Amazon's deal for Whole Foods to shake up area grocery's industry
Rich Norgrove, the brewmaster and chief operating officer at Healdsburg’s Bear Republic Brewing Co., can’t help but think about internet giant Amazon when he considers the weekly basket of produce delivered to his home under a community supported agriculture, or CSA, program.
The local produce arrives consistently fresh, shows up conveniently at his door and Norgrove can order extras like a jar of honey with the fruits and vegetables. Interest in the food deliveries could spread, he said, and Amazon’s plan to purchase Whole Foods grocery stores might lead to a new era in how Americans acquire groceries and prepared foods.
“That’s what Amazon has the potential of doing, introducing a whole new group of people to it who never have done it,” Norgrove said.
After announcement of Amazon’s $13.7 billion offer for Whole Foods, business analysts generally remain optimistic about the future of the local food segment.
In Sonoma County,local producers enjoy more options today than ever for selling the premium wine, beer, cheese and other food items for which the county increasingly has become known. More conventional chain grocers now stock their shelves with natural and organic products, a shift many local producers attribute largely to the success of Whole Foods.
And while the prospect of competition from e-commerce and home food deliveries looms ever larger as a result of the deal, area grocers say consumers here likely won’t see quick changes.
“I don’t think immediately it will have much effect on us,” said Steve Maass, the founder and owner of Oliver’s Markets, a Santa Rosa-based chain of four upscale supermarkets.
Nonetheless, Maass acknowledged the leaders at Amazon are “geniuses at logistics” and already have “changed whole industries,” including those that sell books, apparel and a variety of goods.
“Jeff Bezos has generally changed whatever he’s gotten into,” he said, referring to Amazon’s CEO.
Amazon’s announcement last month to purchase Whole Foods is expected to bring together two companies viewed as master retail innovators. And while outsiders can only guess at exactly what the outcomes of the deal will be, most expect big developments.
“I do get the deep sense that it will fundamentally change the retail landscape as we know it,” said Marcus Benedetti, president and CEO of Clover Sonoma, the Bay Area’s largest dairy processor.
For Benedetti, the fact that Whole Foods will be part of that transformation is especially noteworthy. He maintained that a large number of county producers, including Clover and frozen vegetarian food maker Amy’s Kitchen, “would not be where they are today without that relationship with Whole Foods.”
“They really provided the springboard for the authentic food movement,” he said.
It wasn’t just giving locals shelf space, he said. Whole Foods’ success came from leaders with the foresight to anticipate what consumers wanted and from executives who treated food makers as partners, working with them to develop new products.
“Walter Robb (a former Whole Foods co-CEO) was the instrumental force to get Clover into organics,” Benedetti said.
However, facing sluggish same-store sales, the publicly traded Whole Foods has begun centralizing decisions on what products its stores carry, a move that may make it more difficult for new food makers to get shelf space.
For example, the 4-year-old Hip Chick Farms used to have its organic and natural frozen chicken foods in Whole Foods stores in all five of the chain’s regions, with approval obtained from the buyers in each region. But this year, after taking part in a review piloting a new national buying system, Hip Chick has initially been cut back to three regions.
Serafina Palandech, who with partner and chef Jen Johnson owns Hip Chick Farms, a Sebastopol maker of frozen organic and natural chicken entrées, and others noted the shift toward more centralized decision-making at Whole Foods preceded the Amazon deal. Moreover, for food makers the grocery chain remains a powerful player in the building of brands.
“The folks that shop at Whole Foods influence the rest of us,” Palandech said.
Neal Gottlieb, founder of Petaluma’s Three Twins Ice Cream, agreed with Palandech and Benedetti that startups may need to find other avenues - especially independent grocers who have long welcomed local food items - to get their products on store shelves.
“I do think it will make it harder for smaller brands to get a toehold in Whole Foods,” he said.
For him, the results of Amazon’s latest acquisition are mixed. To the positive, he said, the deal “saved Whole Foods” as a natural foods grocer and spared it from being gobbled up by another large grocery chain that could have fundamentally changed its nature.