Whole Foods Market goes global
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Whole Foods Market plans to expand into Brazil and Italy. It currently operates 312 stores across the US, Canada, and UK, with annual revenues of $10.1 billion in 2011. Whole Foods is known for its high quality organic and natural products. To enter Brazil, Whole Foods will leverage the country's large agricultural industry and growing organic food market. A market analysis shows Brazil has low political risk and high economic growth, though inflation is a challenge. Competition in organic retail is moderate, and suppliers are plentiful.
Whole Foods Market goes global
- 1. Whole Foods Market goes global Entry market strategy for Brazil & Italy
- 2. Company overview AMERICAN ORGANIC FOODS SUPERMARKET CHAIN BASED IN AUSTIN, TEXAS • 312 stores spread in the USA (297), Canada (8) and the UK (7) FOUNDED IN 1980 BY JOHN MACKEY • Annual revenues in 2011: US$ 10.1 billion ENTERED THE UNITED KINGDOM IN 2004 • London (2007): first full-size store • Glasgow (2011): first Scottish store • Cheltenham (2012): last UK store PRODUCTS • Seafood • Grocery • Bakery • Meat and poultry • Prepared food & catering • Specialty (beer, wine & cheese) • Coffee and tea • Books • Nutritional supplements • Vitamins • Body care • Floral items • Pet products • Household
- 3. Financial Highlights CHART 1: CHART 2: 10.1 billion US$ revenues in 2011 8.5% comparable store sales growth, highest result in 5 years (WFM Annual Report 2011)
- 4. Strengths and Weaknesses Strengths Weaknesses Strong ethical values High cost in expansion Community involvement Large perishable inventory Premium prices & High inventory costs Finest quality of goods Shortage of inventory in certain Minimal level of expensive advertising categories Organic products retail leader in the USA Geographic limitations Strong WFM-supplier collaboration Low brand awarness outside the USA Good distribution system Well trained staff with specialized skills Value price private-labels
- 5. Positioning + Brand awareness - + Ethics + Price - + Quality
- 6. Highest quality products Caring for Food safety the concerns environment Organic market leader Ranked #32 Whole Planet Satisfying Community “100 Best Foundation &delighting involved Companies (created customers to work for” 2005) Whole Kids 6 EPA* Green Foundation Power Healthy Creating (created Awards eating health 2011) (2004-2010) education Supporting Organically- employees grown foods
- 7. Branding Advertising Less money spent Budget on advertising and ADV Word-of-mouth recommendations marketing than and testimonials from customers other supermarkets Approximately Marketing budgets allocated among 0.4% of total sales national and regional programs & in fiscal year 2011 individual stores Engage with customers through social media websites, e- newsletters and blog Over 725,000 fans on Facebook and over 2 million followers on Twitter
- 8. Branding Brand identity High quality Brand Equity • Lifestyle brand • Environment friendly Feelings Judgment • Ethical • Value service •Healthy • Quality • Active • Community involved Users’ profile Performance • Middle to upper class • High quality provider • Healthy eating • Supporting • Families, Partners and employees Couples • Quality awards Core brand • Professionals winner values • Satisfying and delighting customers • Creative wealth through profits and growth • Caring about communities and environment • Creating on-going win-win partnerships with suppliers
- 9. Why WFM in Brazil? • Organic food sales grew by +40% (350 M BRL) in 2010 • 1.8 Billion ha of agricultural land (2nd largest in south America) • 332 M ha: soil devoted to organic agriculture and farming (APEX-Agência Brasileira de Promoção de Exportações) • 74.5% of organic products’ consumers believe that they taste better, are safer in terms of health and hygiene and look better than conventional products
