How the Amazon-Wholefoods deal could hit the food industry?
The bomb that Amazon dropped recently with the Whole Foods acquisition has spilled a lot of ‘food for thought’ and creative predictions…from using Whole Foods as an internal ‘beta tester’ to sell logistics to other retailers to the ‘darkest conspiracy’ of taking over the whole grocery market, we have seen a lot of interpretations of Amazon’s motives behind this deal.
To help us make sense of the acquisition, our friends from Food Tech Connect have put together a brilliant piece to share some takes from leading entrepreneurs, investors, farmers, chefs and investors. As I believe this deal can have a huge impact on the whole food industry, I’ve even shared my personal thoughts in this brief article but I’ve felt that some voices deserved to be heard and we have decided to collect some takes from fellow entrepreneurs, industry thought leaders and investors to compliment the ‘acquisition picture’ ;)
We asked them to provide us with their insights on the opportunities this deal will generate for the food industry, how they see other retailers reacting to this acquisition, and how they envision Amazon playing in the food space in the foreseeable future.
Below are some of the responses we’ve received:
Mike Lee, Founder of Future Market, sees Amazon’s distribution power as a huge opportunity to make the whole food system more sustainable:
“Last mile delivery for food just got shorter. Also curious to see how this will impact small food entrepreneurs who typically use Amazon/Whole Foods as incubator grounds before they scale into mass retail. Regarding competition, this move made it an imperative to have a real e-commerce platform. No more fooling around, players like WalMart and Target need to figure out how to become amazon before amazon becomes them.
Last but not least I feel that data and distribution are amazon’s biggest assets and when they apply that to food, we’ll have a more predictive, just-in-time delivered food system. I really hope they can use their reach and knowledge making things cheaper to get more good food to food deserts too.”
For Tessa Stuart, Food brand customer research & consulting expert, Amazon will seek to develop their own (private labelled) food products, revolutionise the ‘click and collect’ for chilled food, and develop new in-store customer experiences:
“I think the acquisition of Whole Foods by Amazon adds an interesting new contender to the UK online marketplace of Ocado and other supermarkets. Whole Foods now have access to Amazon’s unrevealed ability in delivery, whilst Amazon now have a very credible well regarded brand in food. Given the wafer thin margins for online food delivery, Amazon will surely seek to develop their own food brand or a lower price new Whole Foods brand similar to Waitrose Essentials or Ocado own label, to make more margin. […]
Chilled food delivery is a whole different ball game from Amazon’s standard product range, and I don’t think Amazon Fresh has yet managed to get much traction in the UK. Where Amazon could innovate is in terms of click and collect so that people can pick up their evening shopping ready assembled for them on the way home from Whole Foods stores or perhaps chilled lockers at stations. […]
Amazon will stand or fall by the ability to pick products accurately and avoid substitutions in people’s shopping.
I see in my shopper research that Whole Foods stores in the UK are destinations for foodies, where they like to hang out, meet their friends for coffee or a bite, and browse new products. In my view this makes Whole Foods entirely unique. It may be that Amazon will seek to leverage this customer affection for the store by developing events and experiences which they could then ticket, as Whole Foods already does now, keeping the store experience fresh and new, and encouraging people to return for more. Perhaps they’ll add fee-based work spaces; I often see people working in Whole Foods. […]
I would also add that given that Amazon have habituated their shareholders into accepting low returns in exchange for market share prospects, they will not be subject to the quarterly earnings expectations of their supermarket competitors. So Amazon can play a very long game indeed. “
Livio Bisterzo, CEO & Founder of Green Park Brands, is very optimistic about this move. He believes it will bring momentum and excitement back to Wholefoods, and will allow them through to strengthen their operations and lower their costs to make their food more affordable for consumers, which ultimately will have an impact on their education and their shift towards better and healthier food, bringing emerging brands to the forefront. Last but not least, the connection between physical retail knowledge (WF) and data/machine learning/cloud (AWS) has the potential to generate a new paradigm for grocery, which is why competitors like Walmart shouldn’t take this lightly.
“The biggest and frankly most impactful announcement in our industry in the last 10 years. I see it as a huge positive for several reasons.[…] Wholefoods will gain a huge advantage strengthening its supply chain and business operations likely repositioning its premium offering to more affordable, delivering a better value proposition for its shoppers. But the most important reason is the fact that this move from Amazon will give Wholefoods a new wave of life.[…]. The amazon acquisition will bring back excitement and momentum to WFM. The role Wholefoods has played as THE leading platform where brands, trends and innovation have launched in the market place is so important for our eco-system. Our industry needs a strong Wholefoods Market. […]
I see this as the beginning of a new cycle of transformation for retailers and manufacturers where health will become more and more affordable, the middle pantry of grocery stores will face its biggest challenge, personalization and data will become day to day ways of shopping and convenience will totally drive consumer’s buying decisions.
