Whole Foods Market Corporation in China

Executive Summary

Whole Foods Market is an American multinational corporation that specializes in the sales of organic foods. The company has identified unsatisfied market segment in China. Thus, it intends to exploit the market by establishing stores in the main cities like Beijing, Shanghai, and Hangzhou. A few years back, food scandal hit China. Since then, most Chinese are wary of food safety in the country. They are afraid of purchasing food products that are sourced locally. Indeed, most Chinese prefer to buy imported food products. Since the scandal, the country has witnessed the growth of a health-conscious market segment. A majority of people who live in the cities prefer organic foods. These are individuals with a high degree of disposable income. Besides, they live a healthy lifestyle. The customers are only concerned about the quality of the food they eat and are willing to pay high prices as long as they are guaranteed of quality. A majority of Chinese keep on relocating to the urban centers. Thus, the demand for organic foods in the country continues to rise. Currently, few companies deal with organic foods. They stock small quantities of organic foods making it hard for them to satisfy the market.

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Whole Foods Market intends to venture into the Chinese market to satisfy the demand for organic foods. The company will focus on high-end customers. They comprise employed individuals with high level of disposable income. The company will establish stores in Beijing, Shanghai, and Hangzhou. As high-end consumers are conscious of food quality, Whole Foods Market will endeavor to manufacture superior products. It will sell the products at premium prices to compensate production cost. The company will use an integrated communication strategy to popularize its brand. It will also partner with local farmers and grocery stores to facilitate distribution of organic foods.

Introduction

The food scandal that hit China recently led to many citizens doubting the quality of local food products. Today, a majority of Chinese prefer to buy imported food products because they consider them secure. Most Chinese are willing to spend a lot of money on imported food products. The demand for imported healthy foods in China has created a lucrative business opportunity for many foreign companies. The country has imposed stringent rules on food production. The food manufacturers are liable for additives they use to manufacture their products. In spite of the introduction of the food safety law, the demand for products from foreign countries continues to intensify.

Paul and Rana hold, “The amount of food imports has more than quadrupled in the last ten years” (414). Research shows that China will be the leading importer of overseas food products by 2018 (Paul and Rana 416). The primary foods that China imports include cereals, edible vegetable oils, and milk products. Most food importers major in organic products. Initially, natural products were viewed as a luxury. However, as the level of disposable income amid the Chinese continues to grow, the demand for organic food products has increased significantly. A study conducted in Shanghai and Beijing found that most Chinese are willing to pay premium prices for organic products. It underlines the reason why Whole Foods Market intends to establish stores in China. This report comprises a marketing strategy for Whole Foods Market in China.

Market Analysis

History of Whole Foods Market Inc

According to Harbin and Humphrey, “Whole Foods Market Inc. is an American supermarket chain that features foods without artificial preservatives, colors, flavors, sweeteners, and hydrogenated fats” (5). It was the first company to get approval to sell organic products in the United States. Whole Foods Market was established in 1980. Its headquarters are in Austin Texas. Currently, the company runs over 431 outlets in the United States, the United Kingdom, and Canada. Additionally, it has hired over 91,000 workers. Harbin and Humphrey claim that Whole Foods Market has managed to grow its market share by targeting women (8). Additionally, it has acquired numerous companies across the United States. For instance, in 2014, the company acquired seven Dominick’s Finer Foods stores in Chicago. In spite the acquisition strategy, the company has sold numerous stores that did not help it to achieve its objectives.

Whole Foods Market has come up with self-made quality standards. The company makes sure that all its products meet these standards. It ensures that the goods are void of hydrogenated fats, preservatives, artificial flavors, and sweeteners. Moreover, the company does not deal with milk or meat from genetically modified animals. Whole Foods Market is in the forefront in the fight against environmental degradation. The company manufactures environmentally friendly products. It sells “many United States Department of Agriculture-certified organic foods and products that aim to be environmentally friendly and ecologically responsible” (Yin et al. 1364). The company’s website outlines the standards it follows to sell dietary supplements, foods, and personal care goods.

