Strategic Plan for Woolworths/Macro Wholefoods
Year |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
Total wholefoods retail value |
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($M) |
1,000.00 |
1,200.00 |
1,440.00 |
1,728.00 |
2,073.60 |
2,384.64 |
2,742.34 |
3,153.69 |
3,469.06 |
3,815.96 |
4,197.56 |
Projected growth rate for |
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wholefoods industry |
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20% |
20% |
20% |
20% |
15% |
15% |
15% |
10% |
10% |
10% |
Supermarkets market share |
60% |
62% |
64% |
66% |
68% |
70% |
72% |
74% |
76% |
78% |
80% |
Supermarkets market share |
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|
|
($M) |
600.00 |
744.00 |
921.60 |
1,140.48 |
1,410.05 |
1,669.25 |
1,974.48 |
2,333.73 |
2,636.48 |
2,976.45 |
3,358.05 |
Macro's market share |
10% |
15% |
19% |
23% |
26% |
29% |
32% |
34% |
36% |
38% |
40% |
Macro's market share ($M) |
60.00 |
111.60 |
175.10 |
262.31 |
366.61 |
484.08 |
631.83 |
793.47 |
949.13 |
1,131.05 |
1,343.22 |
Required growth rate to |
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achieve target |
|
86% |
57% |
50% |
40% |
32% |
31% |
26% |
20% |
19% |
19% |
7.2 Marketing strategy
There are two challenges inherent in marketing the organic products within Woolworths. The first is that the premium priced organic products must be differentiated from existing product offerings. The second is that our premium offerings must then be differentiated from the premium offerings that Coles and other organic food vendors will offer. Therefore, any marketing campaign should focus on positioning of organic food, market segmentation, cost leadership, future market demand and how to develop repeat purchases via our customer loyalty program.
Emotional Positioning or price positioning of organic food
Research carried out by Zanoli and Naspetti suggests that a value-based approach to position organic products that favours a strong emotional involvement by consumer is preferable. Organic food is associated with health and, most importantly, wellbeing and quality of life (Zanoli & Naspetti, 2006). Woolworths Macro management should thus apply emotional positioning of organic food products for customer segments that are highly concerned about health. Macro must understand how they can maximise the use of emotions when customers are purchasing of its organic products. As social mindedness is also a characteristic of buyers of organics, it is important that we make customers aware of the social benefits of buying organic, to also emotionally position them in that respect.
Price positioning will be a big challenge as a positioning strategy. Organic food products are
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Strategic Plan for Woolworths/Macro Wholefoods
comparably more expensive to produce due to high labour costs, difficulty in processing, storage and handling (Australian Bureau of Agricultural and Resource Economics, 2004). However, this pricing disparity, which makes it difficult to attract price conscious customers, is exaggerated by the present, comparatively low volume of organic produce grown and a lack of supply. This weakness can be overcome, as the price premium decreases, with increasing customer knowledge of health benefits of consuming organic food as well as the social benefits. Thus emotional positioning of organic produce can play a major role in converting some of the non-organic consumers into organic consumers.
Market Segmentation – increase customer base and brand awareness
The market is segmented according to various needs and wants of customers. Woolworth Macro should identity different potential customer segments based on their age, gender, location demographic characteristics, health preferences and social mindedness to identify their target market. It is our belief that it will be a wide market indeed, given the widespread aversion to chemicals in food with in the Australian market (source). Indeed, given that the latest statistics, as discussed above, suggest that 60% of buyers of fresh produce presently consider organics, it is quite apparent that virtually all who can afford organic produce will consider purchasing it.
In order to encourage customers to become aware of organic products and purchase them, Woolworths should focus on creating customer awareness about organic products. This will increase the market segment for organic products as a whole. Woolworths’ strategy to educate consumers about the benefits and advantages of consuming organic food on a daily basis will strengthen its brand image by showing its social responsibility and commitment for the health concerns of consumers. Woolworth can run or sponsor various campaigns to educate non-organic consumers about health benefits, environmental concern and animal welfare which will, in turn, motivate them to start consuming organic products. This marketing campaign should also highlight Woolworth’s vision of ‘Destination ZERO’ which aims for zero harm to people, the environment, and the community (a
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Strategic Plan for Woolworths/Macro Wholefoods
part of its corporate social responsibility program). This campaign will not only help increase the number of organic customers, but also Woolworths’ wider customer base due to its efforts to create a new market. This awareness will become a driver to increase consumer’s cost/benefit perceptions of buying organic products resulting in increased sales volumes.
Demand Forecast Model
The organic industry’s biggest challenge is to meet the growing demand (Biological Farmers of Australia Ltd, 2010). Demand forecast modeling will, thus, help in planning the future supply of organic produce to meet the increasing demand, allowing Woolworths to determine if existing suppliers/farmers can meet future demand or whether it should seek to develop new organic farms. Developing new organic farms requires the process of organic certification by Australian organic certification bodies which requires long time (generally three or more years) and is a costly process. Woolworth must thus build relationship with certifying agencies like the Biological Farmers of Australia (BFA) to help new farmers to gain organic certification, to meet the forecast demand (as predicted in the models developed.)
Customer loyalty program
Due to the highly competitive nature of the retail industry, it can be difficult to gain customer loyalty. As such, we will integrate Woolworths Macro products with the existing Woolworths reward programs, providing a reward whenever a customer purchases an organic product (Woolworths, 2009). Using this program, we could also provide free upgrades to organic products (from regular products) and so on, in order to promote awareness.
Separated versus Integrated Approach
To capture projected wholefoods market share, Macro has to introduce more product lines and grow its presence in existing lines. There are two approaches to push wholefoods into the market through existing supermarkets:
1. Introduce a specialized aisle, which will offer only wholefoods/ organic selections (Separated
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Strategic Plan for Woolworths/Macro Wholefoods
Approach).
2.Add wholefoods/organic products to the existing product lines on display in the supermarkets (Integrated Approach).
Both approaches have their advantages and disadvantages summarized in the table below.
Comparison of Separated Versus Integrated Approach
Separated Approach
Advantages |
Easy to find wholefood items |
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No price comparison |
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Possibility a customer will buy additional/ unplanned wholefood items |
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Disadvantages |
Non-existing customers will not go into the aisle |
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No awareness of the existing wholefood alternative if shopping in conventional food |
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section |
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Perceived small selection/ product line |
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Perceived as a specialised option, not an everyday choice |
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Integrated Approach |
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Advantages |
Increasing customer awareness about wholefoods |
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More choice/ options for supermarket in general |
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Opportunity to compare prices and realize that wholefoods are reasonably priced |
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Convenience (Continuous flow of shopping without the necessity to go into another |
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area) |
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Disadvantages |
Hard to find if looking for specific items |
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Price comparison (for price conscious consumers) |
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Real wholefoods consumers might prefer to go to specialized stores |
To overcome the disadvantages of the separated approach, the following measures are advised:
•Run specials and promotions to draw customers to wholefoods aisles.
•Design layout so that customers have to walk through wholefoods aisles to get to necessities and everyday items.
•Undertake a survey to identify what items customers would like to see in wholefoods aisles. To overcome the disadvantages of the separated approach, the following measures are advised:
•Use purple lines across the shelves to indicate wholefoods section (see Appendix E for the image).
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