Jul 22, 2017
Amazon-Whole Foods Could Transform the US Food Market — In a Good Way
And food stamps will help them do it.
American farming, on any meaningful scale, is driven by one thing and one thing only: the almighty dollar. We’d all like to think that producing the food and fiber that nourishes us physically, mentally, and emotionally is about more than economics — but at the end of the day, farmers have to eat too.
That’s why Amazon’s proposed acquisition of Whole Foods is such a huge deal. When I spend time with farmers, many of them big commodity farmers in the Midwest, they (generally) aren’t ideologically opposed to growing organic or otherwise changing their management practices. The biggest reason they don’t do it is because it’s expensive, and there usually isn’t a market for it. And when they say market, they mean in the most literal sense — there is not a physical place where they can easily, and with certainty, go and sell thousands or millions of bushels of whatever they’ve grown for a good price (or any price, these days). Few local elevators separate organic produce, and otherwise finding specialty buyers and storage takes a whole lot of time that farmers don’t have.
Many farmers don’t grow organic because they don’t know where to sell it. But Amazon could change that.
If anyone has the logistical expertise, the capital, and the value proposition for setting up a massive national infrastructure to support a huge uptick in organic production, it’s Amazon. And if anyone has the marketing pull to get consumers to spend more, it’s Whole Foods (hopefully leaving more “food dollars” left over for farmers as well as the grocer). One of the primary reasons that a few big companies (Tyson, Bunge, Louis Dreyfus, Archer Daniel Midlands, etc.) have such a strong hold over the American food system is because they own, or have cornered and co-opted, the physical infrastructure of our food system; from rail lines and grain elevators to barges and cold storage. Breaking up that oligopoly requires a worthy challenger- one willing to build and maintain a more modern, efficient, and technological infrastructure system. And it might not be as hard as it sounds, given that US ag infrastructure is already dated. Given there’s been no competition for decades, why make improvements?
How does food stamps fit into the equation? (The program formerly known as food stamps is now called the Supplemental Nutrition Assistance Program, or SNAP.) In the 2014 Farm Bill, Congress allowed for a few pilot programs allowing SNAP recipients to use their EBT (Electronic Benefits Transfer, food stamp debit cards) and WIC (Women, Infants, and Children assistance) benefits at online retailers. Amazon recently announced that anyone with an EBT card could get a reduced Amazon Prime membership, paying only $5.99/month. For the poor, who often live in neighborhoods or rural areas that don’t have access to grocery stores, this could be a game changer.
Imagine being a working single mom, without a car, living more than a mile from the nearest grocery store. Now, even with the nutrition benefits she gets through SNAP, she may have to travel for an hour, by bus, after working a long shift at one of her two jobs, just to find a store where she could possibly buy the nutritious food her children need. She almost certainly spends more than $5.99/month on bus fare. If Amazon had a fully built out grocery system, she could save hours traveling to the grocery shopping, have access to a broader range of food options, and get them delivered right to her door. The impacts that might have on underserved communities could be enormous.
Obviously, there are caveats. If you don’t have access to the internet, this is not a solution for you. Amazon is by no means a local business, so spending money with them, rather than at a local shop or grocery store could be devastating for local businesses.
And Amazon is certainly not doing this for altruistic reasons. If they can win even a fraction of SNAP spending, it would be a billion-dollar proposition (tens of billions of dollars are rolled into nutrition programs every year- representing more than 75 percent of the farm bill allocation). And Amazon is having trouble with dishonest pricing, Consumer Watchdog is currently calling for the federal government to halt Amazon’s acquisition of Whole Foods until they are investigated for a pricing issue (apparently that crossed out “original price” you see on Amazon may be fake). Obviously giving one company too big a share of our food system is a dangerous proposition, but it’s a problem that already exists. Currently, you could count the number of companies that dominate wholesale and retail food markets in the US on two hands. Adding Amazon to the mix may actually diversify, not shrink, the marketplace. (Those other food sellers, and their representatives, are calling for more scrutiny.)
A big concern is whether the American agricultural system can respond fast enough. Though the organic food sector has been growing at a rate of 8 percent a year (compared to 0.6 percent for non-organic food), it still represents a relatively small percent of total US production. Transitioning to certified organic takes three years under current USDA regulations, and during the transition period, farmers have no way of differentiating their products (meaning they have all the pain of organics for those three years, but none of the gain). Companies like Kashi have responded to this by developing a line of “Transition” products, working directly with farmers to pay them a premium while they’re in transition. Experts from across the industry recently came before the Senate Ag Committee to request that the USDA Organics program follow in Kashi’s footsteps and develop a Transition label to help farmers command more of a premium and encourage the switch to organic.
The other alternative is buying more international organics products. This flies directly in the face of the popular “local” movement, and it also leaves US companies and consumers open to fraud. The Washington Post recently reported a case where thousands of tons of “organic” labeled soybeans were found to have violated organic standards. So if Amazon is hoping to source massive amounts of produce from American farmers, they’ll have to do work, both on Capitol Hill and directly with farmers, to bring the supply chain they need on-line.
Amazon-Whole Foods does seem to be the end of the organic movement as we know it. If Amazon makes the effort to secure a constant flow of organic produce from American farmers, it will not be from small, local, artisanal producers. It will be from bigger and more conventional farmers, who will be able to take advantage of economies of scale and carefully follow organic prescriptions to meet the minimum requirements. In some ways, the goals of the organic movement will have been met, if Amazon is able to widely commercialize Whole Food offerings, not just to the coastal elite but to rural food stamp recipients and everyone in between, then hasn’t organic food truly been made available to the masses?
Is it happening exactly as early organic purists hoped? Definitely not. But the organic movement has reached its end, regardless, perhaps, of the means.
So if you were hoping, like me, to see the moment that might drive real transformation in the way we grow food in the US, this might be it. Is it a perfect solution? No. It’s arguably a second-best solution. Ideally, we would be able to use the democratic tools to alter a system that, in a lot of ways, is broken, but remains broken because of bad policies, which create perverse incentives that benefit very few and harm many. But, we’ve been trying and failing at that for a long time. Here’s a solution that doesn’t exactly spread the benefits equitably (obviously the big winner here will be Amazon-Whole Foods), but it gets more benefits to consumers and farmers than the former. Maybe we’re moving up the ladder, from a less good solution to a better solution, slowly making our way to the top. But for now, any solution that gets better food to the hungry and fairer prices to farmers seems like one worth trying.
If you liked this story, you might also like the following story on why American farmers should stop worrying about feeding the world, and why that’ll make us all better off. And if you really liked it, you could hit the green heart below. To disagreers, I can’t wait to read your comments! — Sarah Mock