Whole Foods Market endeavors to offer customers a new way of life by marketing health-conscious products. The company ensures that people lead a high quality life through what they eat. Currently, many people are not only environmentally mindful but also health-conscious. Most consumers prefer to purchase products that meet set environmental standards and have no adverse impacts on their health. In the United States, Whole Foods Market enjoys a significant share of loyal customers. The experience that the company has in the production of organic products has won it a reputation as the “Google” in this sector.

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Overview of the Whole Foods Market

Paul and Rana maintain, “The global organic food and beverage market is expected to reach $211.44 billion by 2020” (417). The demand for inorganic food continues to decline across the globe as consumers become health-conscious. Organic food products are associated with numerous health benefits. It underlines the reason why their demand continues to rise globally. A study conducted in China in 2014 found that the demand for organic foods has grown tremendously. The food scandal that locked the country led to many consumers being wary of the kind of products they purchase. At least 80% of the Chinese claim that they are not contented with the state of food security in the country (Paul and Rana 420). Consequently, they have resulted to buying imported organic food products, which they believe are produced in line with established safety standards. China’s economy runs on coal. As a result, the country suffers from a high level of environmental pollution. Most Chinese fear that heavy metals from mining and industries find their way into the soil and rivers, therefore contaminating food products (Pei et al. 414). As a result, many people prefer to buy organic food products.

The rate of urbanization has contributed to the growth of organic food market in China. Many people keep on relocating to the mushrooming cities. In return, they no longer have access to sources of food. Thus, they look for alternative sources. Currently, the demand for imported products and organic foods is high in China. There has been an increase in the number of stores that sell organic foods in the main cities like Beijing and Shanghai (Paul and Rana 421). The stores target expatriate society and middle-class families who have a high level of disposable income. In spite of the high demand for organic foods in China, the country’s production is still small. China depends on importation of natural products from overseas. Therefore, foreign companies have an opportunity to exploit the enormous market in the country. China is expected to be a global leader in the importation of organic foods by 2018.

SWOT Analysis

Strengths

Whole Foods Market has been in the organic food industry for many years. As a result, the company can manufacture products that meet the highest quality. In fact, high quality is what distinguishes Whole Foods Market from other businesses. The company attracts and retains a significant share of loyal clients. It does not use various ingredients that are common in other food stores. They include artificial flavors and hydrogenated fats. Maintenance of quality standards enables the company to sell products at premium prices without losing customers. The company serves a pool of educated clients with high degree of disposable income. Besides quality, Whole Foods Market enjoys favorable industrial trends. Currently, many consumers prefer to purchase organic foods because they do not pose a threat to their health.

The organic food industry is expected to grow as consumers continue to understand the significance of healthy eating. Thus, Whole Foods Market will continue to profit from growth in market share (Zapeda and Deal 701). A majority of Chinese are concerned about the procedures followed in food production. Whole Foods Market is renowned for abiding by established food safety standards. Thus, most Chinese will not have doubts purchasing the company’s products. Creativity and innovation are other strengths of Whole Foods Market. The company has acquired skills in production of organic foods due to being in the industry for a long time. Besides, it has come up with innovative ways of producing organic products at low costs. Thus, the company enjoys a significant profit from its produce. Whole Foods Market’s organizational culture enables it to retain a motivated workforce. It helps to boost the company’s productivity and cut down on operations costs. The company does not require recruiting and training new employees often.

Weaknesses

Consumer attitude is one of the weaknesses of Whole Foods Market. In spite of the company having a huge pool of loyal customers, some individuals believe that the corporation’s prices are not reasonable. Some clients have branded the company “Whole Paycheck” since they believe that one can spend all his/her salary in buying Whole Foods Market’s products. Nonetheless, it ensures that clients get value for their money by offering quality products. The company depends mainly on the American market. Thus, it is likely to incur a significant loss in the event of an economic downturn in the United States. Currently, Whole Foods Market does not have outlets in China. Thus, the company’s brand name is weak in the Chinese market. The company depends on a small number of suppliers. As a result, it would be difficult for Whole Foods Market to expand its operations at a fast rate.