- 10. Market analysis BERI analysis ATTITUDE POLITICAL ECONOMIC LABOUR COST/ TOWARDS MONETARY STABILITY GROWTH PRODUCTIVITY FOREIGN INFLATION INVESTORS 9 10 8 4 4.5 One of the High, but in Same party fastest 2012 High inflation rules since growing decreased to Open to rates, +5.4% 2003. Next emerging 153.57 Index foreign inflation in elections in economies in Points to investments 2012 2014 the world: 155.35 index GDP 2476.65 points billion US$ Evaluation: LOW RISK 64.5
- 11. Market analysis Porter’s 5 Forces Moderate Potential Entrants • High barriers to entry • Importance of branding & reputation Moderate • Profitable industry Low • Open to foreign investment Suppliers Rivalry Buyers • Many suppliers • Huge range of organic producers • Low buying power • Localize market (work with local • Use international/ foreign • Price insensitive suppliers) identity to increase brand • Like to bargain, will switch if • Deal with high levels of awareness unhappy with price Bureaucracy • Growth in organic food market Substitutes • Non organic food Moderate High • Unhealthy food (junk food) • Price of substitute plays important role • Perceived level of product differentiation
- 12. Market analysis Porter’s 5 Forces Moderate Potential Entrants • High barriers to entry • Importance of branding & reputation Moderate • Profitable industry Low • Open to foreign investment Suppliers Rivalry Buyers • Many suppliers • Huge range of organic producers • Low buying power • Localize market (work with local • Use international/ foreign • Price insensitive suppliers) identity to increase brand • Like to bargain, will switch if • Deal with high levels of awareness unhappy with price Bureaucracy • Growth in organic food market Substitutes • Non organic food Moderate High • Unhealthy food (junk food) • Price of substitute plays important role • Perceived level of product differentiation
- 13. PESTLE Analysis Environmental: • 1.8 M ha of Technological: Economic: agricultural land • More than 242 M • 6th biggest economy • Rich in natural mobile phones (2011) (World) resources (2nd largest • Broadcast media: more • High GDP growth rates producer of iron-ore) than 1,000 radio stations • Biggest economy in • One of the largest and more than 100 TV South America offshore oil discoveries channels (2007) • 5.40% unemployment • 75.982 M internet users (2009) Legal: • Corruption Social: Political: • Complex tax rules • Gap between higher • President of Brazil: and lower class • Slow legal process Dilma Rousseff (since • Hierarchy of class 2010 up to 2014) • High consuming culture • Same party rules the • Family orientated country since 2003 (Source: CIAa)
- 14. PESTLE Analysis Environmental: • 1.8 M ha of Technological: Economic: agricultural land • More than 242 M • 6th biggest economy • Rich in natural mobile phones (2011) (World) resources (2nd largest • Broadcast media: more • High GDP growth rates producer of iron-ore) than 1,000 radio stations • Biggest economy in • One of the largest and more than 100 TV South America offshore oil discoveries channels (2007) • 5.40% unemployment • 75.982 M internet users (2009) Legal: • Corruption Social: Political: • Complex tax rules • Gap between higher • President of Brazil: and lower class • Slow legal process Dilma Rousseff (since • Hierarchy of class 2010 up to 2014) • High consuming culture • Same party rules the • Family orientated country since 2003 (Source: CIAa)
