When P&G and Unilever Have to React to Amazon Whole Foods

Amazon Whole FoodsHere is a very optimistic take on Whole Foods and Amazon by Scott Galloway: “AMZN + WFM = $1T

Amazon / Whole Foods will be the fourth-largest grocer in the US, and will likely post growth rates no $10B+ retailer, sans Amazon, has registered. The Seattle firm will apply its operational chops and lower (zero) profit hurdle to the Whole Foods business model and bring prices (way) down. If you wish you could shop at Whole Foods more often, but it’s too expensive, your prayers have been answered. Whole Foods will become the grocery equivalent of a Mercedes for the price of a Toyota. Grocery has stuck their chin out (little innovation), and the entire sector is about to have its jaw shattered.

​Making Whole Foods more affordable is a no-brainer and will increase Amazon’s footprint. (And thus bring scale effects yadda yadda.)

Amazon has warehouses within 20 miles of 45% of the US population. It will soon have an additional 446 warehouses, including in 32 states where Amazon has not yet established a grocery presence. However, these are warehouses (Whole Foods stores) that also make money.

​I would counter that stores are bad warehouses.

​There are good reasons for why Walmart, which has many more stores around the US, is building dedicated warehouses for its online operations as well. On the other hand, Amazon is laying the groundwork with Amazon Go to implement technologies in stores that mirror those in warehouses. Amazon will certainly try to bring the two -stores and warehouses- together. They may succeed, but it will take a while for this to have a significant impact.

P&G, Unilever, Nestle, and Conagra should recognize they’re no longer competing with each other and form a consortium to present a counterbid for Whole Foods. It likely won’t work (see above: Amazon has cheap capital), but they should make Whole Foods more expensive for Amazon.

— The advertising industrial complex and the media sector will also begin wondering if this puts pressure on their business. Yes, it does.

​This is the really big picture to keep in mind in here. We are now in a phase where the change in retail is starting to have effects on brands.

​Once the large FMCG brand conglomerates start to adapt -not by forming a consortium, but by changing the products themselves-, the already fast pace will accelerate again. (Like a flywheel on the industry level.)

​More on this topic:

​* What Amazon Go Will Look Like in an Amazon Flex World
​* Analysis: Whole Foods in an Amazon Go/Flex/Fresh World
​* From Alibaba to Instacart: The Most Insightful Reactions to the Whole Foods Amazon Deal
* ​Post Whole Foods, What Will Amazon’s Grocery Strategy Outside the US Look Like?


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