Opportunities

Whole Foods Market has an opportunity to grow its market share in countries like China where it does not have stores. The company can liaise with organic producers in China to expand its pool of suppliers. It would enable it to increase operations in China. Besides, the company can partner with local grocery stores. It would help to reach many customers. On the other hand, Whole Foods Market has an opportunity to grow its market share by offering competitive prices. Currently, the company targets affluent people only as it sells products at premium prices. A slight reduction of prices would allow the company to reach a broad customer base. Investing in technology would enable the company to boost its sales volume. It would be difficult for Whole Foods Market to have outlets in all the main and minor cities. However, the company can reach many customers by offering online shopping services. Most Chinese own smartphones. The company can invest in a mobile application to reach many customers who might not have time to visit physical outlets to shop.

As millennials continue to join the labor force in China, the market share of organic products continues to grow. Besides, many women progressively join workforce leading to increasing their disposable income (Yan 709). A majority of customers who buy organic products are female. Thus, Whole Foods Market is likely to benefit from an increase in disposable income amid women. Changes in lifestyle and consumption patterns amid the Chinese are other opportunities that Whole Foods Market might exploit. Today, the Chinese prefer to lead a healthy way of life. They are conscious of what they eat or drink. It underlines the reason many people purchase organic products.

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Threats

Whole Foods Market encounters numerous threats. One of the threats is global warming. Climate changes are likely to affect the company’s level of production of organic products. Another threat that the firm faces is competition from rival businesses. In the Chinese market, Whole Foods Market is likely to face a significant threat from companies like Carrefour, Wal-Mart, and Century Mart. Wal-Mart capitalizes on the provision of retail service as its product. The company does not stock a lot of organic goods. It deprives Wal-Mart of the opportunity to exploit the Chinese market. According to Harbin and Humphrey, Wal-Mart sells its products at low prices (12). The company always advertises a reduction in costs. As a result, it attracts many customers. Indeed, Wal-Mart uses cost leadership strategy to dominate the Chinese market. In spite of selling products at low prices, the company offers a limited quantity of organic foods. Thus, Whole Foods Market can capitalize on the production of a high volume of organic foods.

Wal-Mart uses an efficient promotional mix. The company employs sales promotions, public relations, advertisements, and personal selling to market products. The use of an effective promotional mix enables the company to reach a broad customer base and attract many customers. Besides, it has an opportunity to persuade clients to purchase its products. Wal-Mart uses “the intensive distribution strategy” (Harbin and Humphrey 16). The company has numerous stores in the main cities in China. Besides, it continues to open stores as a way to reach many customers. The company brands itself as socially conscious as a way to make clients believe that it cares about their needs. The strategy enables Wal-Mart to attract many customers as it gives them the liberty to shop based on their choices.

Carrefour has been in the Chinese market since 1995. The company brands itself as one that resonates with the Chinese culture. In spite of being in China for at least twenty years, the company offers limited varieties of organic food products. It denies the Carrefour an opportunity to exploit the enormous Chinese market. Besides, the company sells its products at regular prices. It helps Carrefour to make substantial sales and wage competition against major companies like Wal-Mart. Carrefour uses numerous strategies to promote its products. The company uses personal selling, public relations, advertisements, and sales promotion to market organic products (Ortega et al. 319). At times, Carrefour gives customers discounts as a way to encourage them to buy more products. Initially, the company had establishments in first-tier cities only. In Shanghai, the company has stores in residential areas and major business districts. It targets high-income earners.

Century Mart has been in China for over twenty-five years. The company positions itself as a one-stop shop where customers can get everything they want. Century Mart stocks organic food. However, it sells the products in small quantities. Thus, it cannot satisfy the Chinese market. Century Mart sells its organic products at low prices compared to other stores like Carrefour. The reduction in prices of organic products is meant to encourage customers to purchase the goods. The company uses numerous channels to promote its products. They include direct marketing, public relations, sales promotion and advertisements among others. Century Mart is one of the companies with efficient distribution channels in China. The company has over 5,600 outlets across China (Ortega et al. 320). It has stores in the main cities as well as residential areas. The numerous outlets facilitate distribution of organic products and boost the company’s sales volume.

