Plus potential job cuts, the fate of ‘365’ brand products and other implications of the recent buyout.
Amazon’s purchase of Whole Foods has been huge news – the teaming up of America’s largest online retailer with probably its best-known health food grocer is almost certain to shake up the food world. Assuming the deal is finalized later this year as projected, the big question that remains is “How?”
Since things tend to move more quickly in the online world, one immediate ramification could be that what’s Whole Foods’ would now also be Amazon’s, meaning certain Whole Foods’ products could be sold online by Amazon, including the grocer’s private label brand, 365. “The possibility that Amazon will begin to use the well-known 365 private label brand from The Whole Foods Market as a lynchpin of its food grocery offering is important,” said analysts at Bernstein according to Food Navigator USA. “Clearly many of us had thought that any ‘Amazon’ branded foods would be shunned by consumers. But by acquiring Whole Foods, the 365 brand becomes instantly available as part of Amazon’s online offering. This brand is highly credible with consumers – indeed we had previously asked Whole Foods if they might consider selling the brand more broadly into other retail channels.”
On the brick-and-mortar side, new ownership probably has many workers wondering about the future of their jobs. Though an Amazon spokesman stated that the tech-savvy company has “no plans to use no-checkout technology to automate the jobs of cashiers at Whole Foods and no job reductions are planned,” Bloomberg isn’t so sure. The site says that shedding Whole Foods infamous “Whole Paycheck” image will probably be a top priority and cite a “person with knowledge of the company’s grocery plans” as suggesting that saving money by cutting employees – including potentially by implementing checkout-free technology being tested at the Amazon Go store in Seattle – is definitely on the table.
The packaged food industry has reason to worry as well. All this talk of pushing private labels theoretically comes at the expense of big name brands like General Mills, Kellogg’s, Kraft Heinz and Campbell’s. “There's probably a lot of independent brands that are owned privately around the country that have the least pricing power and will be hit hard by this,” Bernstein analyst Alexia Howard was quoted as saying by CNBC. She stressed that it’s bad news “for the cereal companies, but it's generally not good news for packaged companies.” By aligning itself with the heath-focused Whole Foods, Amazon also could be dealing another blow to these larger legacy brands since they are often seen as being less healthy options.
After the aftermath, another question arises as well: Where does Amazon plan to go from here? Beyond getting into the grocery biz, the massive online retailer has also been trying and struggling to infiltrate the restaurant delivery market. That’s led to speculation that GrubHub, the largest company in that sector, could be Amazon’s next possible buyout target. “A combination of WFM [Whole Foods] and GRUB [GrubHub] would give AMZN [Amazon] significant competitive positioning on in-home meal consumption regardless of whether the meal was prepared in home or at a restaurant,” wrote Aaron Turner, an analyst at Wedbush Securities, according to the Chicago Tribune. “WFM the Main Course, GRUB for Dessert?” Suddenly, I’m feeling very full.