- 15. Hofstede Cultural Analysis 100 Individualism vs. collectivism 90 Collectivist Power Distance 80 Inequality accepted 70 Uncertainty avoidance 60 Brazil High Uncertainty- rules and elaborate legal systems to structure life. Rules and 50 laws important 40 United States Masculinity vs. femininity 30 Masculine Short term and long term 20 Long term (accept change as part of life) 10 Official language 0 Brazilian (Portuguese) PDI IDV MAS UAI LTD
- 16. Cultural framework Diffusion Rate Fast Slow Context High Brazil Low
- 17. Cultural framework Social organisation: Values and attitudes: • Wide gap between rich and poor • Family orientated • Hierarchy of class • Relaxed and tend to live life in slower pace • High crime rates • Enjoy socializing • Fashion conscious Technology and material culture: Aesthetics to food: • Huge amount of foreign products • Staple foods to Brazilian diet are root • High consuming culture vegetables, seafood and meat • Food tends to be sweet rather than spicy • The cuisine is welcoming like the people Diffusion Rate • Health is most important issue in relation to organic food Fast Slow Context High Brazil Low
- 18. Why WFM in Italy? • Market of organic goods grew by +8.9% in 2011, whereas goods consumption is decreasing (-4,2% in 2012) • Demand for healthy food • €550 M: the turnover for organic products estimated in 2011 • 1.11 M ha of soil devoted to organic agriculture • Consumers already aware of the benefits of organic food
- 19. Market analysis BERI analysis ATTITUDE POLITICAL ECONOMIC LABOUR COST/ TOWARDS MONETARY STABILITY GROWTH PRODUCTIVITY FOREIGN INFLATION INVESTORS 6 5 4 6 3 Political Recession elections in ongoing. IMF Open to 2013. Labour tax foreign (April 2012): Inflation in Temporary and investments the Italian 2012: +3% government contributions Good economy will (Banca of are 43.4% relation- shrink by d’Italia) technocrats (World Bank, ships with -1.9% in 2012 (PM Mario 2013a) Anglo-Saxon and by -0.3% Monti) in 2013 companies Evaluation: typical industrial economy risk 76
- 20. Market analysis Porter’s 5 Forces Moderate Potential Entrants • Purchasing locally produce goods • Diversifying stakeholders Moderate to Moderate • Loyal consumer base high • Financial investment Suppliers Rivalry • NaturaSì (organic supermarket Buyers • Moderate power • Low buying power • Need to focus on brand chain) • Focus on Product, price and • Price insensitive awareness • Like to bargain, will switch if • Localize market product differences • Location unhappy with price • “What’s new” about WFM Substitutes Moderate • COOP (food supermarket chain) High • Easily switch to organic range or non organic • Price of substitute plays important role
- 21. Market analysis Porter’s 5 Forces Moderate Potential Entrants • Purchasing locally produce goods • Diversifying stakeholders Moderate to Moderate • Loyal consumer base high • Financial investment Suppliers Rivalry • NaturaSì (organic supermarket Buyers • Moderate power • Low buying power • Need to focus on brand chain) • Focus on Product, price and • Price insensitive awareness • Like to bargain, will switch if • Localize market product differences • Location unhappy with price • “What’s new” about WFM Substitutes Moderate • COOP (food supermarket chain) High • Easily switch to organic range or non organic • Price of substitute plays important role
- 22. PESTLE Analysis Environmental: • North and South Technological: Economic: suitable for cultivation • 29.235 million (2009) • 4% GNP from • Cost advantage of internet users agriculture having cultivable environment • 92.3 million (2011) • 1% economic growth mobile users since millennium • Organic agriculture keeps environment •2 media giants: RAI and • 10.7% unemployment Mediaset rate until July 2012 (on healthy recession) Legal: Political: Social: • Legal procedures • Current PM Mario • Rich culinary tradition required Monti nominated after • Savour typical regional • Time cannot estimated Berlusconi motion of no cuisines confidence • Strong food regulations •New PM election by 2013 April (Source: CIA)
