Industry Attractiveness
Broadly speaking, the grocery industry tends to be noncyclical as food is a basic requirement of life. Due to the basic need to sustain life, competition for sales is intense, profit margins are typically small, and product offerings are considered homogenous. Many forces squeeze operating profitability, primarily being the effectiveness of the supply chain, location, and overall perception.
Whole Foods Markets, who is viewed as an industry leader, competes within the organic grocery industry; an industry that’s grown by double-digits in the United States every year for over a decade, nearly reaching $40 billion in sales in 2014. As a result of increasing social trends and market growth, the US government expanded …show more content…
Despite the United States leading global demand, the Nielsen Company indicated in the January 2015 report, that emerging markets actually lead the way in desire for healthier foods and are more willing to pay a premium for such products.
Internal Factors
Financial Analysis
Financial analysis is a key to tool allowing both managers and investors gauge the overall performance of a company relative to the industry averages. Within the grocery industry there are four key ratios: sales, profits, liquidity, and inventory turnover. Each of these metrics will be discussed in further detail below using data from industry comparison metrics provided by CSImarket.com.
Sales: Due to low profit margins per purchase, the volume of sales is critical to producing sustainable profits within the grocery industry. Overall, sales have continued to climb year over year (YoY), eclipsing $14 billion in fiscal 2014. Although, for two consecutive years, both annual sales and comparable store sales have seen decreased growth. In comparison to industry averages, WFM shows there strength by performing better than the competition in both YoY revenue and five year average revenue growth.
Broadly speaking, the grocery industry tends to be noncyclical as food is a basic requirement of life. Due to the basic need to sustain life, competition for sales is intense, profit margins are typically small, and product offerings are considered homogenous. Many forces squeeze operating profitability, primarily being the effectiveness of the supply chain, location, and overall perception.
Whole Foods Markets, who is viewed as an industry leader, competes within the organic grocery industry; an industry that’s grown by double-digits in the United States every year for over a decade, nearly reaching $40 billion in sales in 2014. As a result of increasing social trends and market growth, the US government expanded …show more content…
Despite the United States leading global demand, the Nielsen Company indicated in the January 2015 report, that emerging markets actually lead the way in desire for healthier foods and are more willing to pay a premium for such products.
Internal Factors
Financial Analysis
Financial analysis is a key to tool allowing both managers and investors gauge the overall performance of a company relative to the industry averages. Within the grocery industry there are four key ratios: sales, profits, liquidity, and inventory turnover. Each of these metrics will be discussed in further detail below using data from industry comparison metrics provided by CSImarket.com.
Sales: Due to low profit margins per purchase, the volume of sales is critical to producing sustainable profits within the grocery industry. Overall, sales have continued to climb year over year (YoY), eclipsing $14 billion in fiscal 2014. Although, for two consecutive years, both annual sales and comparable store sales have seen decreased growth. In comparison to industry averages, WFM shows there strength by performing better than the competition in both YoY revenue and five year average revenue growth.