the company uses its marketing mix to with the utmost efficiency. WFMI offers its customers a wide range of products that can fit into three categories: 365 Everyday Value, Whole Foods Market Brand, and Engine 2 Plant-Strong (Panmore Institute, 2015). The first product line targets price-conscious buyers who want to stay healthy and consume organic foods. Whole Foods Market Brand is a product line fits at the top of the company’s brands portfolio. Engine 2 Plant-strong is a successful attempt of WFMI to extend its product line by accommodating customers with special dietary restrictions and vegetarian preferences. Moreover, the company diversifies the list of products it offers to its customers by using “the Whole Trade label for products that come from suppliers certified under the Whole Trade Guarantee for sustainability, fair labor practices and related criteria” (Panmore Institute, 2015, para. 5). It can be argued that in order to get a competitive advantage in Canada, WFMI has to put more emphasis on new 365 stores. Due to the fact that new brand is going to target millennials as the main consumer base and provide more people with organic products at affordable prices, it will have a chance to effectively respond to needs and demands of the new market.
4Ps of marketing is a tool that helps to describe and assess how a company delivers its products or services. Place is an extremely important component of the marketing mix; therefore, it is necessary to assess distribution venues of the company. As of 2015 WFMI had 433 facilities across the U.S., Canada and the United Kingdom (Market Realist, 2015). The company constantly adds new locations, thus reaching a large share of people who would like to become a part of the interdependent global community. Moreover, the company sells its products online, thereby reaching a wider audience of consumers. In order to facilitate distribution, WFMI offers delivery services for foods purchased online.
To this end, the company created a partnership program with Instacart which is a group of independent contractors offering their shopping services to companies like Safeway and Costco (Kusek, 2015). As a result of the partnership with Instacart, WFMI was able to sell $1 million worth of products in the first few months of 2015 (Kusek, 2015). Taking into consideration the fact that delivery costs only $3.99 to $5.99 and takes only one hour on average, WFMI should see a sizable spike in demand for its foods (Kusek, 2015). Therefore, it can be argued that WFMI has to put more emphasis on online sales as an effective distribution channel helping it to ensure a high level of availability of their products in Canadian organic foods market.
Promotion is an element of a marketing mix that helps to examine how effectively a company reaches its target audience. In the case of WFMI moving in a new geographical region, it is clear that the company has to lead aggressive promotional activity using three core elements of marketing: advertising, public relations (PR), and sales promotions (Panmore Institute, 2015). Even though the company is already present in the Canadian market, it has to reach its target audience with the help of online, press, TV, radio, and billboards advertising. Currently most of its messages are directed at local and regional consumers; however, it also creates series of advertisement messages such as the ‘Values Matter’ aimed at the national audience (Panmore Institute, 2015).
Taking into consideration the fact that “the company invested between $15 million and $20 million for the campaign” (Market Realist, 2015, para. 19) it could be argued that promotion budget for the Canadian market should be similar. In addition to creating national campaigns, the company also participates in local PR programs which helps it to build its unique brand image. Similar promotion strategy should be applied to increase public awareness and convert it into an instantly recognizable brand. Moreover, during summer months a team of promoters will travel through the major Canadian cities offering free samples of WFMI products at public conferences and other gatherings.
WFMI is concentrated on the delivery of premium products; therefore, in terms of pricing strategy, it is separated from its competitors such as Wal-Mart (Panmore Institute, 2015). This separation is justified because the company always delivers products with the least possible amount of artificial ingredients. The company guarantees the quality of its foods making it one of the main selling points of its brand. Furthermore, the premium pricing strategy is aligned with the strategy of broad differentiation that allows to maximize product quality and ensure business success and expansion (Panmore Institute, 2015). However, in order to attract more Canadian consumers, the company should consider adding more 365 stores in order to occupy as many different market segments as possible. Taking into consideration the fact that the company’s pricing strategy keeps away many price-conscious consumers, it can be argued that new 365 stores will offer significant growth opportunity for WFMI because they better correspond to purchasing power of the majority of prospective customers (Dalavagas, 2015).
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SWOT analysis is an important component of the marketing plan. By assessing the most significant strengths, weaknesses, opportunities and threats of WFMI, it will be easier to take into account both favorable and unfavorable factors affecting the future expansion efforts.
