A Year After Amazon Devoured Whole Foods, Rivals Are Pursuing Countermoves

A Year After Amazon Devoured Whole Foods, Rivals Are Pursuing Countermoves


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year-old acquisition of Whole Foods is prompting the meals business to retool the way it sells contemporary meals to shoppers.

The e-commerce big agreed to buy Whole Foods Market Inc. last June for roughly $13.5 billion and closed the deal in August. Since then, Amazon has rolled out extra offers and supply to Prime members. Companies, traders and analysts count on extra adjustments as Amazon makes use of knowledge capabilities to trace what buyers purchase on the grocery chain and market to them.

The deal has been “shaking up the food industry from top to bottom,” mentioned

Angela Spivey,

a food-and-beverage lawyer at McGuireWoods LLP, who’s advising shoppers on easy methods to shortly change their packaging and advertising to promote at Amazon and Whole Foods. “Don’t be surprised if the milk and cereal just shows up at your door based on your usual eating habits.”

Food retailers, producers and different suppliers have begun to make elementary adjustments to their promoting methods, pushed partly by stronger gross sales and supply from Whole Foods shops because the acquisition.

Whole Foods’ foot site visitors has elevated roughly three% 12 months over 12 months in every of the quarters since Amazon purchased the chain, in response to an evaluation by Thasos Group, which makes use of mobile-phone location knowledge to find out tendencies. That reversed two straight years of stagnating gross sales on the chain earlier than the deal. Of 11 supermarkets analyzed by Thasos, Trader Joe’s and Sprouts clients have been most desperate to check out Whole Foods after the acquisition to take a look at subsequent price cuts, with eight% of their common buyers visiting the rival chain.

A Sprouts spokeswoman mentioned site visitors was up on the Phoenix chain in its most up-to-date quarter and that the model “continues to resonate.” A Trader Joe’s spokeswoman mentioned gross sales have been sturdy and its merchandise are in demand. Spokeswomen for Amazon and Whole Foods declined to remark.

Grocery chains have invested in on-line supply and pickup companies, in some instances bumping plans forward to two- to three-year timelines as an alternative of 5 to seven years, in response to

Steve Caine,

a Bain & Co. accomplice who consults with grocers on their on-line methods.

Dozens of supermarkets have struck offers with Instacart Inc., a web-based grocery supply service that has expanded to greater than 200 retailers from 30 earlier than Amazon’s deal.




and Target Stores Inc. have all made e-commerce acquisitions, with extra expertise funding anticipated. Those chains have slowed retailer development to deploy tens of millions of of capital for expertise.

“We are continuing to look across the U.S. and the world for potential partnerships,” Kroger chief govt

Rodney McMullen

mentioned in an interview after the corporate mentioned it could take a $250 million stake in British online grocer Ocado Group PLC final month.

Whole Foods stays a small a part of the roughly $800 billion U.S. meals retail market, with lower than one-fifth the variety of shops of Kroger, the nation’s largest grocer. Executives at Kroger and different massive typical chains say they haven’t seen an enormous drop in gross sales prior to now 12 months as a result of they cater to mainstream buyers and have little overlap with Whole Foods, whose common buyer family earnings exceeds $70,00zero, in response to market analysis.

After Amazon prolonged reductions at Whole Foods to Prime members—which can assist it collect knowledge about buyers’ preferences—analysts mentioned rivals would possibly must replace their very own shopper-loyalty applications. Amazon now presents free, two-hour supply and extra 10% reductions on a number of hundred objects for Prime members in choose areas.

Many meals makers are redesigning their packaging and formulation to raised promote by way of Amazon and Whole Foods, inserting an emphasis on on-line repeat purchases as an alternative of impulse buys, business consultants mentioned.

Meanwhile, Whole Foods’s principal distributor,

United Natural Foods

has seen a flood of enterprise prior to now 12 months as internet gross sales on the Providence, R.I., firm jumped 12% for its most up-to-date monetary interval that resulted in April. Business to the Whole Foods sector alone was up by 24%.

United Natural reported practically $1 billion in gross sales to Whole Foods within the quarter that resulted in April, up from about $800 million within the year-earlier interval, earlier than the deal.

But United Natural has struggled to maintain items in inventory, leading to tens of millions of in misplaced gross sales and sudden bills for unexpected storage and staffing wants. On Thursday, its shares fell virtually 15%, the most important drop in additional than two years, after saying its third-quarter earnings.

Amazon’s method for attracting clients to Whole Foods was easy. After the deal closed, the net retailer slashed costs on avocados, bananas and different objects at Whole Foods’s 460 U.S. shops, attracting waves of buyers. That technique has helped drive year-over-year gross sales development of grocery items and well being merchandise by the best ranges in seven years, in response to monetary filings by United Natural.

“I do find myself going there more often,” mentioned

Theresa Bond,

a 46-year-old librarian in Bridgewater, N.J., who mentioned she has observed cheaper costs on crackers, tortillas and tea at Whole Foods shops.

Pricing surveys present Whole Foods’ costs nonetheless common larger than many rivals, however they’ve come down. The chain has targeted on getting aggressive on staples, mentioned

Guillaume Bacuvier,

chief govt of Dunnhumby, a world retail consulting and expertise agency that Whole Foods employed to assist enhance shopper analytics.

Retailers haven’t been shocked by Amazon’s strikes, Bain’s Mr. Caine mentioned. But “it’s this anticipation of what may come next that has turned up the heat on everyone.”

Write to Heather Haddon at [email protected]

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