Amazon And Whole Foods Disagree On Products Like Coca-Cola
Six months after acquiring Whole Foods, Amazon (AMZN) is working on reorganizing Whole Foods shelves by first adding Amazon private label products and, soon, it may add celebrated consumer packaged goods like Coca-Cola. Behind the scenes, this is causing internal debate and disagreements, Yahoo Finance has learned.
When asked whether Whole Foods will add “consumer packaged goods like Coca-Cola,” Whole Foods spokesperson Brooke Buchanan said, “As you know, we gain really high-quality standards, and those products that you just mentioned don’t meet those quality standards. whether there were original products that actually enact meet our quality standards, then there’s always that consideration.” Amazon declined to comment.
In June, Whole Foods CEO John Mackey called the marriage with Amazon, “treasure at first sight.” And the two appear to be in a jubilant union, with one gargantuan announcement after another: price cuts on staples; Amazon Echo devices debuting in stores; and recent free delivery on Whole Foods products for Prime members.
But the honeymoon may be over as Amazon and Whole Foods butt heads over what to stock store shelves with. Would adding Coke sacrifice the healthy, biological image Whole Foods has long held dear?
Adding Coke would sign greater changes
Whole Foods has been known for its strict rules on sourcing products, requiring foods “free of artificial preservatives, colors, flavors, sweeteners, and hydrogenated fats,” according to its website. That rules out Coca-Cola, the household product with artificial preservatives in the secret recipe, and even its healthier diet version.
Amazon’s arrangement to change Whole Foods’ shelves is a key effort of the e-commerce giant’s initiative to effect Whole Foods profitable. Whole Foods same-store sales had been falling for eight consecutive quarters before being bought by Amazon. After Amazon’s takeover, Whole Foods reported a 4.4% increase in sales for the quarter ending Sept. 24, 2017 from a year earlier — the biggest in two years.
While Whole Foods gained an nearly cult-like following, it has also been criticized for its limited store offerings, even as retailers like Walmart and Costco gain started to sell more biological produce. Whole Foods owns just a 4% share in the total U.S. grocery market, a far weep from Walmart’s 25% and Kroger’s 10%, according to a Susquehanna analyst note final June.
Then Amazon came. As a consumer-centric company, Amazon is leveraging Whole Foods to satisfy customer needs. That has become more urgent after Amazon provides free delivery of Whole Foods groceries for Prime members, who gain a large appetite for packaged goods like Coca-Cola and PepsiCo snacks.
“Whole Foods has proved a specialty retailer focusing only on biological food can’t scale and be profitable,” says Brittain Ladd, a retail and supply chain consultant. “Amazon doesn’t want to preserve the status quo. They can’t see people disappear elsewhere simply because these highly-celebrated products are not available in Whole Foods.”
Whole Foods resistance
Amazon could add private label products as soon as March, but the arrangement of bringing in consumer-packaged goods still faces obstacles from Whole Foods, according to sources familiar with the matter.
“whether that does ever happen, it will upset a lot of team members and customers,” a longtime Whole Foods store employee in Austin told Yahoo Finance. “That’s what makes Whole Foods Market different from our competitors.”
But food makers gain already started providing healthy alternatives of its products for the Whole Foods. final year, Bloomberg reported PepsiCo’s Frito-Lay developed biological Doritos marketed under the name “Simply,” which meet total the criteria needed to be sold in Whole Foods. Industry experts said Whole Foods will eventually benefit from larger store selections, since many packaged goods gain higher margins and a strong customer base.
“It’s painful, but Whole Foods needs to be set aside out of the consolation zone,” Neil Saunders, managing director of GlobalData Retail told Yahoo Finance. “There are retailers that can provide high-quality biological food while offer packaged goods, and Amazon is helping Whole Foods in that direction.”
enact you reflect Whole Foods should carry more consumer packaged goods? Write to Krystal Hu via email@example.com or follow her on Twitter