Whole foods market competitors

Introduction

Whole foods market is committed to selling the highest quality natural and organic products available as one of their values. With a team membership of over 50,000, it is clear that it has a big market share for the products it stores. The company has climbed to the top overtaking the main rival Wild Oats Markets. The company operates about 300 stores in 38 US states. Perishable products constitute about 60% of the sales revenues. The profitability of the company can be attributed to competitive pricing, stocking the needed merchandise and the locating its stores effectively in areas with high traffic. The annual revenue per worker without gas is $145,000 and $440,000 inclusive of gas.

Top competitors

The top three competitors include AMCON Distributing Company, Ahold USA, Inc and Albertson’s LLC (Hoover’s Inc, 2011)

AMCON Distributing Company

The company operates in the healthy meal products as well as others such as paper products, tobacco products, beauty aids etc. AMCON distributes through about 4,000 retail stores in the Great Plains and Rocky Mountains region. It also operates 15 health food stores which use the brands Chamberlin’s Market & Café and Akin’s Natural Foods. Through the small branches the company is able to compete effectively by providing quality customer service, offering a variety of unique products and the advantage of operating within a local environment where the business environment can be manipulated. It also applies the advantage of a large company when it comes to purchasing supplies, distribution, finance and marketing. Average annual revenue per worker is less than $140,000. The company competes with companies in the tobacco Brokers & Distributors, consumer products manufacturers, food wholesale distributors and specialty foods distributors.

Ahold USA is an arm of the Netherlands based Royal holdings. It has an online grocery delivery service known as Peapod which serves giant food and stop & shop in selected markets. The company is under a reorganization strategy that seeks expansion. Average annual per worker revenue is $145,000 without gas and $440,000 inclusive of gas.

Albertson’s LLC Rankings is another competitor with about 220 supermarkets across several states. At one time it had ranked second supermarket operator when it had about 2,500 stores. It relies on the demand supported by the US aging population and innovation in medical treatment. It is known as capital intensive industry whose average annual revenue per employee is $300,000. The drug stores account for half the company’s sales. Its large branches benefit from purchasing large quantities and ability to capture large groups of customers. It small sized store are able to offer unique products and also use location positioning.

Market share

There has been increasing competition from foreign grocery retailers entering the market and snatching part of the market share initially held by traditional food stores. US sales by foreign retailers inclusive of companies such as Ahold (Netherlands), Delhaize Group (Belgium) and A&P (Germany), amounted to $85.6 billion in 2005 which took 17.7 percent of food stores sales, a 6.8 percent increase from the value in 1988 (Martinez, 2007). The rate is not high but with new more aggressive entrants like Tesco and the attraction to investors is getting even bigger then the rate at which foreign food stores chains capture market share will increase beyond the 6.8 percent. Tesco from United Kingdom entered the market promising to open over 200 stores across the US.

 

Market share measured by employees and revenues

Whole Food Market sales in the year 2006 were $5.6 billion and by 2010 it had 58,300 employees. AMCON on the other hand in the year 2009 had sales of $0.908 billion and employees by 2010 had reached 785 in number. Ahold has 169,835 employees. Albertson’s by he year 2010 had 20,000 employees. Ahold USA remains the main threat to the market share and since it is on an expansion strategy, Whole Food Market will have to rely on customer loyalty and its franchise since it also has expansive capital potential. The other two are minor when it comes to market share compared by sales revenues and employees. Since the companies deal in whole food as their main product and diversify to other goods such as gas and drugs competition is also being distributed across these products reducing the focus which would only be on food quality and competitive pricing. Ahold is capable of taking half of the market share since it has capital and experience in the business environment.

Indirect competitors

Non-traditional food stores have become another group of companies that are forming an influx into the food sale industry. These are outlets which originally did not deal in food sales. The non-traditional food stores are perceived to offer food at lower prices than the traditional food stores such as supermarkets, convenience stores and specialty stores (Martinez 2007). With this in mind they have a competitive advantage on the social environment through attitude and perception. Examples of these non-traditional food stores are the Costco and Sam’s Club and drug stores such as CVS, Walgreens and Rite Aid which have different market positioning serving customers who buy snacks, convenience foods, and drugs, frozen and refrigerated items (Martinez 2007). Dollar stores that offer products that range in between $1 and $2 are part of the indirect competitors attracting the low income groups. These non traditional outlets have increased their market share for home use from 13.8 percent in 1988 to 32.6 percent by the year 2006. The supercenters and club stores were estimated to have taken 17.9 percent of food consumed at home expenditures in the same year.

Another group of indirect competitors are the food service chains such as restaurants; Outback Steakhouse and Carraba’s Italian Grill, have seen the significance of take-out orders and are emphasizing on it. Take-out sales accounted for 10 percent of there total sales in 2004 which was a rate increase twice as much as what they had three years before (Martinez, 2007).

Conclusion

Traditional grocers are responding to the loss of market share by diversifying their merchandise, designing new store formats and using innovative in-store technologies. The supermarkets are aIDing more goods valued at a dollar. The cost cutting strategies include mergers and innovative technologies. High labor productivity; which reduces labor costs which account for 50 percent of operating costs, has helped the traditional food stores like Whole Food Market to remain relevant in shaping the business environment. With the projected slow down of Wal-Mart supercenters, Whole Food Market will sustain its market share may be only lose some fraction to non-traditional food stores that have shifted to emphasizing take-out options. Even with the whole emergence of new competitors, it is noted that the traditional food stores only lost 0.6 percent of their sales in 2006 compared to 1.9 in 2005 and 3.4 in 2004 (Martinez, 2007).This is an indication of resurgence of the traditional food stores.

 

Reference

Hoover’s Inc (2011). Whole Foods Market, Inc. retrieved August 1st, 2011 from http://www.hoovers.com/company/Whole_Foods_Market_Inc/rfshti-1-1njea3.html

Martinez W.S., (2007). The US Food Marketing System: Recent developments, 1997-2006, ERR-42,        USDA, Economic Research service. Retrieved on August 1st, 2011 from http://www.ers.usda.gov/AmberWaves/April08/Features/FoodMarketing.htm