To: Clark Hansen, CEO, AMDP
From: Milan Bhatt, R&D Team
Date: October 14, 2014
Subject: Potential Whole Foods Investment Opportunity
You have given me the opportunity to find a company that would fit with AMDP’s culture of doing business in a socially responsible, environmentally sustainable, and profitable manner. Whole Foods Market is the world’s leading natural and organic food supermarket that focuses on the triple bottom line approach of people, planet, and profit. I highly recommend investing in Whole Foods because it is not your ordinary food supermarket, it attempts to differentiate itself with high quality standards, commitment to sustainability, and consequently higher margins. Whole Foods has the opportunity to lead the movement on sustainability, not just in organic food, but also in all aspects of social, business, and environmental communities.
AMDP Investment Criteria:
I would like to remind you that AMDP investment criteria consists of four parts: triple bottom approach, corporate social responsibility, social enterprise, and carbon footprint.
Triple Bottom Line:
People: How a company conducts its relationships with employees, customers, suppliers, and surrounding communities (Triple Bottom Line).
Planet: The actions that a company is taking to help improve environmental sustainability such as reducing waste and preserving natural resources (Triple Bottom Line).
Profit: The amount of revenue a company brings in after it reduces expenditures that is sustained for a significant time (Triple Bottom Line).
Corporate Social Responsibility:
This type of responsibility helps demonstrate how a company combines its financial goals with its social and environmental goals, in order to follow ethical standards (Corporate Social Responsibility).
An organization that strives to help out its surrounding communities by improving human, social, and environmental well-being (Case for Social Enterprise).
The amount of greenhouse gases, measured in units of carbon dioxide, produced by human activities. A carbon footprint can be measured for an individual or an organization, and is typically given in tons of CO2-equivalent (CO2-eq) per year (Walser). It is important to reduce our carbon footprint because greenhouse gas emission prevents our ozone from discarding harmful radiation. The storage of greenhouse gasses in our atmosphere is also the number one cause of climate temperature increase and global warming (ABC Science).
The Culmination of Whole Foods
The first Whole foods Market opened up in 1980 when John Mackey merged his SaferWay store with Clarksville Natural Grocery in Austin, Texas (Harbin). During this time period, there were only a dozen natural food markets in the United States. In 1984, Whole Foods began expanding by acquiring other natural food chains and began to open up stores in Dallas, New Orleans, and one store in California (Hoovers). Today, Whole Foods has 373 stores located in throughout the US, Canada, and UK. Today, their mission goes beyond food retailing and their vision as an organization is to “help support the health, well-being, and healing of both people — customers, Team Members, and business organizations in general — and the planet” (Our Values and Mission).
Whole Foods Motto, “Whole Foods, Whole People, Whole Planet”, demonstrates how it is a triple bottom line company.
People: “Whole” Communities
Whole Foods has a mentality of being “part of the neighborhood”, which helps allocate power to their individual stores and doesn’t emphasize a centralized “corporate” business structure (Our Values and Mission). Each of these stores are given the opportunity to make decisions on their own that will meet the needs of their local communities. One way Whole Foods is able to demonstrate their corporate social responsibility is by donating over 5% of their total net profits each year to local communities (Community Giving). Each individual store also donates food to community food banks and shelters on a daily basis. Outside of store donations, they also give back to national and global community through their Whole Planet Foundation, which “fights poverty through micro-lending in rural communities around the world” (About the Foundation).
Whole Foods not only emphasizes its role in their communities but it also focuses on the treatment of their employees. Fortune magazine has ranked Whole Foods in their “100 Best Companies to Work For” list for the 17th consecutive year (Fortune). Fortune magazine also explains the factors that makes this company so great when they state that “this pioneering natural-foods grocer is all about transparency: employees can vote on new hires, go on field trips to meet suppliers, and are able to see every everyone’s salary” (Fortune). This sense of transparency and emphasis on employees reiterates Whole Foods focus on corporate responsibility and “Whole” People.
Planet: “The Green Mission”
Whole Foods understands that being in the organic food industry means they will be facing issues that have a large impact on the environment. That is why they have become one of the biggest trendsetters in environmental sustainability. Some of the world largest retailers are following Whole Foods environmental practices of green building, the use of solar power, company-wide recycling programs, internal green mission programs and support for organics. They are the first major retailer to offset 100% of their energy use with wind energy (Green Mission). From this investment in wind energy, Whole Foods is able to avoid nearly 551,000 metric tons of carbon dioxide pollution, which is the equivalent to not consuming 1,200,000 barrels of oil (Green Mission). The organic food retailer also invests in solar panels to reduce gas emissions in stores. These solar panel installations result in more than “1,650 tons of CO2 emissions avoided”, which is the “equivalent of removing 440 cars from roadways” (Green Mission).
Whole Foods has received several awards for its role in leading the cause toward environmental sustainability. In 2012, The Environmental Protection Agency (EPA) awarded the company the Green Power Leadership Award for the company’s commitment to green power purchases, which included “800 million kilowatt-hours last year alone (EPA). They also received the EPA’s 2010 GreenChill Most Improved Emissions Rate award, which is given to the company that has demonstrated the most effort toward reducing refrigerant emissions (EPA). Whole Foods is currently ranked fourth on the EPA’s National Top 100 list for green companies in the world (Green Power).
