part04CT - PART 4-CRITICAL THINKING CASE WHOLE FOODS...

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PART 4-CRITICAL THINKING CASE WHOLE FOODS THRIVES IN A DECLINING MARKETPLACE In a marketplace in where businesses are experiencing flat to declining growth, Whole Foods Market is gaining in share of wallet. Not only is the food chain profiting in grocery retailing, one of the toughest businesses in the world, but the company’s goal is to more than double its sales to $10 billion by 2010. Whole Foods is challenging both the way supermarkets do business and the way consumers shop for food. Americans spend $430 billion a year on food at approximately 34,000 supermarkets. Yet the typical grocery retailer makes only one cent on every dollar spent in the store. This low margin is the impetus behind vendor allowances and slotting fees (fees paid by food producers to have a supermarket carry their products), which netted grocery stores close to $100 billion in 2003. Whole Foods refuses to take slotting fees, however, and accepted only about $1 million in other inducements in 2004. The company’s niche is in organic foods that carry a price premium of 40 to 175 percent over regular goods—a niche market that provides Whole Foods with a profit margin that is triple the industry standard and sales per square foot of $800, double the industry standard. In the mid-1950s, consumers were spending 17 percent of their total income on groceries. By 2005, however,
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This document was uploaded on 09/20/2011.

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