Posted: March 18th, 2023

Whole Foods and Trader Joe’s Assessment

profiled for this exercise are Whole Foods and Trader Joe’s. Whole Foods is based in Texas and has spread across the country as a retailer of organic, gourmet and natural foods. The company has expanded into Canada and the United Kingdom. Whole Foods also made a major move in the United States when it acquired Wild Oats, which was its major competitor at the time. The deal ran into trouble with the Federal Trade Commission but was ultimately allowed to go through, since there is nothing stopping other grocery stores from selling the same type of foods (Gogoi, 2007).

Trader Joe’s is a competitor to Whole Foods, but one that remains only in the United States and it has typically expanded by building new stores. The company does not just have natural foods but it competes for roughly the same customer base as Whole Foods, and most customers of one will also be customers of the other at times. Trader Joe’s has a different business model to some extent, with a lot of house brands, and smaller stores, but is one of the bigger threats to Whole Foods.

Merger & Acquisition

Whole Foods bought Wild Oats for two reasons. The biggest one is that Whole Foods wanted to expand rapidly. Building its own stores is typically a slow way for a large retailer to grow. Real estate location is important in the grocery industry so growing organically — no pun intended — is a slow process for a company like Whole Foods. The acquisition of Wild Oats was as much about gaining key real estate as it was about shutting down a competitor. Wild Oats was strong in regions where Whole Foods was weak — Florida, the Pacific Northwest and Rocky Mountain (Moore, 2007). Whole Foods therefore was able to enter these regions quickly, and do so with locations already vetted for proximity to key demographic clusters by a competitor in the same industry. This moved saved Whole Foods a lot of time and money with respect to growing its geographic footprint.

Whole Foods also benefitted from access to the Wild Oats customers. Whole Foods saw that the organic food industry was beginning to grow rapidly, and major grocery sellers were starting to increase the amount of organic food on their shelves. As a result, Whole Foods recognized that there was going to be some consolidation among the specialist retailers in this segment in order to gain the scale needed to compete with the larger mainstream grocery retailers. Having already significant experience with the use of acquisitions as an expansion strategy, Whole Foods was able to build the size and scope it needed quickly with this expansion.

Trader Joe’s

In contrast to Whole Foods, Trader Joe’s has preferred to build its own stores in order to expand. Part of this is driven by the desire of Trader Joe’s to build pent-up demand in a given region before entering. The company’s stores have a reputation the precedes them, and it has actively petitioned for its fans to ask for stores in given areas. When it moves in, it tends to do so slowly because of the need to acquire real estate and space its stores. The company’s move into South Florida has taken many years just to get to a couple of stores in Naples and Miami, with expansion in the region remaining gradual (Valverde, 2014).

What the slow pace of growth highlights for Trader Joe’s is that the company needs to start working on a faster pace of expansion. It is recommended that the company undertake an acquisition to fill in its territories. There are a couple of key considerations for Trader Joe’s. The first is that the company is not publicly-traded, so it has a much lower access to capital than most other grocery stores. The company can add debt, but it will be challenged to add equity without tapping the credit markets. This fact has probably played a role in limiting the growth of Trader Joe’s thus far. So any acquisition at this point will probably have to be fairly small. The other factor to take into consideration is that Trader Joe’s has its own brand, store design and inventory — the only thing it really needs to acquire is the real estate. Getting the right location is important in the grocery business, even for a destination store like Trader Joe’s. A map of the company’s stores highlights this — it does not set up shop in poor parts of town, but it prefers to go where it customers live and work.

A good acquisition target for Trader Joe’s therefore is Fresh Market, which is a chain that is about a quarter of the size by the number of stores and even smaller still when evaluated by sales, owing to the fact that Trader Joe’s has much higher sales per square foot. The value of Fresh Market is an bringing about a more national presence to Trader Joe’s, in particular in the eastern markets where Fresh Market is strong. Fresh Market directly competes against Whole Foods but it less successful overall, which makes it a good takeover target.

For an acquisition to have value, it needs to deliver a higher value to the acquiring company than it costs. Two factors are important here. The first is that Trader Joe’s is mostly acquiring the real estate, getting its saturation levels in places on the eastern seaboard more to the level where they are in the West, and doing so in precisely the high-income areas that TJ’s likes to target. The second factor is that the real estate is going to be more valuable for Trader Joe’s. The price is going to be roughly what it is worth for Fresh Market, but Trader Joe’s has the highest sales per square foot in the industry (Loeb, 2012), so that in the hands of a better-run and more successful company like Trader Joe’s that real estate will generate more income. This is where there is advantage for a company to take over the real estate, which is essentially the nature of the transaction for Trader Joe’s.

