With food and other items that are free of pesticides, preservatives, sweeteners, and cruelty, Whole Foods Market knows more about guiltless eating and shopping than most retailers. The world's #1 natural foods chain by far -- now that it has digested its main rival Wild Oats Markets -- the company operates more than 400 stores throughout the US, Canada, and the UK. The stores emphasize perishable and prepared products, which account for about two-thirds of sales. Whole Foods Market offers some 4,400 items in four lines of private-label products (such as the premium Whole Foods line). Founded in Austin, Texas, in 1980, Whole Foods Market pioneered the supermarket concept in natural and organic foods retailing.
With about 20 stores in Canada and the UK, Whole Foods rings up some 3% of its $11.7 billion in sales outside the US. After announcing plans to open hundreds more stores across Europe, international growth appears to have stalled, at least for now. In 2014 the company had more than 380 stores in 42 US states and Washington, DC.
Sales and Marketing
Whole Foods spends much less on advertising and marketing than rival supermarket operators. Indeed, in fiscal 2014 (ends September) it spent about $93 million on ads and marketing, up from about $56 million the previous year. Instead, the grocery chain relies on word-of-mouth recommendations from its shoppers and marketing through social media such as Facebook, Twitter, Instagram and Google+. The company also markets its products through television, print, and digital advertising.
United Natural Foods is its single largest third-party supplier, accounting for 32% of Whole Foods total purchases in fiscal 2014.
After a rough patch that coincided with the worst recession since the Great Depression -- during which the grocery chain logged five consecutive quarters of same-store sales declines (the first in its history) -- Whole Foods is back on track and picking up steam and has reported four successful years of growth. In 2014 its revenues increased by 10% to $14.2 billion due to a growth in same-store sales and the addition of about 25 new stores.
Net income increased by 5% to $579 million in 2014 (compared to more than $551 million in 2013) as the result of an increase in revenues.
Whole Foods generated almost $1.1 billion in cash flow from operations in fiscal 2014 ($79 million up on 2013) and invested about $710 million in capital expenditures. Of that, about $447 million was related to new stores. Operating cash flow increased by 8% due to higher net income and a decline in cash used in prepaid expenses and other current assets.
Key elements of the company's growth strategy are the opening of new stores, acquisitions, and increasing same-store sales. In 2014 the company opened 32 new stores, expanding into 10 new markets and growing its square footage by 8% to 14 million. Among these were 6 remodeled stores in the Boston area, and a store in downtown Detroit. In fiscal 2013 Whole Foods added more than 34 new stores. Six of those locations are former Johnnie's Foodmaster stores, whose leases Whole Foods acquired in late 2012.
With the incursion of traditional grocery chains (Safeway and Kroger) and retail giant Wal-Mart into the natural and organic food space and fast-growing natural foods chains, such as Sprouts Farmers Market, adding stores, Whole Foods is facing a more mature and crowded retail market going forward. Chastened by the defection of shoppers to lower-priced chains during the financial crisis, Whole Foods is working hard to emphasize its value proposition and shed its pricey image as "Whole Paycheck." To lure shoppers and boost profit margins, Whole Foods has been aggressively expanding its range of private-label items, which includes the 365 Everyday Value and 365 Organic brands. In 2014 the company launched 365 Everyday Value pre-packed chicken, Whole Paws pet products, 365 Everyday Value, and Whole Foods Market frozen dessert and novelties, and Whole Catch wild-caught frozen seafood steaks and fillets.
Also on the innovation front, that year Whole Foods became the first national Instacart partner to offer both grocery delivery and in-store pickup in select US markets, and we was one of the first merchants to integrate with Apple Pay.
Responding to its health-conscious clientele, Whole Foods has pledged that by 2018 all products in its stores in North America must be labeled to indicate if they contain genetically modified organisms.
Mergers and Acquisitions
In 2014 Whole Foods inked a deal to purchase four natural foods stores from New Frontiers in Arizona (in the cities of Flagstaff, Prescott, and Sedona) and San Luis Obispo, California. Averaging some 22,000 sq. ft., the stores will continue to operate under the New Frontiers Natural Marketplace banner. Whole Foods in 2014 also acquired seven leases for stores in the Chicago area from Safeway, which is exiting the market with the closure of its Dominick's chain there. The moves significantly boosts the company's presence in the market.