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Impact of Amazon + Whole Foods on the Foodservice Industry

Impact of Amazon + Whole Foods on the Foodservice Industry

By Jim Klass


A lot has been written and speculated on Amazon + Whole Foods (A+WF) and what it all means.

We do know a few things the stocks of Retailers and Foodservice Distributors have declined, the Foodservice @Home (Blue Apron, Hello Fresh) are considered vulnerable.

But what is the broader impact on Foodservice?

Amazon + Whole Foods Impact on Food and Beverage

I think it falls into five areas:

foodservice trade promotionConsumers– With the ease of Amazon Echo + 466 Whole Foods locations, Foodservice @Home will become seamless.  Buying your groceries and dinner at Whole Foods without having to wait in a checkout line (either in store, drive thru or delivered) on your prime account creates numerous opportunities to exploit. So, the consumer now has a new path to dining, the lines between foodservice and retail are non-existent to the consumer.

Operators – A+WF is a double-edged sword. Since consumers have an easy way to “dine with Prime,” operators will have to be more attuned to consumer demands, trends and local preferences or risk loss of business. If not, their on-premise sales will fall, and their Foodservice @Home may stagnate. On the other hand, if A+WF becomes a foodservice distributor, pricing will be more transparent and ordering less of a challenge. Amazon’s pricing algorithms will be the pricing standard. The availability of new products and suppliers will open new possibilities and options.

Distributors – Although they will continue to be the predominant last mile option, their margin will continue to be under pressure. Operators can order a vast variety of products that have been Category Managed out of Broadliners.  A+WF will represent a new competitor that has advanced digital and analytic capabilities that will be difficult to match. Pricing will become more transparent across all operator segments.

As an example, look how you compare offerings on Amazon today for the same product with various delivery options (20-hour, same-day, two-day, etc.). Operators will have new avenues to try and purchase products as well as learn about evolving trends from multiple sources, not just the DSR. How will the DSR evolve and how will they be compensated?

foodservice tpmManufacturers – Like the operator, A+WF is a double-edged sword. If they are willing to work with Amazon, they will have greater access to the street and greater visibility to who is buying their product. On the other hand, as P&G and others have learned, Amazon will create their own brands to rival traditional manufacturers.

How will manufacturers reach the operator? Does the direct sales force/broker model still work as communications with the operator or become more digital? How will operators want to be reached? If an operator can be reached digitally and order a sample through Amazon what is the purpose of field sales? Will brokers/field sales evolve to a new model to help manufacturers reach operators and their consumers? Will manufacturers develop alternative partnerships with distributors and take advantage of the data both possess to drive “butts in seats” via analytics and machine-learning or will they cede the space to A+WF? As the consumer has erased the lines between retail and foodservice will manufacturers do the same?

Trade – This will be the area of greatest change, the traditional shelter to distributors and deviated/rebates to operators does not create new demand, it is basically table stakes to contract volume. Pricing will become more important and visible. With tighter pricing regimens is there room for Distributor, Contract Management, and GPO programs or does it to move to a chain model net pricing and LTOs??

The A+WF effect is taking shape and it’s important for all branches of the foodservice industry to be ready. If you’re not ready, you may find yourself left behind.

 

About the Author:

Jim KlassJim Klass is the founder of Market Intelligence Solutions. He is a scholar of Consumer Products and understands the important role technology plays in the foodservice supply chain. He has over 20 years as a principal of a successful Foodservice Brokerage in New York working with numerous manufacturers, distributors and operators.

 

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