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WFMI is a supermarket chain of natural foods that shares a leading position with Costco Wholesale Corporation in the America’s organic food market. Taking into consideration the fact that the company’s main competitors –Wal-Mart, Kroger Company, and Costco—are interested in the delivery of a diversified range of products while WFMI specializes in the narrow niche of organic products, it could be argued that its product range is an easily observable strength (Gregory, 2015). Furthermore, a leading position in its market niche is another key strength that allows WFMI to leverage on economies of scale (Gregory, 2015). Moreover, the company has a recognizable brand that is strongly associated with superior quality goods. The consumers recognize the food retailer as a lifestyle brand; therefore, it is able to easily retain its large customer’s base.
Even though WFMI has strong support among high-income consumers, the individuals with more modest incomes perceive the company’s prices as very high. Interestingly enough, this perception has led to the creation of a mocking nickname for the company—“Whole Paycheck” due to the believe that in order to pay for its products, consumers have to give up their paychecks (Dalavagas, 2015). Therefore, high prices can be considered the main weakness of WFMI. Another issue that has to be addressed by the management of the company has to do with its overdependence on the U.S. market. According to a recent report, more than 95 percent of 2015 revenues came from the domestic market which makes WFMI vulnerable to swings in the U.S. economy (Dalavagas, 2015). In order to address these concerns, the company should review its pricing strategy and start making more tangible investments in foreign facilities. However, limited supplier base can hinder the expansion of WFMI operations.
The launch of a new store format called 365 is an important move in the company’s attempt to occupy as many different market segments as possible. The mission of this offshoot is to provide more people with organic products at affordable prices. The new brand is going to target millennials as the main consumer base. Taking into consideration the fact that the company’s pricing strategy keeps away many price-conscious consumers, it can be argued that new 365 stores offer significant growth opportunity for WFMI (Dalavagas, 2015).
Since the major share of WFMI revenues comes from the U.S. market, international expansion is another opportunity that cannot be missed. Therefore, the company should continue growing the number of its store in the U.K. and Canada. The international expansion will provide WFMI with the opportunity to support its margin growth which is higher in foreign locations than the corporate average (Dalavagas, 2015).
The company experiences fierce competition in the organic food industry which is not limited by local and regional players but also includes “national and international supermarkets, natural food stores, warehouse membership clubs, online retailers, farmers, markets, and restaurants” (Dalavagas, 2015, para. 6). Wal-Mart, Kroger Company, Sprouts Farmers Marker, Trader Joe’s, and Costco are also selling similar organic products but at lower prices. If competitive trends continue, the company will not have a chance to capitalize on 365 stores and fill in the new market segment.
Numerous government agencies such as the Food and Drug Administration (FD), the Federal Trade Commission (FTC), the United States Department of Agriculture (USDA), and the Consumer Product Safety Commission (CPSC) among others present significant regulation issues which can result in severe penalties and other legal repercussions including seizure of licensing (Dalavagas, 2015).
Host Country Analysis
While expanding into the overseas market, WFMI has to adjust its products, price, place, and promotion strategies in order to effectively respond to the needs and demands of local organic food consumers. Therefore, the selection of both the market and segment is an extremely important step in an attempt to pursue growth opportunities.
According to a report issued by Canada Organic Trade Association (2013), estimated value of Canada’s organic market was around $3.7 billion in 2012. It means that the size of the market has grown by 300 percent since 2006 (Canada Organic Trade Association, 2013). The expansion of organic market share can be evident from the following figures. While in 2006, organic sales accounted for less than 1 percent of total grocery sales in the country, the figure reached 1.3 percent in 2008 and climbed to 1.7 percent in 2012 (Canada Organic Trade Association, 2013). According to Canada Organic Trade Association (2013), “58 percent of all Canadians are buying organic products every week” (p. 2). Total national organic food and non-alcoholic beverages sales amounted to $2, 978.6M (Canada Organic Trade Association, 2013).
Therefore, WFMI can explore the broadening of organic food market in the country by opening additional locations there. Taking into consideration the fact that British Columbia is a leading Canadian province in the consumption of organic foods, the company should consider opening new locations there. Canada Organic Trade Association (2013) report suggests that “Alberta and Ontario have the next most developed organic markets based on mainstream retail sales”; therefore, these provinces should be also considered as potential expansion locations (p. 3). Interestingly enough, while mainstream retail accounted for $1, 350.3M or 45 percent of the total sales, natural health, and online retail accounted for $864.7M or 29 percent of total organic sales (Canada Organic Trade Association, 2013). It means that the company has a chance to explore its Instacart partnership program and expand its online presence in the Canadian market.