I really hope this WFM/Amazon partnership will focus on bring health and education through food to the masses. The natural food industry still only accounts for 5% of the total industry. I would love to see these 2 incredible companies joining forces to drive this number to 25% in 5 years. They have a chance to change the game now. A chance to prompt cultural and behavioral change by promoting good food. I hope to see this socially important cause as part of their strategic vision.”
Niccolo Manzoni & Ivan Farneti, founding partners of Five Seasons Venture, have a similar view and really see this deal as an opportunity to bring good food to the masses, by lowering the price of organic food and bring better service to consumers.
[…] Amazon struggled to sort out operations on Amazon Fresh and WF is going to help them in that respect, they are sort of buying that knowledge about transporting and distributing perishable food products which would take many years and sales to build. More importantly (and what I think is really exciting about this deal) is the connection between physical retail knowledge (WF) and data / machine learning / cloud (Amazon). This mix has the potential to generate a new paradigm for grocery
Walmart is not standing still and is making a number of acquisitions of pure online players (Jet.com last year, Bonobos announced the same day of the Amazon deal). They are also testing new ways of becoming part of their consumers’ daily lives, trying to imitate Amazon…they have a huge advantage as the incumbent and they have knowledge of how most groceries are sold today — i.e. in a supermarket, not online. Long story short, this acquisition is a small headache for Walmart, likely to become bigger if they don’t start running and stop chasing innovation.
Organic food is considered affordable luxury by some families, but not yet by the mass market. This deal will offer unprecedented easy (lazy?) access to organic food to any American household with a possible effect on volumes of demand. Amazon gets a network of 340 prime location to make their physical network even more capillary, which for fresh/perishable products means higher service level to the customers and lower wastage.”
Ali Morrow, Head of Editorial and Leadership Strategy at Jamie Oliver Foundation, see this deal not only as an opportunity to empower farmers and local producers, by scaling volumes of good food, without impacting the quality, but it could give a boost to the whole industry to go towards the same direction.
The opportunity for the food industry is to tap into the economies of scale created for ‘good’ food — namely, food that’s grown locally from healthy soil on economically healthy farms. The largest buyers in any system always have the chance to set the standard — in quality and in price.
The problems rife across the food system — from economic inequity across the supply chain, to degraded nutritional quality, to ballooning environmental costs — are the unintended child of opaque, complex supply chains that prioritize price above quality, taste or sustainability. Like kids re-distributing broccoli stems to the shadowy outskirts of our plates, these often hidden costs have bubbled to the fore, now wreaking havoc on our health — and the health of farmers and our planet:
-Obesity has nearly doubled since 1980, while malnutrition and hunger haunt one in nine of us.
-At the same time, we waste enough food each year to feed the world’s hungry four times over.
-And generate one third of global greenhouse gas emission that drive climate change from the intensive approach we take to agriculture.
In our race to the bottom, we’ve lost a lot.
Whole Foods was built, in many ways, to be a home for the resistance — a vehicle for ‘good’ food to be sold at a scale no producer could achieve alone. The uniting of many smaller players under one umbrella of shared values gave more consumers a way in to a regenerative relationship with farmers, business and their own health.
But it was a closed loop that lived at a price sustainable for the few, not the many.
We know consumer demand is booming for products of better quality and with a ‘healthier for me and the world’ promise at their core. So, it follows that if Amazon can scale that value chain in a way that empowers farmers, smaller scale food businesses and consumers, it could make more competitive a food ecosystem that regenerates, instead of deteriorates.
So far we’ve seen direct competitors celebrate the deal — because it adds fuel to their market more than wages war on their piece of the growing pie. A bit like how the green/clean energy market grew — the more players in the market, the more profile and consumer education, the more supply (bringing down the cost on all ends) and, thus, the more demand.
Overall, everyone seems to agree that this deal has the potential to ‘disrupt’ the food industry. Allowing Whole Foods to leverage Amazon’s distribution networks and logistics capabilities, as well as their ability to collect and use consumers’ data in an efficient way, could ultimately contribute to shorten the supply chain. This can bolster the conglomerate’s ability to bring more (good) food to the masses, provide more customizable products/services and lean towards an overall more sustainable food system, while major food retailers will have to react quickly to bridge the gap.
Finally I believe a very interesting take was offered by Ben Thompson stating that Amazon can use Whole Foods as an internal ‘beta tester’ to sell logistics to other retailers (full article here) and speculating on the fact that they other major retailers may want to ‘outsource’ their logistics platform to Amazon further down the line.
At Forward Fooding we think this deal is by far the biggest announcement in the food industry in the last 10 years and are excited about the huge positive impacts that can be unfold from it…our hope is that this acquisition will not only benefit all the great foodpreneurs we encounter every day by allowing them to tap into a bigger retail channel but also the consumers who will have more food options hopefully at even more affordable prices as the supply chain shortens.
No doubt we will see more interpretations of this acquisition coming out, but only time (or Jeff Bezos) will tell us what the whole move was about…