Market Segmentation and Targeting

Segmentation is paramount when venturing into a new market. It enables a company to establish a marketing mix that suits diverse target groups. Organizations ought to appreciate that not all customers can afford expensive products. Therefore, there is no need of spending a lot of money selling a company to the wrong people. Market segmentation enables a corporation to identify the right customers and create an effective marketing plan. Whole Foods Market will use psychographic, demographic, behavioral and geographic factors to segment the Chinese market.

Geographic

It would be hard for Whole Foods Market to establish numerous stores in China within a short duration. The demand for organic products in China is highly concentrated in the major cities. As the company sells its products at premium prices, it has to target geographic regions with individuals who can afford the goods. Opening outlets in rural areas would yield minimal returns (Chen 169). Whole Foods Market will target major cities like Shanghai, Beijing, and Hangzhou. The cities are highly populated. Besides, people in these towns do not farm. They purchase all their food products. Hence, Whole Foods Market is guaranteed of a ready market in the major cities. Organic products do not require taking too much time before they get to the market. Major cities have a well-established transport network. Thus, the company will not have difficulties shipping its products to the market.

Demographics

Whole Foods Market will target the wealthy people who dwell in the major cities. The company will also target high-income groups and working people. According to Chen, many people from these demographics have a vast knowledge of organic products and their benefits (173). Thus, they are likely to purchase Whole Foods Market’s products. Besides, they have a high degree of disposable income. It would not be difficult for high-income groups to part with extra cash to purchase quality food products. Employed women comprise the biggest proportion of people who buy organic products. Therefore, Whole Foods Market will target working women. Additionally, the number of millennials who are joining the workforce continues to rise. Thus, the company will focus on the white collar class that comprises individuals aged between 18 and 39.

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Psychographics

Whole Foods Market intends to establish stores in the major cities as people who live in towns prefer organic foods. According to Johnston and Szabo, most Chinese who live in urban areas are conscious of what they eat (307). The food scandal that occurred in China was an eye-opener. Today, the customers scrutinize all the food products before purchasing them. They prefer to live a healthy lifestyle. Consequently, they do not purchase anything inorganic. Moreover, they are not worried about the cost of products as long as they are secure. Thus, they are willing to pay premium prices for organic foods.

Perceptual Map

Perceptual Map

Currently, Whole Foods Market offers its products at high prices compared to rivals such as Wal-Mart, Carrefour, Century Mart and City Shop. Nonetheless, a majority of the competitors stock low quantities of organic foods (Johnston and Szabo 309). Thus, they are unlikely to satisfy the demand for the products in the Chinese market. Whole Foods Market can benefit from stocking many varieties of organic foods in bulk. The company will sell its products at premium prices as a strategy to instill the sense of quality in consumers’ minds. Stocking many varieties of organic products will enable the company to meet all the needs of individual customers.

Consumer Problem

Today, most Chinese are wary of the food products that they consume. The demand for organic food continues to rise across the country. Currently, a majority of the city dwellers prefer to buy organic foods. In spite of there being some food stores that stock organic products, the outlets cannot satisfy the demand in the market (Johnston and Szabo 312). Besides, a majority of the Chinese markets do not stock organic foods. Thus, Whole Foods Market intends to exploit the unsatisfied markets in China. In the major cities like Beijing and Shanghai, the demand for organic foods is higher than what the available companies can supply.

As people continue to relocate to the central cities across the country, the demand for organic foods is expected to rise. Additionally, changes in lifestyle and consumer behaviors will lead to high demand for organic foods (Roth et al. 27). As the Chinese economy continues to grow, the level of disposable income in many households is bound to rise. Hence, many people will afford organic foods. Indeed, the market for organic foods is expected to grow with time. Currently, the companies that sell organic foods in China do so at low or regular prices (Johnston and Szabo 317). They do not meet the needs of high-income earners who prefer to purchase expensive products. The customers believe that existing products are of poor quality and that is why they are sold at low prices. Hence, Whole Foods Market will exploit this market segment by selling its products at premium prices.

The rise in intercultural exchanges has influenced the culture of food consumption in China (Ortega et al. 323). Today, most Chinese prefer to purchase food from other countries. Thus, Whole Foods Market is likely to benefit from the Chinese market by importing organic products from the United States. According to Ortega et al., it is imperative to understand the ethical practices of a target population (324). It would ensure that a company does not deal in products that violate the moral beliefs of the consumers. Currently, Chinese have developed a culture of doing the right things. For instance, some Chinese do not like violating animal rights. As a result, they avoid eating pork, beef, and chicken products. Instead, they prefer to buy organic products that do not interfere with animal welfare.

