Whole Foods Market Company in China

Executive Summary

Whole Foods Market is an American company that specializes in the production and sales of natural products. The company has branches in the United Kingdom and Canada. Whole Foods Market has spotted a void amid high-end consumers who prefer quality organic products in China. It intends to fill this void by opening organic food stores in the central cities across the country.

The food scandal that hit China led to people changing their feeding habits. Today, most Chinese prefer to live a healthy life. Thus, they consume organic products. The demand for organic foods in China is high. However, the country does not produce adequate products to satisfy the high demand. China is a major importer of organic foods. Numerous foreign organic food companies have subsidiaries in China. A majority of the organic food companies do not target high-end consumers. The customers prefer quality products that go at premium prices. However, most companies sell their organic goods at low prices. It leads to high-end customers doubting the quality of the products. Additionally, businesses stock organic products in small quantities. Hence, they can hardly satisfy the market.

Whole Foods Market will establish stores in Beijing, Shanghai, and Guangzhou to try to meet the needs of high-end consumers. It will target wealthy people, white-collar class, and high-income groups. These are clients with vast knowledge about organic products and are willing to pay premium prices for quality goods. The company will endeavor to manufacture quality products. Besides, it will sell the products at premium prices to recoup production costs and instill a sense of quality in consumers’ minds. Whole Foods Market will specialize in the sale of organic products only. It will enable the company to differentiate itself from its competitors.

Introduction

Organic foods are gaining popularity across the world due to the perception that they are safe. In China, consumers are torn between buying local foods that are cheap and imported products that are deemed safe (Lu et al. 921). The recent food scandal led to many Chinese avoiding to purchase local foods. Today, most affluent and middle-class consumers prefer to buy organic foods as they are free from adulteration. Thus, the demand for organic foods in China has gone up tremendously. Local companies can hardly satisfy the market. There exists an opportunity for foreign companies to invest in China. China has a food safety law that holds manufacturers accountable for the ingredients they use to manufacture food products. In spite of the enactment of the food security law, the demand for imported food products keeps on rising.

The Chinese are expected to spend at least $77 billion in food imports by 2018 (Lu et al. 927). People continue to relocate to the central cities. It implies that the demand for food products is expected to grow with time. Currently, organic foods are no longer regarded as luxuries in China. As the level of disposable income for most households grows, more families are switching to the consumption of organic foods. A study conducted in Shanghai and Beijing found that consumers are willing to pay premium prices for organic foods (Lu et al. 931). The fact that there is a huge market for organic foods in China makes the country a potential target for major foreign companies like Whole Foods Market. This report will discuss the strategy that Whole Foods Market should apply to exploit the Chinese market.

Market Analysis

Market Overview

History of Whole Foods Market

Whole Foods Market has its headquarters in Austin, Texas. The company was established in 1980. Four business people came up with an idea of setting up a supermarket that could specialize in the sale of natural foods. They built the first store that recruited 19 employees. At the time, there were very few businesses that dealt with natural foods in the United States. Thus, there was limited competition. It enabled the company to grow and establish numerous stores across the country. According to Harbin and Humphrey, Whole Foods Market leveraged merger and acquisition to increase its market share (3). In 1984, the company purchased Whole Food Company, enabling it to venture into the New Orleans’ market (Harbin and Humphrey 5). The company gained fame for the production of quality organic foods. Whole Foods Market does not use sweeteners, hydrogenated fats, artificial flavors, colors, or preservatives to manufacture its products. It abides by established National Organic Program principles. Currently, the company serves at least 33.6% of the American market (Harbin and Humphrey 9). It competes with firms like Wal-Mart, Fresh Market, and Kroger.

Besides manufacturing and selling organic foods, the company participates in environmental management programs. For instance, it advocates sustainable fishing practices. Whole Foods Market has invested in green energy as a way to conserve the environment. In 2008, the company pledged to do away with non-biodegradable packaging materials (Harbin and Humphrey 13). It no longer uses plastic bags to pack its products. Even though Whole Foods Market relies mainly on the American market, the company has stores in the United Kingdom and Canada. The corporation is in the process of opening stores in other countries across the globe.

