By Phil Lempert, CEO, Retail Dietitians Business Alliance
June 16, 2017 will go down in history as the beginning of the new world of supermarketing. Grocers have had Lidl, Aldi, Walmart Cstore and Amazon on their radar for the past year or so, but now Amazon moves to the top of this list with their potential purchase of Whole Foods.
This deal is brilliant for Amazon. This deal is brilliant for Whole Foods. The Amazon Prime shopper is the Whole Foods shopper. The timing of the announcement however is interesting: it was the same week that Lidl opened, Aldi announced an even bigger expansion, Texas Monthly published a less than flattering profile of John Mackey and Kroger’s stock dropped 18% just as Costco’s plummeted by 10 percent.
The Amazon/Whole Foods deal will lower prices, put Amazon lockers in every Whole Foods and become the store that offers Millennials and Gen Z great value and great foods. Expect to see a push for more store branded products and less national brands (same as Aldi and Lidl) since Amazon has been pushing their own brands in online food and beverages for some time.
The losers? Just about every traditional grocer and even companies like Instacart (who built their business on Whole Foods). Clearly Amazon doesn't need someone else to deliver its groceries; but with Whole Foods they are also buying the fuel and expertise that can make the Amazon Fresh delivery business better and more robust, by using the already trained Whole Foods employees to be shoppers to select the best meats and produce (two areas that Amazon Fresh needs help in) and the Amazon delivery model to deliver within that two hour window that they love. While Amazon now has about 100 distribution centers across the US, just imagine what happens when they add another 440+ and make their delivery service much more robust, fresher and quicker and use all the stores as distribution points that it has estimated are within ten miles of the 80 million Amazon Prime members.
And then there is that terrific technology that drives Amazon – from its insights for the online shopper to Amazon Go and Amazon Fresh pickup click & collect model – all of which are naturals to be added to the existing Whole Foods stores.
The volatility that has occurred since the day of the announcement is much greater than say a Target or Albertson’s swooping up Whole Foods. Because it’s a technology company, Amazon’s impact has been much greater – and scarier to traditional grocers. The game will change as Jeff Bezos puts his “grocery-hacking” to work and brings in the future generation of grocery leaders to think differently and not play by the same old rules. While the deal is not set to close until the end of this year, there will be lots of planning and new faces over the next few months; once the deal closes, expect prices to come down first (remember Amazon did build its brand on value) to shed the Whole Paycheck image and attract new customers. Next come the Amazon Lockers in all the stores so shoppers can buy the gazillion products offered online and have them ready for pick up after they shop for their fresh foods. And then the exciting part starts up as Amazon looks to grow and add stores and even more services.
So what will all this mean for retail dietitians? For America’s health and wellness it’s a good move forward. John Mackay -- while many may not agree with his management style or personality -- has certainly been the driver for healthy eating and hacked the corner health foods store into a major chain. Bezos, along with every other Silicon Valley brands from Apple to Google to Nokia (with their recent acquisition of Whithings) to food companies like Beyond Meat and Soylent, is focused on health and sees a responsibility to life-hack sustainability, transparency and nutrition – and create the tools that make it easier to accomplish those goals.
Every grocer will remember this day as the beginning of a new era, and many are scared, but retail dietitians shouldn’t be as this reignited brand can do more to push the health and wellness agenda forward with the health and nutrition tools that every RD and every shopper has been yearning for. As we have seen before these two powerhouse brands will lead the way for every grocery retailer to do the same.