Target Market

Identifying a target market facilitates the formulation of an effective marketing communication. A target market comprises people with everyday needs or features that an organization intends to serve. In China, Whole Foods Market will target individuals aged between 18 and 39. Most people who fall under this age bracket are employed, wealthy and educated. Besides, they prefer to lead a healthy lifestyle. Thus, the people are conscious of what they eat. Most educated people have adequate knowledge about organic products and their benefits. Thus, they are less concerned about the cost of the goods as long as they get value for their money (Pei et al. 416).

The company intends to establish outlets in the main towns to satisfy the unmet needs of the target segment. The idea to venture into the Chinese market came after Whole Foods Market realized that there was a tremendous potential in China. Currently, the companies that sell organic foods do not satisfy the demand. Besides, they do not stock many varieties of organic products. The companies are unable to satisfy all customers, particularly the affluent households. Thus, Whole Foods Market believes that it can resolve the current problems by stocking a wide variety of organic foods and targeting wealthy clients.

Whole Foods Market delights in satisfying customers. The company believes that the clients are its lifeline. One reason why Whole Foods Market is different from other companies is that it offers exceptional customer services. The company goes to “extraordinary lengths to satisfy, delight, and nourish its customers” (Pei et al. 419). It endeavors to not only meet but also surpass clients’ expectations. The company intends to turn customers into brand ambassadors by offering excellent services. Whole Foods Market serves clients skillfully, proficiently, adeptly, and with style.

Marketing Mix

The marketing mix is vital to an organization. It helps to determine the appropriate marketing strategy to apply for a target market. Additionally, it facilitates segmentation, targeting, and positioning of business. Whole Foods Market will focus mainly on the affluent people whose primary ideal point is quality. They are not concerned about the cost of the products as long as they meet the desired quality. The company will position itself as socially conscious. It will endeavor to respond to the needs of the customers.

Product

Whole Foods Market will stock numerous varieties of organic foods in line with its branding strategy. The company will have many product lines that include Engine 2 Plant-Strong and 365 Everyday Value. The later will target customers who are price-conscious. The products in this category will be sold at regular prices. On the other hand, the Engine 2 Plant-Strong product line will target customers with unique nutritional preferences like vegetarians. The company will have a range of goods sold at premium prices. The objective of selling products at premium prices is to distinguish Whole Foods Market from rival companies like Wal-Mart. Additionally, the company wishes to instill a sense of quality in the minds of target customers. Whole Foods Market will endeavor to manufacture quality products in line with the clients’ preferences.

Place

Whole Foods Market may not be able to open stores in all markets across China. As the company’s primary target customers are found in the central cities, it will open stores in Beijing, Shanghai, and Hangzhou. The company will also have an online store where customers can purchase products and have them delivered to their homes. The company will gradually open new stores across China and partner with local firms to expand its market share.

Promotion

Whole Foods Market will use numerous promotional techniques based on the market conditions and season. The company will mainly use advertising, public relations, and sales promotions to sell its products. It will use television to advertise its products. Besides, the company will use billboards to reach clients who do not have time to watch television. A majority of the millennials own smartphones and have social media accounts. Thus, the company will use social media platforms like Facebook and Twitter. Whole Foods Market will use public relations to reach target customers. The company will use themes that touch on the interests of the target customers to publicize its products. It will give target customers insights into its organic products. Whole Foods Market will use point-of-sales displays, product samples, premiums, and coupons to market its products. Additionally, customers will have an opportunity to learn about products and their benefits. It will help to create a rapport with clients and win their trust.

Price

The primary target for Whole Foods Market is not price-conscious. Although the company will sell some products at reduced prices to target the price-conscious clients, the biggest share of the products will be sold at premium prices. Whole Foods Market will ensure that it produces quality products. As a result, it will sell the goods at high prices to recover the production cost. The company will use psychology pricing strategy. The target customers are concerned about the quality and safety of the products. Selling organic foods at low prices will lead to customers doubting their quality. Thus, Whole Foods Market will set its prices higher than those of competitors to inspire a notion of quality in clients’ minds.