History of Organic Foods in China

For decades, there was no data that accounted for the organic food market in China. Nevertheless, it did not imply that the country did not produce and sell organic foods. Pei et al. hold that China has been producing and selling organic foods for many years (415). Perhaps, the absence of data that accounted for the country’s organic food industry could be blamed on the previous weak demand for natural products. Today, demand has grown tremendously. China is a major producer and importer of organic foods globally. Indeed, the country is ranked as the fourth organic market in the world. China is a major producer of natural raw materials (Pei et al. 417).

A study conducted in 2010 found that the country produced at least ten million tons of organic goods. It consumed 70% of the food, and the rest was exported to other nations (Pei et al. 419). The country’s organic market continues to grow dynamically. Today, over 50 multinational corporations export organic foods to China. However, the Chinese market is still underserved. A study by Ken Research, an Indian research firm, indicates that the Chinese market is bound to grow (Pei et al. 420). A majority of the Chinese are wary of the state of food safety. Additionally, the number of middle-class households and the population of educated people continue to increase. Thus, many people can afford organic foods leading to the growth of the market.

SWOT Analysis

Strengths

Whole Foods Market has been in the natural products industry for a long time. As a result, the company has built a reputation. One of the company’s strengths is the brand image. Whole Foods Market is a renowned brand not only in the United States but also across the globe. The strong brand reputation helps the company to attract many customers. There is no doubt that the firm will quickly adapt to the Chinese market due to its popularity. Qiao et al. cite quality as the strength of Whole Foods Market (380). The company has vast experience in the production of organic products. Whole Foods Market uses innovative methods to produce its goods. It helps to create quality products and cut down on production costs. Production of quality products enables Whole Foods Market to stand out from competitors.

A majority of the rival companies produce low-quality products. It underlines the reason they sell goods at low prices. Qiao et al. claim that Whole Foods Market has a favorable organizational culture (382). It enables the company to recruit and retain a motivated workforce. Indeed, the company does not incur costs due to employee turnover. Retention of a motivated workforce allows Whole Foods Market to capitalize on output and cut down on human resource expenses. According to Qiao et al., Whole Foods Market organizes its stores in an appealing manner (384). The company’s leadership ensures that the stores have an eye-catching environment to attract customers. One can quickly notice the company’s stores from a distance. They have captivating displays that rouse consumers’ interest. Clients can hardly desist from visiting Whole Foods Market’s stores.

Weaknesses

One of the major weaknesses of Whole Foods Market is its dependence on the American market. The company has many stores across the United States. Thus, it is vulnerable to the economic crisis in the United States. An economic downturn in the United States would cripple the performance of the company. Another weakness of Whole Foods Market is the cost of its products (Qiao et al. 386). The company sells organic foods at premium prices. Even though the pricing strategy enables it to make a significant profit, it deprives the company of the opportunity to exploit a broad market. The company cannot target customers who are price-conscious. Currently, Whole Foods Market relies on a small pool of suppliers. Thus, the company has weak bargaining power over the vendors. Overdependence on a limited number of vendors impacts the company’s ability to sell its products at competitive prices. Additionally, it impedes the company’s ability to expand its market share at a rapid rate.

Opportunities

Currently, Whole Foods Market has stores in the United States, the United Kingdom, and Canada. The company has not exploited the global market. Thus, it can expand its operations to other markets across the globe. The demand for organic food is high in developed countries. Thus, Whole Foods Market has a chance to open stores in advanced nations like China, France, Germany, and Singapore, among others. As the Chinese market is underserved, Whole Foods Market has an opportunity to venture into this country.