- 23. PESTLE Analysis Environmental: • North and South Technological: Economic: suitable for cultivation • 29.235 million (2009) • 4% GNP from • Cost advantage of internet users agriculture having cultivable environment • 92.3 million (2011) • 1% economic growth mobile users since millennium • Organic agriculture keeps environment •2 media giants: RAI and • 10.7% unemployment Mediaset rate until July 2012 (on healthy recession) Legal: Political: Social: • Legal procedures • Current PM Mario • Rich culinary tradition required Monti nominated after • Savour typical regional • Time cannot estimated Berlusconi motion of no cuisines confidence • Strong food regulations •New PM election by 2013 April (Source: CIA)
- 24. Hofstede Cultural Analysis 100 Individualism vs. collectivism Individualist (North) Collectivist (South) 80 Power Distance Inequality accepted 60 Uncertainty avoidance High Uncertain- Formality is important, not Italy 40 comfortable in unknown situation USA Masculinity vs. femininity 20 Masculine Short term and long term 0 Short term Oriented, Great respect for history and culture PDI IDV MAS UAI LTO Official language Italian
- 25. Cultural framework Diffusion Rate Fast Slow Context High Italy Low
- 26. Cultural framework Social organisation: Values and attitudes: • Masculine society • Family oriented • Inequality in standard of living • Religious between North and South of Italy • More materialist • Sluggish economy • Interest in money and economy • Organized crime and corruption Technology and material culture: Aesthetics to food: • Interested in new technologies • High food regulation • High consuming culture • Consume more fruits and vegetables, milk and dairy product and Diffusion Rate wine • Keen about traditional food and cuisine Fast Slow Context High Italy Low
- 27. Market trends & Opportunities Brazil Industry market opportunities Key trends & opportunities Consumers: • Organics Brazil: a program • Obesity on the rise (48.5%) • Enjoy good quality living supporting and marketing organic (AFP, 2012) • Convenience producers in Brazil • Open to foreign investment • Price consciousness • Organic products sales up +40% • Attraction for tourists (grows • Brand loyalty in 2010 (Organics Brazil, 2011) +7.8% in 2012) • Shopping integrated in the • Price difference organic Vs. non- • Growing economy (largest in lifestyle of Brazilians organic products is decreasing south America): +5.5% expected • Spend more than save due to (30% in 2010, was 70% in 2006) GPD growth in 2013 (Bloomberg, high rising inflation rates (APEX, 2011) 2012) • Functional foods market • Boom of middle class (54%) growing +10% each year biggest official class • Attracts global companies like Nestlé, Coca Cola, AIG and etc.
- 28. Market trends & Opportunities Italy Industry market opportunities Key trends/ opportunities Consumers: • The market for organic • Enjoy fashion • Old brands respected food grew from 700 to 800 M • Most organic food producers • Seek approval from family EUR (+ 14%) in 2010 (Organic in Europe - over 47,000 before making decision Food Info, 2011) • Tourist attraction - Travel & • Value getting a good deal • Organic products in the Tourism to GDP in 2011 was • Appreciate high quality conventional trade also grew EUR 51.4bn (3.3% of GDP) • Enjoy comfort from 450 to 500 million EUR (+11%) (Organic Food Info, 2011) (WTTC, 2012) • In 2010, there were 47,663 • Obesity on the rise, growing farmers, processors and traders +0.5%/year. In 2011, 35% of • Over 40% people understand overweight. By the age of benefits of healthy living eight, 36% children will be obese/overweight (The Independent, 2011)