International Expansion

Whole Foods has a division for its international operations, which are in the UK (9) and Canada (8). The company has expanded slowly in these international operations, in many cases by building the stores greenfield, in both the UK and in Toronto. It entered Vancouver with three stores via acquisition, the one time it has used that as a method of international expansion. It is unusual for a mix of strategies to be used in international expansion, but Whole Foods has used both methods to open stores elsewhere. At present, though, the growth is slow in both foreign countries — after a massive buildout in the 2000s, Whole Foods has curtailed growth ambitions everywhere including internationally.

The sluggish pace of growth internationally should be a concern for Whole Foods management. The company needs to fully commit to these two markets, and right now they retain only a limited presence. The UK operation has only a couple of locations outside of London, which is not good enough given the size of the market. The Canadian operation is only in two markets. These two markets are by far the easiest for an American company to expand into, being large, wealthy and English-speaking. There is potential for Whole Foods to do much better, so it is recommended that expansion proceed more aggressively. The UK has a lot of great potential markets, and Whole Foods should target another six stores there — Bristol, Edinburgh, Southampton, Newcastle, York, Cambridge, Oxford and other cities are all ripe markets. In Canada, the company should avoid Quebec for now because of the language issue, but there are several potential markets for expansion and these should be explored, along with filling in the Toronto market, which is relatively underserved compared with equivalent metros elsewhere.

At the corporate level, the biggest issue is that the foreign operations are still trying to fit into a niche market, as opposed to the Whole Foods strategy in the U.S. They are running a small selection of stores, with hardly any move into the suburbs, and the result is that the company lacks the saturation. It is not a viable grocery option for many people within its target market. There are comparables — looking at the four stores in Vancouver that is the same as the number in Portland, OR, a city of comparable size and market characteristics. Whole Foods still has to consider that it needs a nationwide strategy rather than a focus city strategy for its foreign operations, because it has succeeded in the U.S. By becoming a household name, not a niche player. So there is a corporate-level strategy difference between domestic and international operations and it is recommended that this gap is closed in order to enhance the international operations and get them to the same level as the American operations.

TJ’s International

At present, Trader Joe’s does not have any plans to go international. A lawsuit it filed against an imitator in Vancouver essentially reached the same conclusion — Trader Joe’s is not actively pursuing international customers (CBC, 2013). This case is interesting, because it is exactly the same type of guerilla strategy that TJ’s uses when entering new markets. The company allows its reputation and cult following to proceed it — in this case with a store right across the border in Washington State where reportedly 40% of the business comes from Canadians. So as far as a recommendation for operating strategy is concerned, opening a Canadian store makes perfect sense, and Vancouver is the place to start since the advanced hype has been built up already to the point where a business model as absurd as Pirate Joe’s actually works. It is really that simple as far as operating strategy — you have to actually go into another country and operate there. Trader Joe’s does not alter its business model so exporting some of its products is not a direction the company wants to go, and nor should it, but opening a store or two in markets that are already primed for a TJ’s is a great idea.

The decision to move into a foreign market is not one to take lightly, however. There must be a corporate-level strategy where international expansion makes sense. On one level, opening a couple of stores across the border is probably not going to make much of a dent on a company as large as Trader Joe’s. Certainly, moving into two foreign markets has actually done relatively little for Whole Foods. There is no particular advantage to opening a store in Vancouver that opening a store in Random City, USA would not deliver (Memphis, New Orleans, El Paso, Jacksonville and Honolulu are among major cities without one). So it is important for Trader Joe’s to look at international expansion in the bigger picture context.

If Trader Joe’s goes public with an IPO, that will put the company in a better position for international expansion to make sense. An IPO will give the company a major capital injection that will allow it to fill in its domestic markets as well as target international ones. At this point, the company can and should pursue more growth domestically, but having the capital from an IPO will help it to pursue opportunities internationally as well. Canada is obviously the easiest — the brand is becoming known there despite not having stores, the country has money, and most of the largest markets in North America without a Trader Joe’s are now in Canada, not the U.S. Food just gets trucked across the border, so while there are some additional logistics considerations, these are not major and would be overcome is the company had enough money to fill in the Canadian markets in the same way that it has filled in the American ones.

