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Please answer the following Questions : 1. Who are the competitors for Whole Foods? 2. Do you consider traditional supermarkets to be competitors for natural
Please answer the following Questions :
1. Who are the competitors for Whole Foods?
2. Do you consider traditional supermarkets to be competitors for natural and organic supermarkets? 3. How would you characterize the competition between Whole Foods and Wild Oats? 4. What barriers to entry exist for natural and organic supermarkets? If Whole Foods were to raise price, could entry prevent monopoly power?
Whole Foods to Acquire Wild Oats On February 21, 2007, Whole Foods and Wild Oats executed an agreement whereby Whole Foods would purchase all of the outstanding shares of Wild Oats common stock. Whole Foods has agreed to pay $18.50 per outstanding share of Wild Oats stock, or a total of $565 million. In addition, Whole Foods would assume $106 million in outstanding debt from Wild Oats. On June 5, 2007, the Federal Trade Commission (FTC) filed for and was granted a temporary restraining order and preliminary injunction preventing the completion of the merger. The United States District Court would now have to decide whether the proposed merger violates U.S. antitrust law. Specifically, the FTC argued that the merger violates Section 7 of the Clayton Act, which states that a merger or acquisition should be prohibited if "...the effect of such acquisition may be substantially to lessen competition, or tend to create a monopoly." The Natural and Organic Food Industry The natural and organic food market had grown to $57 billion by the end of 2006, and was experiencing growth rates of better than 10% per year. This growth was being driven by a number of factors. More consumers were focusing on a healthier lifestyle and drawing a stronger link between health and natural and organic foods. Additionally, consumers were also becoming more aware of food safety issues and growing more concerned about the use of synthetic hormones and the use of antibiotics in food. Also, the standardization and certification of organic foods, and an increase in the supply of organic products, were making these product choices available. Many felt that affluent and middle class baby boomers would grow more health conscious as they aged, ensuring that the natural and organic food market would maintain high growth rates for years to come. Natural foods are foods that are minimally processed and largely free of artificial ingredients or preservatives. Organic foods are foods that are produced using stringent agricultural practices and are certified as organic by a federally accredited agency. These agricultural practices include promoting healthy ecosystems, not using genetically modified crops or long-lasting pesticides, using healthy livestock management practices, not using antibiotics or growth hormones, and using food processing that protects the healthfulness of the product. While organic product offerings had been around for several decades, the U.S. Department of Agriculture (USDA) boosted the industry in 2002 by creating the Organic Rule. The Organic Rule created a clear set of guidelines that define what products could be labeled as organic, and how such products should be grown, handled, stored, and sold. The guidelines include rules that 1 This case was prepared by Kyle J. Anderson, Michael Baye, and Jeffrey Prince to serve as the basis for classroom discussion, rather than to represent economic or legal fact, or the effective or ineffective handling of managerial situations.
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