When Amazon bought Whole Foods last week, most of us paused for a moment to take notice. Why? One simple word: Disruption.
Amazon has been directly linked to the closing of places like Borders Books and Circuit City. Within a day of the Whole Foods purchase, Walmart’s stocks dropped as low as 7%, Kroger dropped 14.5%, and Supervalu sank 17%. Meanwhile, Whole Foods’ stocks soared 28%.
I’m not saying that grocery stores as we know it are in imminent danger of shutting down. But everyone is waiting and speculating on “disruptions” this will bring to the grocery industry and how it will impact how people shop for food. In the long-term, will people even be shopping at a brick and mortar grocery store as often? (Amazon already has a food delivery service, and remember, they’re the ones pioneering the drone delivery network!)
Like many in agriculture, I’m more interested in how this will affect the food supply chain. Amazon is known for its streamlined operations and for using sophisticated data to get people to buy things and ensure their satisfaction. What processes will it bring to Whole Foods that impact where they source their food from and how they interact with their suppliers? And what will the ripple effect be?
Anything I say now is speculation - I want to be upfront about that. Here are a few thoughts that entered my mind when the announcement was made:
Whole Foods may have just received a larger megaphone to communicate its philosophy. Whole Foods calls itself “America’s Healthiest Grocery Store” and has high standards for its food suppliers – they prefer foods with no additives, and evaluate suppliers based on criteria like animal welfare, sustainability and freshness. And it is one of the largest retailers of non-GMO and organic foods. They market their food transparency programs, and hold their suppliers accountable. Whether you agree with these practices or not, Whole Foods has created a very successful business around this philosophy. Consumers want what they are selling. And now with Amazon on its side, it may have a bigger platform for its “wholesome” message.
In agriculture, I believe the pressure is on for us to respond. For some, that may be exploring non-GMO or organic markets – there’s money to be made! For all of us, I believe we’re getting to a point where we’re going to be expected to document production. Last month, my company IntelliFarms launched our new SureTrack Farm platform, designed to help farms track, document and manage yields and profits from seed to field to bin to market. It connects data from our products like BinManager and FieldDataManager so farmers can get a holistic look at their crop. Using the platform, farms also can give consent to connect with processors and companies they are growing for to share key production data and show what the grain has experienced in the field and in storage. The SureTrack platform is a tool to help farms and food manufacturers produce higher-quality grain, and to also be prepared when the Amazon/Whole Foods of the world demand transparency.
Consolidation is happening up and down the food supply chain. In ag, we’re used to the consolidation that has been common within seed and chemical companies. The Amazon/Whole Foods deal on the other end of the supply chain does gives me a little concern. Is this eventually just going to be the big guys on one end of the supply chain making deals with the big guys on the other end? I wake up every day fighting for America’s independent farms – this is not something I want to see. However, I do believe that farms can survive and be successful even amidst consolidation if they spend time calculating and understanding their costs of production and identifying how they can improve margins – which can be from improving efficiency, improving yields or exploring new market opportunities. If consumers (and by proxy, big name food brands) are asking for specific types of grain, it may be worth considering new markets! Growing a generic “commodity” and selling it at the elevator down the road is not cutting it anymore. When you grow a quality “product” and get it in the hands of those who want it (and will pay you nicely for it), I believe that’s where farms are going to find success and weather these headwinds and changes.
I enjoy discussing topics like these and hearing others’ perspectives. If you’d like to discuss or learn more about our SureTrack platform and how it can bring certainty to farms and food processors in this interesting time of change and uncertainty, please contact us.
While there is no way right now to tell how Amazon will shape Whole Foods and the grocery industry, I do feel confident that agriculture will continue to find ways to innovate, adjust and remain strong, no matter what disruptions arise.