- 29. Market segment ... AND GEOGRAPHY ITALY DEMOGRAPHY NICHE TOURISTS Income level: • Northern and Central Parts Middle & Surge in Upper class demand and • Population 1.3 costumer needs M (Milan) and 2.7 M (Rome) Cultured (ISTAT, 2012) & • Growth and BRAZIL Educated change in market • Mid-West and South-West •Families, • Diversify the parts Partners and market couples • Population (30-50) 2.5M (Rio de Janeiro) and • Young 11.3 M (Sao Professionals Know the Paulo) (25-35) costumer (IBGE, 2010 (a) • Students and (b)) (18-25)
- 30. Entry mode strategy Objectives Monetary • < 2 years: 30% organic products market share in São Paulo and Rio de Janeiro (Brazil) and in Milan and Rome (Italy) • 2-5 years: 30% organic products market share in Brazil and Italy • ≤ 5 years: become market leader of organic products retail in Brazil and Italy Brand positioning • Build and reinforce a strong brand equity for WFM • Make WFM the top brand for organic products retailing in Brazil and Italy
- 31. Entry mode strategy Managing information Relevant and “usable” information Before While entering the market being in the market PURPOSE: ISSUES: DATA: PURPOSE: ISSUES: Know and • Market needs Mostly “control and • Market understand the • Patterns Quantitative foresee” response market • correct and • Threats + readjust • Potentials Qualitative • improve the offer Mostly Qualitative + Quantitative
- 32. Entry mode Strategy • SEPTEMBER (BRAZIL): 2014 • BRAZIL: NEW STORES 2016 RIO DE JANEIRO, 1 OPENING FLAGSHIP STORE (FRANCHISING) IN SÃO • ALLIANCES & • JANUARY (BRAZIL): SÃO PAOLO & RIO DE • BRAZIL: STORES PARTNERSHIPS PAOLO, 1 FLAGSHIP STORE JANEIRO OPENING IN NEW (ORGANICS BRAZIL) • BRAZIL: WORLD CUP • JANUARY (ITALY): TOWNS (FRANCHISING) 2014 (SPONSORSHIP) ROME, 1 FLAGSHIP • BRAZIL: OLYMPICS • JANUARY (ITALY): STORE 2016 (SPONSORSHIP) MILAN, 1 FLAGSHIP STORE • ITALY: EXPO MILANO • ITALY: STORES OPENING • ITALY: ALLIANCES & PARTNERSHIPS 2015 (SPONSORSHIP) IN NEW TOWNS (COLDIRETTI) (FRANCHISING) 2013 2015 Budget: 200 million US$ per country
- 33. Market entry The 7 ‘P’s Price: Standardization Process: Place: Standardization Standardization Our karma: Physical Think Product: evidence: global, Act Standardization + Standardization local customization + customization People: Promotion: Standardization + Standardization customization + customization Approach: mostly (Keller, 2008) Geogentric
- 34. Market entry Medium-high prices The 7 ‘P’s Price: Standardization Process: Place: Standardization Standardization • Local suppliers • Flagship stores • Owned stores • Kiosks Our karma: Physical Think Product: evidence: global, Act Standardization + Standardization local customization • Pleasant shops + customization • In-store • High quality experience (Italy) • Wide offer People: Promotion: Standardization + Standardization customization + customization The • Integrated “right staff” • Customized (Keller, 2008)
- 35. Entry Mode Strategy Marketing Mix The ‘P’ Brazil Italy Approach • Category: medium-high • Category: medium-high Standardization Price • Same as in the USA converted into BRL • Same as in the USA converted into EURO (slightly lower than in UK) • High quality standards • High quality standards • Wide range of products and labels: • Wide range of products and labels: “generalist”, 365 Everyday Value®, “generalist”, 365 Everyday Value®, Standardization Product Exclusive, Whole Trade® Guarantee, Exclusive, Whole Trade® Guarantee, + customization Premium Body Care, own brand Premium Body Care, own brand • “Top in store”: greengrocery, • “Top in store”: greengrocery, milk and butchery, fresh fish dept. diaries dept.