Harbin and Humphrey claim that the corporation has a chance to expand its supply chain (15). Expanding the supply chain would help the company to complement its growth. It would be easy for Whole Foods Market to source raw materials from different regions. Eventually, the company would be in a position to sell products at competitive prices. Harbin and Humphrey cite competitive pricing as another opportunity for Whole Foods Market (16). The company sells products at premium prices. It targets mainly the affluent and middle-class people. Offering products at competitive prices would help it to grow its market share. A slight reduction in prices would not adversely affect the reputation of the company. Instead, it would enable it to target a broad customer base.

The Chinese economy continues to grow. In return, the level of disposable income in many families has gone up. It means that many people can afford organic products. The number of youths joining the labor force has increased significantly. Most young people have relocated to major towns in search of employment. On the other hand, many people have information regarding organic foods and their benefits. A majority of the Chinese are cautious of what they eat. They prefer to buy imported foods as they believe them to be secure. An increase in the consumption of organic foods not only in China but also across the globe is a great opportunity for Whole Foods Market. The company’s market is bound to grow. Technological advancement has made it easy for organizations to sell their products without establishing physical stores. Whole Foods Market has a chance to invest in online retail stores. It will help the company to reach clients in areas where it does not have establishments. Whole Foods Market has an opportunity to collaborate with grocery stores in China as well as organic farmers. It would help the company to distribute its products and source raw materials locally.

Threats

One of the major threats that Whole Foods Market encounters is competition from rival companies, which include Wal-Mart, Century Mart, and Carrefour. According to Chen, Wal-Mart brands itself as socially-conscious (47). The company positions itself as committed to meeting the needs of all customers. Wal-Mart’s primary product is its retail service. The company offers efficient services, a strategy that helps it to attract many clients. The company’s employees assist clients in finding products in the store. Even though Wal-Mart sells organic foods, it stocks the products in small quantities. Thus, it is unable to satisfy the market. Chen claims, “Wal-Mart uses an everyday low price (EDLP) pricing strategy” (51). The company lowers the prices of organic foods on a regular basis. Consequently, it attracts many customers. Unfortunately, the company cannot satisfy all the customers as it stocks low quantities of organic products.

Wal-Mart uses a myriad of promotional strategies to sell its products. The company conducts personal selling in all the stores. Additionally, it advertises products via television, website, newspapers and billboards. Besides, the company conducts sales promotions by offering discounts to clients. Currently, Wal-Mart has numerous outlets across China. The stores are strategically located. Thus, they are easy to access. Besides, they offer a great shopping experience to customers.

Carrefour positions itself as a product- and customer-centric company. It endeavors to produce goods that align with customer demands. Currently, the company capitalizes on the sales of both organic and inorganic food products. However, it majors mainly in the sale of inorganic food products. Chen holds that Carrefour stocks small quantities of organic foods (56). Thus, it cannot satisfy the demand for the products in China. The company sells its products at regular prices. The pricing strategy is aimed at helping Carrefour to attract many customers. It uses an integrated marketing communication strategy to promote its organic foods. Carrefour runs advertisements on televisions (Wang et al. 31). Besides, it conducts direct marketing in all its sales stores. The enterprise uses sales promotion to attract clients. It also issues discounts for organic foods as a way to encourage consumers to buy the goods. Carrefour distributes its products through six different kinds of stores. They are hypermarkets, hard discount stores, supermarkets, cash and carry stores, convenience stores, and e-commerce (Wang et al. 31). The company has stores across the major cities in China.

Century Mart positions itself as a distinctive and prestigious brand. Indeed, it is among the prestigious chain stores in China. The company stocks both organic and inorganic products. However, it mainly sells inorganic foods. Century Mart sells natural products at low prices. However, its prices are higher than those of Wal-Mart. Chen argues that Century Mart sells products at low prices to attract customers (62). Despite selling organic foods at low prices, the company does not get significant returns because of it stocks small quantities of the goods. Century Mart uses television to promote products. Additionally, the company practices direct marketing in its stores. Employees interact directly with customers and persuade them to purchase organic products. The company offers discounts and samples to customers to win their loyalty. Century Mart has multiple stores across China, which facilitate the distribution of organic and inorganic products. Chen posits that the company opens fifteen stores annually as a way to compete with Wal-Mart (64).

