Forefront Communications

Wall Street Journal: Amazon Stirs Up Change Across Food Business

Forefront Communications

Forefront Communications

Amazon’s year-old acquisition of Whole Foods is prompting the food industry to retool how it sells fresh food to consumers.

The e-commerce giant 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 additional deals and delivery to Prime members. Companies, investors and analysts expect more changes as Amazon uses data capabilities to track what shoppers buy at the grocery chain and market to them.

The deal has been “shaking up the food industry from top to bottom,” said Angela Spivey, a food-and-beverage attorney at McGuireWoods LLP, who is advising clients on how to quickly change their packaging and marketing to sell 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, manufacturers and other suppliers have begun to make fundamental changes to their selling strategies, driven partly by stronger sales and delivery from Whole Foods stores since the acquisition.Whole Foods’ foot traffic has increased roughly 3% year over year in each of the quarters since Amazon bought the chain, according to an analysis by Thasos Group, which uses mobile-phone location data to determine trends. That came after two straight years of stagnating sales at the chain before the deal. Higher foot traffic improves a retailer’s likelihood of sales, and the figure can be a used as a proxy for a chain’s health. Of 11 supermarkets analyzed by Thasos, Trader Joe’s and Sprouts customers were most eager to try out Whole Foods after the acquisition to potentially check out subsequent price cuts, with 8% of their regular shoppers visiting the rival chain.

A Sprouts spokeswoman said traffic was up at the Phoenix chain in its most recent quarter and that the brand “continues to resonate.” A Trader Joe’s spokeswoman said sales were strong and its products are in demand. Spokeswomen for Amazon and Whole Foods declined to comment.

Grocery chains have accelerated planned investments in online delivery and pickup services, in some cases bumping plans ahead to two- to three-year timelines instead of five to seven years, according to Steve Caine, a Bain & Co. partner who consults with grocers on their online strategies.

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