Amazon's Takeover of Whole Foods: What Are the Implications for CPGs?
In a record two months since the original announcement was made, Amazon closed its acquisition of Whole Foods, taking formal control on Monday, 28 August. In light of the few announcements made on day 1 of the ‘Amazon era’, in this note, we re-examine our initial assessment of the consequences of this deal for CPGs.
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Amazon is in this for the long term, and its modus operandi is to offer lower prices and drive traffic increases. It will look to trim fat from the supply chain and will pressure manufacturing companies for lower prices. CPGs should seek to improve their strength and bargaining position through product renovation and further consolidation.
Private-label will grow as grocery shopping moves online. Amazon will look to expand Whole Foods’ store brands (including 365), as well as other own brands under different names. This offers an enormous growth opportunity for those in co-packing. Taking the 365 label beyond Whole Foods’ 460 stores and onto AmazonFresh opens up a new route to market.
The threat of lower prices and competition from 365 notwithstanding, working with Amazon will open possibilities for CPGs to gain a closer connection to consumers by setting up their own DTC platforms, and obtaining troves of data on consumption patterns and behaviour. CPGs would be wise to look at their interactions with Amazon beyond Whole Foods.
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Paula SavantiSenior Analyst - Consumer Foods