Market Segmentation and Targeting

Geographic

Market segmentation refers to splitting the target consumers into distinct groups. It helps to identify and meet shared needs. Wang et al. hold that market segmentation helps an organization to come up with an effective marketing mix (33). In China, different categories of clients demand organic food. Thus, a company ought to understand the various groups of customers and their preferences. Whole Foods Market will segment its target market based on geographic, demographic and psychographic factors. Regarding the geographic factors, the company will target clients who reside in the central cities.

Whole Foods Market intends to open stores in Shanghai, Beijing, and Guangzhou. The primary reason for focusing on the main cities is the high demand for organic foods. Besides, organic foods are not supposed to take long before they are sold. The major cities have established transport infrastructure (Wang et al. 35). Hence, it will be easy for the company to transport its products to the market. A majority of people who live in cities are employed. Their level of disposable income is high. Thus, they can afford organic foods. Whole Foods Market intends to sell its products at premium prices. Thus, the company cannot target rural areas as customers would not afford the products.

Demographics

As aforementioned, Whole Foods Market will sell its products at premium prices. The company will target wealthy individuals living in big cities. Additionally, it will target white collar class and high-income groups. The company will focus mainly on the youths. Currently, a majority of the Chinese aged between 18 and 39 work in the main cities. They rely on purchasing food as they do not have alternative sources. The fear of food adulteration forces them to depend on organic products. According to Wang et al., the biggest percentage of people who purchase organic products constitutes women (36). Today, a lot of women have joined the labor force in China. Whole Foods Market will target female workers living in the cities.

Psychographics

The increase in the rate of diseases associated with unhealthy eating has led to people being cautious of what they eat. Currently, a majority of the Chinese are watchful of the food they eat. China uses coal to run most industries. The country’s environment is highly polluted. Many people avoid buying inorganic food due to fear that they might be contaminated. Currently, there has emerged a group of consumers who prefer organic products for their health benefits. Whole Foods Market will target clients who prefer to lead a healthy lifestyle. These are individuals who are health-conscious. They have vast knowledge about organic products and their benefits. Xiu and Klein claim that persons who consume organic foods prefer to buy them from natural supermarkets (465). They do not visit traditional grocery stores. The customers are willing to pay premium prices for organic products. All they care about is the quality of the food products.

Perceptual Map

Perceptual Map

Whole Foods Market will face competition from Wal-Mart, Century Mart, Carrefour, and City Shop. Century Mart and Wal-Mart target price-conscious customers. Consequently, they sell their products at low prices. On the other hand, Carrefour sells its organic products at regular prices. The three firms stock small quantities of organic foods. Hence, they can barely satisfy their target market (Xiu and Klein 468). City Shop targets wealthy clients. The company sells its products at relatively high prices. However, it does not sell large quantities of natural goods. Whole Foods Market will target the affluent and high-end clients. Thus, the company will sell its products at premium prices. Whole Foods Market specializes in the production and sale of organic products. Consequently, it will stock its products in bulk. The company will have a chance to serve many customers. The consumers’ ideal points are expected to fall on the cost and quality.

Consumer Opportunity

Today, a big percentage of the Chinese population lives in main cities. The population depends on buying food. The incident of a food scandal that hit China in the recent past led to many people abandoning inorganic foods. Currently, a lot of people prefer to eat organic foods. In spite of the high demand for natural foods, the country does not produce enough to satisfy the market. As a result, many foreign companies export organic foods to China. According to Xiu and Klein, most companies sell their products at low prices (469). As a result, the wealthy and high-income groups do not purchase the products. They doubt their quality. Currently, no company targets the affluent, high-income groups and white collar class in China. Thus, Whole Foods Market will focus on this market segment.

