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Assessing Whole Foods’ Investment and Private Label Strategies

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Key company strategies

In this and the next part of our series on Whole Foods Market (WFM), we’ll discuss Whole Foods’ business strategies. Before looking at the company’s purchasing strategy and marketing initiatives, let’s look at its investment and private label strategies.

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Investment strategy

Whole Foods’ growth strategy primarily focuses on organic growth. However, the company is also open to acquisitions of small stores for geographical expansion. The grocery retailer expects to hit the 500-store mark by 2017, and it anticipates that the US alone can support a total of 1,200 Whole Foods locations. For fiscal 2016, Whole Foods anticipates its square footage growth to be 7%, based on 30 new stores, three 365 stores, and two to three relocations.

The company is relatively smaller than competitors like Wal-Mart Stores (WMT), Kroger Company (KR), and Costco Wholesale Corporation (COST), which own 4,344, 3,770, and 686 stores, respectively, in the US. However, Whole Foods is completely focused on organic products, while its competitors offer a diversified product range.

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Private label strategy

Whole Foods follows a differentiation strategy and has a strong focus on developing its own brands. The company generated ~$2 billion in sales in fiscal 2015 through its exclusive brands program. During fiscal 2014, Whole Foods’ exclusive brands accounted for ~13% of its total retail sales.

Over one-third of the company’s exclusive brand offerings is certified as organic. The company’s 365 Everyday Value brand accounts for approximately half of Whole Foods’ exclusive brand items while Allegro Coffee, Engine 2 Plant-Strong, and Whole Foods Market are among its other important brands.

ETF exposures and what’s next

With sales of over $15.4 billion during fiscal 2015, Whole Foods has a weight of more than 1% in the SPDR S&P Retail ETF (XRT) and 0.1% in the SPDR Consumer Staples Select Sector ETF (XLP).

In the next part of this series, we’ll look at Whole Foods’ marketing and purchasing strategies.

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