Please read the following article: Whole Foods_ Walmart,Costco Steal Grow:
Over much of the past 30 years, Whole Foods Market co-founderJohn Mackey enjoyed wild success selling organic groceries to themasses. That brought media buzz, fast growth, and high profitmargins to his grocery chain. It's also attracted imitators. Now,with the likes of Kroger and Wal-Mart Stores muscling intoeverything from organic milk to sustainably raised salmon, Mackeyfinds himself fending off challenges from bigger rivals intent oneating Whole Foods' lunch. Just how well the competition is doingbecame clear on May 6 when Whole Foods reported that sales growthat stores open more than 57 weeks had slowed to 3.6 percent in themost recent quarter, well off the 5.3 percent gain forecast byanalysts. Mackey also announced a plan to revive growth by startinga lowerpriced chain aimed at millennials next year. Thedisappointing growth and seeming change in strategy spookedinvestors, who trimmed almost 10 percent from Whole Foods' stockprice on the day after the news. "Business has really slowed downcompared to what it used to be," says Brian Yarbrough, an analystat Edward Jones. "I fear they're being a little complacent aboutwhat's going on in the competitive environment." So far, WholeFoods has said only that its as-yet-unnamed chain for millennialswill be smaller and more focused on value, convenience, andtechnology than traditional Whole Foods markets. They'll also becheaper to open and build, Mackey said.
With the new stores, Whole Foods is targeting younger consumerswho may not be as dazzled by its organic offerings, particularlywhen many of those items are increasingly available at theirneighborhood grocery stores, says Virginia Morris, vice presidentfor global consumer strategy at retailing consultant DaymonWorldwide. "It's not unique to millennials-they've grown up withit," she says. "There's no cachet."
The grocer was founded in 1978 in Austin, Texas, by Mackey and aformer girlfriend. It expanded quickly in the 2000s-there werefewer than 200 Whole Foods stores in 2006, compared with more than400 nowas it helped introduce items such as kale and quinoa tomainstream Americans. In its glory days, from 2000 to 2008, WholeFoods' average annual sales growth was 20.4 percent. Stores openedquickly, as the company snatched up cheap real estate that defunctretailers such as Circuit City had abandoned. Those gains slowed to9.9 percent in the fiscal year ended Sept. 28, 2014, the smallestannual increase since 2009. Kroger and Fresh Market, which sellshigh-end produce, both logged better sales growth in their latestfiscal years. To hold on to shoppers, Whole Foods since 2014 hasfocused on lowering prices, especially on fresh fruits andvegetables. It also started running its first national ads, dubbingits campaign "Values matter." But it hasn't pulled back on thefancy amenities that have given it an image to match its prices. Anew store in Boston, for instance, has a spa; many others offervalet parking. Sales of organic foods in the U.S. jumped 11.3percent, to $39.1 billion, last year, according to the OrganicTrade Association. The problem for Whole Foods is that anincreasing share of those sales is going to mainstream players inthe U.S. grocery store business, which logged $1.07 trillion insales last year, according to Euromonitor International.
Kroger's natural and organic Simple Truth line has become a $1billion-a-year brand. Costco Wholesale sells organic and grass-fedbeef and organic coconut oil under its Kirkland Signature brand;its total organic sales were close to $3 billion last year. EvenWal-Mart is hawking everything from organic chia seeds to its WildOats Marketplace organic marinara sauce. There are about 3,800Wal-Mart stores in the U.S. that have at least 30 Wild Oats items,the company says, plus about 2,300 Walmarts have separate organicproduce sections. "You've got a number of competitors out in themarketplace that are growing very rapidly -Kroger, Sprouts FarmersMarket, Trader Joe's, Fresh Market," says Bruce Cohen, seniorpartner at consulting firm Kurt Salmon. "It's caused Whole Foods topause." Whole Foods concedes that rivals are encroaching on itssales gains. "Everybody is jumping kind of on the natural andorganic food bandwagon, and that's really frankly due to oursuccess," Mackey said on a May 6 analyst call. He and co-ChiefExecutive Officer Walter Robb declined to be interviewed for thisstory. Developing a grocer specifically for millennials could be agamble. Americans under the age of 35 prefer natural and organicfood, which often costs more, and seek more transparency on labels,according to recent Goldman Sachs research. Yet, while millennialstend to marry later and put off having kids, once they settle downand form families, their shopping habits aren't that unusual, saysSucharita Mulpuru, a Forrester Research retail analyst. "It's alldelayed, but once those things happen, they spend just like theirparents." That means the biggest determinants of where they willshop will be value, convenience, and selection.
Even if Mackey is right about a need for stores tailored to ayounger demographic, his new tack could present problems, saysEdward Jones's Yarbrough. The smaller locations will likely havelower profit margins and may cannibalize customers from WholeFoods' namesake chain, he says. Some analysts think Whole Foods maybe taking aim at Trader Joe's with its new concept. That 440-storechain appeals to young consumers who have broad, global tastes andlike to hunt for items they might not find elsewhere, Daymon'sMorris says. But Trader Joe's benefits from a perception that itsproducts are cheap-chic, while Whole Foods continues to grapplewith its "Whole Paycheck" image. Says Morris: "That's somethingthey really haven't been able to shake."
Write a 500 Word document. Please respond to the followingquestions:
After reading "Whole Foods or Walmart?" what is your opinionabout whether they believe that the new concept from Whole Foodswill work.
What are at least three ways that companies can developinnovative practices based on demographic trends?
How can companies make good decisions about what trends shouldimpact their corporate strategies?