A majority of the rich people do not buy inorganic products. Besides, they do not care about the cost of organic products as long as they meet the desired quality (Xiu and Klein 470). Hence, Whole Foods Market has an opportunity to target this group. The company has vast experience in the production of organic foods. Besides, it is renowned for the manufacture of quality products. Consequently, it is in a better position to satisfy the needs of this market segment. Currently, there has been a tremendous change in household composition in China. Many families comprise three people. The Chinese observe the one-child policy. Thus, most families have one kid only. As a result, they can afford quality foods and lifestyle goods. Additionally, most Chinese advocate animal rights (Yin et al. 1364). They avoid purchasing products that are manufactured from animal-based ingredients. Instead, they opt to use products made from plant-based constituents. It underlines the reason many people use organic products.

Target Segment

A majority of the individuals who purchase organic foods are youths and the high-income groups. The youths constitute people aged between 18 and 39. They live in big cities. Whole Foods Market will target the wealthy and high-income groups. These are individuals who prefer to purchase food products from the natural supermarkets. Additionally, they are willing to pay premium prices for quality goods. Yin et al. claim that women are the primary consumers of organic foods (1364). Thus, the company will target mainly the wealthy women. Consumers associate quality of a product with its price. They believe that quality products are expensive. Most food businesses in China sell their goods at low prices. Thus, the affluent population doubts their quality. As a result, no company satisfies the demand for organic food amid the affluent population. Whole Foods Market intends to meet the needs of this market by selling quality organic foods at premium prices. The company will sell products at high prices to instill a sense of quality in the minds of customers.

Whole Foods Market is a grocery that sells “responsibly sourced, high-quality organic and natural foods” (Yin et al. 1366). The company has been in the organic food industry for many years. It endeavors to satisfy the needs of all customers. Thus, it monitors the purchasing behaviors of clients to identify the unmet needs. In China, Whole Foods Market will position itself as a socially-conscious entity. It will offer specialized services to customers. The company will not only seek to satisfy the needs of the target market but also go beyond consumer expectations. The objective is to win the trust of clients. It will make sure that customers get value for their money by offering quality products. Moreover, Whole Foods Market will continuously come up with innovative ways of addressing consumer needs. The stores will have open environments that signify the target market. In other words, Whole Foods Market will transform its stores into social places where clients can meet their acquaintances.

Marketing Mix

The Chinese market comprises customers who are ready to pay premium prices for quality products. It also has price-conscious clients. Companies like Wal-Mart, Century Mart, and Carrefour target price-conscious customers. The ideal point of their target customers is the cost. It underlines the reason the companies sell their products at low prices. Whole Foods Market will target high-end clients with high level of disposable income. It will target customers whose ideal point is quality.

Product

Whole Foods Market will target affluent consumers who are health and environmentally-conscious. The customers are willing to part with any amount of money to purchase quality products. As a result, Whole Foods Market will make sure that it follows safety standards in manufacturing its products. It will sell products that are not only fresh but also meet all the necessary nutritional standards. Whole Foods Market will guarantee that its production processes are credible. The company will offer a broad array of products to meet the needs of all consumers. One of the weaknesses of Wal-Mart, Carrefour and Century Mart is that they stock small quantities of organic products (Yin et al. 1366). Thus, Whole Foods Market will be the only company that sells natural goods in bulk. In fact, the company will specialize in the production and sale of organic products only. The leadership of Whole Foods Market appreciates that consumers have varied dietary preferences. Thus, the company will sell products for all kinds of clients. It will have products for individuals with special nutritional penchants like vegetarian.

Price

Clients associate the price of a product with its value. Affluent customers avoid purchasing cheap products because they believe that they are of low quality. In this regard, Whole Foods Market will sell its products at premium prices. One of the ideal points of its target market is quality. Thus, the company intends to instill a sense of quality in its target clients by selling products at higher prices than the competitors. High-income groups and white collar class appreciate the benefits of organic products. They are willing to buy quality products at premium prices (Yin et al. 1367). Besides, the wealthy in the society tend to associate themselves with a particular class. They do not purchase products in stores that middle-class and the poor visit. Selling organic products at premium prices will discourage the poor and middle-class consumers from visiting Whole Foods Market’s stores. The stores will be exclusively for the rich and the working class. Eventually, the company will manage to capture its target market.