- 36. Entry Mode Strategy Marketing Mix The ‘P’ Brazil Italy Approach • 1 Flagship store in each town (São • 1 Flagship store in each town (Milan, Paolo, Rio de Janeiro) Rome) • central and touristic areas • central and touristic areas Place Standardization • Kiosks and “Pop-up stores”: venues of • Kiosks and “Pop-up stores”: venues of main events (Fifa World Cup and main events (Expo 2015 Milan) Olympics) • Suppliers: mostly local (partners) • Suppliers: mostly local (partners) • Long-term contracts • Long-term contracts Process • Distribution: direct-control (owned • Distribution: direct-control (owned Standardization stores) + franchising (after 3 years) stores) + franchising (after 2 years)
- 37. Entry Mode Strategy Marketing Mix The ‘P’ Brazil Italy Approach • The “right staff”: keen about organic • The “right staff”: keen about organic products, trained products, trained • Customer oriented • Customer oriented - focus on products Standardization People • Brazilian (mother tongue) + English information + customization (proficiency) • Italian (mother tongue) + English (proficiency) • Pleasant shop environment • Pleasant shop environment • Shopping + dining (restaurant) • Shopping + dining (restaurant) Physical Standardization • In-store activities and events • In-store activities and events (didactical experience + customization (didactical activities, food tastings, free activities, food tastings, free samples) samples) • In-store “consumer corner” (info)
- 38. Entry Mode Strategy The 7th ‘P’: Promotion – Key Factors The public’s right Strong type of emotional bonds Costumers’ Key factors: experience with customers experience is the Emotional (thoughts, are a crucial in pilaster of the the general brand equity feelings, involvement perceptions, & customers’ process of building process opinions) is experience branding (Keller, 2008) essential (Hollis, 2008) (Keller, 2008)
- 39. Entry Mode Strategy The 7th ‘P’: Promotion Target Budget • Age: 20-55 • (year 1): 20% of total lunch budget • Gender: mostly women • (year 1-5): 5% of annual profits in each country • Job: (young) professionals, committed students • Social class and education: middle to high income| Middle to high education Key messages: • Interests #1: • “Whole foods, Whole people, Whole planet” health, environment, quality food and • Healthy lifestyle lifestyle • Respect the environment • Interests #2: • Sustainability fashion, sport, wellness, beauty, culture, art • Costumer education • Spread happiness (De Olivera Lima-Fihlo, 2012; Pellegrini, 2009)
- 40. Entry Mode Strategy The 7th ‘P’: Promotion – Activities EMOTIONAL INVOLVEMENT & CUSTOMERS’ EXPERIENCE APPROACH: MAINLY STANDARDIZED CONVENTIONAL SPONSORSHIPS, ADV: UNCONVENTIONAL ATL+BTL ACTIVITIES: EVENTS, TESTIMONIALS AMBIENT EDUCATIONAL MARKETING, PROJECTS SOCIAL MEDIA FLASHMOBS (Burcher, 2012)
- 41. Entry Mode Strategy The 7th ‘P’ – Customization Brazil Italy Experts opinions/suggestions • Focus on in-store activities • Didactive and informational events • TV/Radio/Newspapers • Specialized daily programmes and editorials “Try our whole world”: Sampling and free tasting Famous/relevant testimonials: • professional sportspeople • experts • WoM • Buzz Healthy lifestyle
- 42. Conclusions Whole Foods Market can successfully enter and survive both Brazilian and Italian markets Markets Core ethical Past experience opportunities values
- 43. Thank you
- 44. Note This presentation was designed to present a group project developed in October 2012 by Sara Belardi, Anthony Majekodunmi, Anca Marinescu and Kabita Sunuwar. The project was developed for the “Global Marketing” module taught by Cheryl Johashen at the University of West London (MSC Corporate Communication – Academic year 2012/2013). Clearly the developed market entry strategy merely represents a trial and a "scholastic" exercise. The parts of the project and the group members’ roles have been organized as follows: CONTENTS • Sara Belardi: BERI Analysis for Italy; Information management system; Market Entry Strategy (objectives, timeframe, “the 7 ‘P’s”, Marketing mix, Promotion) • Anthony Majekodunmi: market analysis for Brazil (BERI analysis, PESTLE analysis, Porter’s 5 Forces analysis); cultural analysis for Brazil; market trends and opportunities for Brazil and Italy • Anca Marinescu: Company overview (market positioning, values, brand analysis); Market Entry Strategy (objectives and timeframe) • Kabita Sunuwar: market analysis for Italy (PESTLE analysis, Porter’s 5 Forces analysis); cultural analysis for Italy; market segment (Brazil and Italy) EDITING and DESIGN • Sara Belardi and Anca Marinescu GROUP COORDINATION • Sara Belardi