The report states that whole foods hold leading position in organic sales in both brick-and-mortar stores and online sails outperforming “packaged, prepared and snack food categories” (Canada Organic Trade Association, 2013, p. 3). Fruit and vegetables lead the category of organic sales amounting to 40 percent of the total number (Canada Organic Trade Association, 2013). The beverage category accounts for 16 percent of total sales while dairy and eggs, bread and grains, packaged and prepared foods, and condiments make up 15 percent, 12 percent, 8 percent and 4 percent, respectively. (Canada Organic Trade Association, 2013). The rest 9 percent of total organic sales are captured by snack foods, meat, poultry, and fish (Canada Organic Trade Association, 2013).
The report states that there is a significant degree of competition in the majority of market segments in Canada. The most competitive organic foods market segments are the most lucrative ones and include tea, coffee, juice and drinks, pasta, hot cereals, cooking oils, RTE cereals, flour, bread, rice and dried beans (Canada Organic Trade Association, 2013). Taking into consideration the fact that almost half of all organic products sold on the market are either produced, processed or packaged in Canada. Moreover, almost all top segments of the market are filled with Canadian products; therefore, it stands to reason to consider making more investment in local foods suppliers.
The findings of the research conducted by Canada Organic Trade Association (2013) reveal that 58 percent of the country’s residents make weekly purchases of organic foods and beverages. Out of the total number of buyers, British Columbians account for 66 percent (Canada Organic Trade Association, 2013).
While online grocery shopping trend is only starting to shape the consumer behavior in the U.S., it is much stronger in Canada. According to Market Realist (2015), “online grocery sales as a percentage of total grocery sales in the U.S. stood at 4 percent in 2014” (para. 39). In Canada, on the other hand, natural health and online retail accounted for $864.7M or 29 percent of total organic sales in 2013 (Canada Organic Trade Association, 2013). Therefore, WFMI is recommended to capitalize on online sales by conducting e-commerce operations in Canada. However, the current distributing partner of the company, Instacart, does not operate in the country. Taking into consideration the fact that unlike Kroger Company and Wal-Mart, WFMI does not have enough facilities in Canada to justify the creation of its own system of at-home delivery; therefore, WFMI should consider making a new deal with local contractors offering cheap delivery services.
Currently, the company operates 433 facilities: 414 in the U.S., 10 in Canada and 9 in the U.K. (Market Realist, 2015). However, “the management sees growth opportunity beyond 1, 200 stores” (Market Realist, 2015, par. 23). Taking into consideration the fact that host country analysis shows that Canada shows a high level of cultural distance, supportive local environment, and strong online grocery shopping trend, the company is recommended to explore this opportunity by launching more new 365 stores.
Even though in order to succeed in the Canada organic food market, WFMI has to focus on each and every aspect of the marketing plan, products, price, and promotions are the elements of the marketing mix that have to be considered more carefully by the company. Quality foods and beverages offers are the key components in building the trust of new customers. Furthermore, it is also necessary to create as much awareness about the company and its products as possible by starting a campaign similar to the ‘Values Matter’ one. Moreover, WFMI has to reach its Canadian audience with the help of online, press, TV, radio, and billboards advertising. Taking into consideration the fact that millennials are main consumer base the company has to invest in aggressive online marketing campaign emphasizing its intention to provide more people with organic products at affordable prices.
New, innovative and quality product offering is the highly essential factor for building the trust of the customers, on the product. Along with the high-quality products, the awareness about the products in the customer is also a crucial factor for the success of the company in a new market. For this reason, the company needs to enhance the frequency of its marketing campaign. In this way, the company should employ the combination of the quality products with the heavy advertising and promotional strategies of the company.
Canada offers great expansion opportunities for WFMI which can be realized if the company manages to overcome impediments and threats associated with the international expansion. By making British Columbia and its major city, Vancouver, its primary locations, the company will have a chance to tap into 66 percent of organic foods customer base in Canada.
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