Promotion

Organizations use different promotional strategies based on the target market and cost. An effective marketing strategy depends on the ability of the company to reach the consumers. Chen holds that it is imperative to understand the social life of the target market (52). It would help to identify the most appropriate medium to use in product promotion. Whole Foods Market targets the affluent and educated consumers. They are people who mingle via social media platforms. Besides, they use print and digital media to stay informed. Whole Foods Market will use television to promote its products. The company will advertise products via leading television companies. Besides, it will use local dailies and health magazines to promote its goods. A majority of the rich people are tech-savvy. Hence, the company will create a website meant to market it in China. Furthermore, it will use social media platforms like Facebook, Sina Weibo, and Twitter to reach customers and gather feedback.

Place

Some organic products require entering the market while still fresh. Thus, it is imperative to set up organic food stores in areas with an established transport system. Whole Foods Market will target high-end consumers. It will set up stores in central cities like Beijing, Shanghai, and Guangzhou. The stores will be strategically located in areas with high traffic to reach many customers. With time, Whole Foods Market will liaise with local supermarkets to facilitate the distribution of organic foods. A majority of the working people do not get a chance to visit retail stores (Chen 54). Thus, they prefer buying goods online. Whole Foods Market will create an online store to target consumers who do not have time to visit its physical stores. It will facilitate the delivery of products to customers who cannot get a chance to visit the company’s outlets. Below will be the company’s perceptual map.

The company’s perceptual map.

Implementation Planning

The organic food market in China is underserved. Whole Foods Market ought to swing into action with immediate effect to exploit the market. The company will use an integrated marketing communication strategy to popularize itself in China. It will use television and billboards for a period of six months to market products. The company’s advertisements will feature in major television companies. Additionally, it will erect billboards in the streets of Beijing, Shanghai, and Guangzhou. The company will use social media, website and mobile application to market itself. As a majority of the target consumers have social media accounts, Whole Foods Market will open Sina Weibo, Facebook and Twitter accounts. The accounts will help not only to market organic products but also gather consumer feedback. Most Chinese own smartphones. Hence, Whole Foods Market will invest in a mobile application. The application will help to market the company’s products. It will also allow customers to buy goods online.

Whole Foods Market will use celebrity endorsement for three months. It will seek the services of renowned celebrities like Daniel Wu. Besides, the company will collaborate with other brands like Taobao to facilitate distribution of products and create public awareness. Efficiency is paramount in the organic food industry. Whole Foods Market will liaise with local farms to boost its effectiveness. The company will collaborate with organic farmers in China. It will enable the business to acquire raw materials at reduced prices. The company will also use brand licensing strategy to distribute natural products. It will allow organizations that sell personal care products to use its logo. Moreover, the company’s products will feature in major television programs and films. Whole Foods Market will use the point-of-purchase to communicate with clients and gather feedback. Employees will be encouraged to have direct contact with customers to understand their needs.

Conclusion

The demand for organic foods in China has gone up significantly. Since the food scandal incident, consumers are wary of what they eat. They prefer to buy imported organic foods. Currently, numerous foreign companies export organic products to China. However, no companies target the wealthy and high-income groups. Whole Foods Market will focus on this market segment. The company will sell its products at premium prices. It will also endeavor to manufacture quality goods. Whole Foods Market will have establishments in the main cities. Additionally, it will use an integrated marketing communication to reach target consumers.

Works Cited

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Yin, Shijiu, et al. “Consumers’ Purchase Intention of Organic Food in China.” Journal of the Science of Food and Agriculture, vol. 90, no. 8, 2010, pp. 1361-1367.