Implementation Planning

For Whole Foods Market to exploit the Chinese market, it will require an effective integrated marketing communication strategy. The company will use mass media to reach the target clients. In this case, Whole Foods Market will run advertisements on the main television companies for three months. Additionally, the company will erect billboards in Beijing, Shanghai and Hangzhou. The billboards’ ad will run for three months. A majority of the target customers have Twitter and Facebook accounts. Thus, Whole Foods Market will use social media to promote organic foods. The company will also invest in a mobile application to facilitate online shopping. Whole Foods Market will use celebrity endorsement to popularize its brand. It will seek the services of renowned celebrities like Fan Bingbing. The star will serve as the company’s brand ambassador for one year. Whole Foods Market will partner with Taobao to enable it to expand its operations fast. Besides, the company will liaise with local farmers who deal with organic products to allow it to cut down on the cost of procuring raw materials.

Whole Foods Market will look for brand licensing opportunities to grow its market share. The company will allow local grocery stores and cosmetic businesses to lease its brand logo. It will help the company to boost the sales of organic foods as well as personal care products. The company will use product placement technique to sell organic foods. Whole Foods Market’s brand will feature in leading films and television programs in China. It will help the company to reach a broad audience. Additionally, the company will run numerous sales promotions in main cities. It will issue customers with membership cards that will earn them points whenever they buy organic goods. Customers will receive discounts based on the accumulated points.

Conclusion

The demand for organic foods continues to rise in China as people become health-conscious. Besides, a majority of the youths have joined the labor force. Thus, their level of disposable income has gone up. Many people continue to relocate to urban centers leading to increasing demand for organic foods. The food scandal that affected China resulted in people being cautious of what they eat. Currently, numerous companies sell organic foods in China. However, they stock the products in small quantities. Therefore, they are unable to satisfy the market. Whole Foods Market intends to venture into the Chinese market to exploit the demand for organic foods. The company will target mainly the high-end consumers. It will establish stores in the central cities. Whole Foods Market will use integrated marketing communication to promote products. The company will sell products at premium prices to distinguish itself from rival businesses.

Works Cited

Chen, Mei-Fang. “Attitude towards Organic Foods among Taiwanese as related to Health Consciousness, Environmental Attitudes, and the Mediating Effects of a Healthy Lifestyle.” British Food Journal, vol. 111, no. 2, 2009, pp. 165-178.

Harbin, James, and Patricia Humphrey. “Whole Foods Market, Inc.” Journal of Case Research in Business and Economic, vol. 2, no. 1, 2010, pp. 1-19.

Johnston, Josee, and Michelle Szabo. “Reflexivity and the Whole Foods Market Consumer: The Lived Experience of Shopping for Change.” Agriculture and Human Values, vol. 28, no. 3, 2011, pp. 303-319.

Ortega, David, et al. “Modeling Heterogeneity in Consumer Preferences for Select Food Safety Attributes in China.” Food Policy, vol. 36, no. 2, 2011, pp. 318-324.

Paul, Justin, and Jyoti Rana. “Consumer Behavior and Purchase Intention for Organic Food.” Journal of Consumer Marketing, vol. 29, no. 6, 2012, pp. 412-422.

Pei, Xiaofang, et al. “The China Melamine Milk Scandal and its Implications for Food Safety Regulations.” Food Policy, vol. 36, no. 3, 2014, pp. 412-420.

Roth, Aleda, et al. “Unraveling the Food Supply Chain: Strategic Insights from China and the 2007 Recalls.” Journal of Supply Chain Management, vol. 44, no. 1, 2008, pp. 22-39.

Yan, Yunxiang. “Food Safety and Social Risk in Contemporary China.” The Journal of Asian Studies, vol. 71, no. 3, 2012, pp. 705-729.

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.

Zapeda, Lydia, and David Deal. “Organic and Local Food Consumption Behavior: Alphabet Theory.” International Journal of Consumer Studies, vol. 33, no. 6, 2009, pp. 697-705.

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