On June 16, the New York Times and other media outlets reported that Amazon.com Inc will buy Whole Foods Market Inc for $13.7 billion. This is a very interesting development in the food industry. We have been talking about the changes coming to our industry as online shopping grows and this will quicken the pace of change.

What does this mean for suppliers and others in the food industry?

This is a signal that Amazon will be more aggressive in the food segment.

We know Amazon has been trying to sell more food. They see this as a growth opportunity for their business and where food is very consumable, it will add volume to their orders and more regularity to consumers ordering from them. The knowledge they will gain from Whole Foods for procurement, inventory management and selling of fresh foods will be significant.

Nielsen reports online food purchases in North America are less than five per cent, compared to more than 20 per cent in Asia. That is a huge opportunity in front of Amazon. Assuming they pursue it aggressively, sales growth will be delivered for years.

If you don’t understand online shopping for food, you need to learn. You need to learn faster than you did yesterday. 

Distribution for Amazon Fresh will be in more than 450 stores across U.S., Canada and the U.K.

We certainly don’t know yet but Amazon could use the Whole Foods stores as distribution points. This will have an immediate impact on existing bricks and mortar food retailers. This will also bring much needed volume into Whole Foods locations. Sales and inventory turns will improve the financial results in these stores.

Amazon growth means less for the rest.

One thing we do know. North Americans will not eat more because Amazon bought Whole Foods.  If Amazon sells more after this move, existing food retailers will sell less. Whole Foods was a pioneer and ran into trouble when others began to copy the model. Their financial problems are a big reason they sold out. Assuming Amazon is successful, we will see more new ‘non traditional’ sellers of food trying to copy their model. In Canada, Loblaw and Walmart are investing in click and collect. Amazon continues to pursue the delivery model. Amazon now has an option to implement click and collect in more than 450 locations. That will mean less for the rest.

Life for suppliers of Whole Foods might change.

Whole Foods really started as a movement, not a conventional retailer. Certainly, they were in the business to buy and sell while making a profit. They also had their way of doing it and they did make efforts to work with suppliers and even loan them money to get the products they wanted. Amazon is different, bringing a new method of doing business to Whole Foods’ suppliers. Remember it was Amazon who called the leaders of some of the biggest Consumer Packaged Goods food companies to Seattle to tell them to stop selling to Walmart. Perhaps they have more volume but they also have a different philosophy. 

Selling food is changing.

The biggest learning for suppliers is that selling food is changing! You could see new opportunities with non-traditional sellers of food starting up. The buying decision for consumers is changing from the store to a computer, tablet or phone and the whole value chain is being disrupted. This is like being in line at a roller coaster!