Conclusion

While Whole Foods has engaged in international expansion and Trader Joe’s has not, the way that the they should approach the issue is basically the same in either case. Whole Foods seems to be at least somewhat uncommitted to foreign expansion, having stalled its expansion in the UK for the time being and apparently content to operate only in two Canadian cities. Both companies have opportunity to move overseas, however, and this is something that they should look at. Whole Foods has long recognized that size helps it to compete against the bigger companies, and Trader Joe’s doubtless realizes this, too. In a sense, TJ’s should look at the example of Target, which waited too long to get into foreign markets, only to find that it was unable to do so successfully. Whole Foods might be moving slowly, and needs to move faster, but they are learning with these subsidiaries so that when they do begin to see opportunity, they can move much more quickly. If history has shown anything about international expansion it is that the faster a company goes international, the better they are going to be at it — Starbucks is a classic example of that, having made global growth part of its strategy since day one. Whole Foods is ahead of TJ’s in this regard, but Trader Joe’s can make up this ground if it chooses to go public and get some capital for growth on its balance sheet.

References

CBC. (2013). Trader Joe’s loses fight with Vancouver’s Pirate Joe’s. Canadian Broadcasting Corporation. Retrieved June 3, 2014 from http://www.cbc.ca/news/canada/british-columbia/trader-joe-s-loses-fight-with-vancouver-s-pirate-joe-s-1.1912400

Gogoi, P. (2007). No Wild Oats for Whole Foods? Business Week. Retrieved June 3, 2014 from http://www.businessweek.com/stories/2007-06-06/no-wild-oats-for-whole-foods-businessweek-business-news-stock-market-and-financial-advice

Loeb, W. (2012). Aldi’s Trader Joe’s is a winner. Forbes. Retrieved June 3, 2014 from http://www.forbes.com/sites/walterloeb/2012/05/17/aldis-trader-joes-is-a-winner/

Moore, A. (2007). Whole Foods to acquire rival Wild Oats. MarketWatch. Retrieved June 3, 2014 from http://www.marketwatch.com/story/correct-whole-foods-to-acquire-rival-wild-oats-for-565-million

Valverde, M. (2013). South Florida’s grocery shopping options increase in 2014. Sun-Sentinel. Retrieved June 3, 2014 from http://articles.sun-sentinel.com/2013-12-26/business/fl-grocers-2014-20131225_1_lorrie-griffith-shelby-report-south-florida

Get Professional Assignment Help Cheaply

Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?

Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.

Why Choose Our Academic Writing Service?

• Plagiarism free papers
• Timely delivery
• Any deadline
• Skilled, Experienced Native English Writers
• Subject-relevant academic writer
• Adherence to paper instructions
• Ability to tackle bulk assignments
• Reasonable prices
• 24/7 Customer Support
• Get superb grades consistently

Online Academic Help With Different Subjects

Literature

Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.

Finance

Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.

Computer science

Computer science is a tough subject. Fortunately, our computer science experts are up to the match. No need to stress and have sleepless nights. Our academic writers will tackle all your computer science assignments and deliver them on time. Let us handle all your python, java, ruby, JavaScript, php , C+ assignments!

Psychology

While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.

Engineering

Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.

Nursing

In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.

Sociology

Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.

Business

We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!

Statistics

We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.

Law

Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.

What discipline/subjects do you deal in?

We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.

Are your writers competent enough to handle my paper?

Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.

What if I don’t like the paper?

There is a very low likelihood that you won’t like the paper.

Reasons being:

• When assigning your order, we match the paper’s discipline with the writer’s field/specialization. Since all our writers are graduates, we match the paper’s subject with the field the writer studied. For instance, if it’s a nursing paper, only a nursing graduate and writer will handle it. Furthermore, all our writers have academic writing experience and top-notch research skills.
• We have a quality assurance that reviews the paper before it gets to you. As such, we ensure that you get a paper that meets the required standard and will most definitely make the grade.

In the event that you don’t like your paper:

• The writer will revise the paper up to your pleasing. You have unlimited revisions. You simply need to highlight what specifically you don’t like about the paper, and the writer will make the amendments. The paper will be revised until you are satisfied. Revisions are free of charge
• We will have a different writer write the paper from scratch.
• Last resort, if the above does not work, we will refund your money.

Will the professor find out I didn’t write the paper myself?

Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.

What if the paper is plagiarized?

We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.

When will I get my paper?

You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.

Will anyone find out that I used your services?

We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.

How our Assignment  Help Service Works

1.      Place an order

You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.

2.      Pay for the order

Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.

3.      Track the progress

You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.

4.      Download the paper

The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.

PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!