Profit: Financial Results
Even with the highly competitive market of the food retail industry, Whole Foods has demonstrated consistent profitability numbers. According to Whole Foods annual report, in fiscal 2013 they reported $13 billion in sales, which translated to $972 per gross square foot (2013 Annual Report). They were also able to open 32 new stores, expanding into 10 new markets, which increased their square footage to 14 billion (2013 Annual Report). The number that AMDP should be concerned about is the 14.7% return on invested capital that Whole Foods had in 2013, which demonstrates that Whole Foods is allocating its current investment funds efficiently (2013 Annual Report). The one element that will help Whole Foods sustain its profitability in a highly competitive market is its innovativeness. Forbes recently just ranked Whole Foods as the #34 most innovative companies in the world (Forbes). We have seen this innovativeness when Whole Foods recently teamed up with Instacart, a mobile where customers can order groceries and have them delivered within an hour (Dulaney).
I believe that we should take advantage of this great opportunity and invest in Whole Foods because it excels in every criterion that AMDP looks for in an investment. Not only do they follow AMDP’s investment criteria, but they also have set the standards for environmental and social sustainability within the retail industry. Despite the current competitive environment of the organic food retailing industry, Whole Foods has demonstrated new innovative ways to overcome these obstacles that will lead to their continued success of increasing profitability and returns to their investors.
“100 Best Companies to Work For 2013 – Whole Foods Market – Fortune.” Fortune. Web. 12 Oct. 2014. <http://archive.fortune.com/magazines/fortune/best-companies/2013/snapshots/71.html>.
“2013 Annual Report.” Whole Foods Market. Web. 13 Oct. 2014. <http://www.wholefoodsmarket.com/sites/default/files/media/Global/Company Info/PDFs/WFM-2013-Annual-Stakeholders-Report.pdf>.
“About the Foundation.” Whole Planet Foundation. Web. 13 Oct. 2014. <https://www.wholeplanetfoundation.org/about/>.
“Community Giving.” Whole Foods Market. Web. 14 Oct. 2014. <http://www.wholefoodsmarket.com/mission-values/caring-communities/community-giving>.
“Corporate Social Responsibility Definition.” Investopedia. Web. 14 Oct. 2014. <http://www.investopedia.com/terms/c/corp-social-responsibility.asp>.
“Declaration of Interdependence.” Whole Foods Market. Web. 14 Oct. 2014. <http://www.wholefoodsmarket.com/mission-values/core-values/declaration-interdependence>.
Dulaney, Chelsey. “Whole Foods Expands Grocery Delivery Options.” The Wall Street Journal. Dow Jones & Company, 8 Sept. 2014. Web. 14 Oct. 2014. <http://online.wsj.com/articles/whole-foods-expanding-delivery-options-with-instacart-1410192502>.
“EPA Doubles up Green Awards for Whole Foods Market.” Whole Foods Market. Web. 13 Oct. 2014. <EPA doubles up green awards for Whole Foods Market>.
“Green Mission.” Whole Foods Market. Web. 14 Oct. 2014. <http://www.wholefoodsmarket.com/mission-values/environmental-stewardship/green-mission>.
“Green Power Partnership.” EPA. Environmental Protection Agency. Web. 14 Oct. 2014. <http://www.epa.gov/greenpower/toplists/top100.htm>.
Harbin, James, and Patricia Humphrey. “Whole Foods Market, Inc.” Journal of Case Research in Business and Economics. Academic and Business Research Institute (AABRI), 1 May 2010. Web. 9 Oct. 2014. <http://libproxy.usc.edu/login?url=http://search.proquest.com/docview/759568080?accountid=14749>.
“Our Values and Mission.” Whole Foods Market. Web. 14 Oct. 2014. <http://www.wholefoodsmarket.com/careers/our-values-and-mission>.
“The Case for Social Enterprise Alliance.” Why We’re Here. Web. 14 Oct. 2014. <https://www.se-alliance.org/why#whatsasocialenterprise>.
“Triple Bottom Line Definition.” Investopedia. Web. 14 Oct. 2014. <http://www.investopedia.com/terms/t/triple-bottom-line.asp>.
Walser, Maggie. “Carbon Footprint.” The Encyclopedia of Earth. 14 July 2010. Web. 14 Oct. 2014. <http://www.eoearth.org/view/article/150926/>.
“Whole Foods Market.” Forbes. Forbes Magazine. Web. 14 Oct. 2014. <http://www.forbes.com/companies/whole-foods-market/>.
“Whole Foods Market, Inc.” Hoovers. Hoover’s Inc. Web. 13 Oct. 2014. <http://cobrands.hoovers.com/company/WHOLE_FOODS_MARKET_INC/rfshti-1-1njhxk.html>.
“Why We Must Act Now to Reduce Greenhouse Gas Emissions.” ABC Science. Web. 14 Oct. 2014. <http://www.abc.net.au/science/articles/2009/11/25/2753561.htm>.