Omaka paret Wholefoods och Amazon fortsätter att hålla ihop

Whole Foods founder John Mackey is retiring five years after the deal amid major questions about its logic.

By Matt Day

Bloomberg, 31 August 2022

The day in 2017 that Amazon.com Inc. announced it would buy Whole Foods Market, Jeff Wilke, then Amazon’s retail czar, tried to reassure a large group of employees gathered in a conference room above the high-end grocer’s flagship store in Austin that their lives wouldn’t be turned upside down by the deal. Then he referred to blueberries as a vegetable.

Executives from Whole Foods pounced. “Those aren’t vegetables,” cut in co-founder  John Mackey. “So it begins,” added Walter Robb, Mackey’s former co-chief executive officer, before Mackey offered Wilke an out: “We’re learning,” he said.

The flub pointed to the awkwardness of a $13.7 billion union between a company whose core competencies were e-commerce logistics and cloud computing and a grocery store chain catering to people who wanted to choose from several colors of cauliflower. This isn’t to say there was no logic to it. Amazon was a decade into a largely unsuccessful attempt to sell groceries online, and Whole Foods would add specific expertise, along with a 500-store springboard into physical retail. Mackey saw joining Amazon as a way to shield his company from investors pressing for a shakeup because of disappointing growth. It also offered access to data-driven decision-making and innovation. “We’re gonna see a lotta technology,” Mackey told employees at the time. “I think you’re gonna see Whole Foods Market evolve in leaps and bounds.”

The change has been less transformational than Mackey predicted. Amazon rolled out delivery in stores, supplanting a deal Whole Foods had previously offered through Instacart, but hasn’t done as much as expected to change the way the grocer works. Instead, it’s taken a relatively hands-off approach as it splits its attention with its own chain of conventional grocery stores, Amazon Fresh.

Mackey is retiring about 42 years after founding Whole Foods and five years after selling it to Amazon (he insists on calling the deal a “merger” rather than an acquisition). It’s still unclear how Whole Foods fits into Amazon’s plans to become a major player in groceries. Some argue Whole Foods has actually weakened its brand with the Amazonian price cuts and conveniences that weren’t its primary draw in the first place. “People who go to natural and organic stores go there because of the quality of the product,” says David Bishop, a partner with grocery consultant Brick Meets Click, who’s done surveys of shoppers at Whole Foods and other chains. “People don’t shop with them because of price.”

Mackey’s successor is Jason Buechel, Whole Foods’ chief operating officer. Buechel, 44, is the son of a cheesemaker who once worked at a company that made private-label string cheese for the grocery chain. He’s a quiet consensus builder, where Mackey’s leadership style was brash.

By the time Buechel, a former management consultant, showed up at Whole Foods in 2013, the chain was in trouble. Other grocers had entered the organic market, while packaged-goods companies had begun to buy up natural-food startups originated at Whole Foods and brought their products to Walmart Inc. and Target Corp.

Although he piloted projects such as adopting Apple Pay and Instacart, much of what Buechel had arrived to do was remedial. Whole Foods was organized to give lots of responsibility to regional management. That made the company responsive to local trends, but it also meant that different stores used their own point-of-sale technology and record-keeping. Budgeting was a mess, and it was difficult to track how much stores were spending on staffing.

Buechel was part of the chain’s effort to modernize and centralize purchasing, which some longtime executives and shoppers saw as driving Whole Foods toward being just another homogeneous chain. “There are national and seminational grocers that are more attuned to what’s happening in their local market,” says Tim Sperry, a former regional Whole Foods executive who left in 2006 and today advises retailers and food companies. “Ten years ago you couldn’t say that.” Whole Foods rejects the criticism, with a spokesperson saying it stocks more local products now than it did in 2016.

In certain ways, Buechel cuts the classic profile of a Whole Foods consumer. He’s an obsessive runner who’s given up caffeine and has dabbled in cryotherapy, the practice of subjecting one’s body to really cold temperatures to reduce inflammation. He’s been known to get into deep conversations about which type of mushroom snacks best approximate the texture of meat.

In an emailed statement, Buechel credited employees for helping the chain grow during the past five years, “through incredibly challenging times, without compromising our quality standards, our commitment to our customers, or our higher purpose to nourish people and the planet.” He’s said he’ll lay out the specifics of his vision next year, but he’s promised to think long term while also working to restore some of Whole Foods’ traditional crunchiness.

Many of the company’s original fans worry that it’s strayed too far from its initial vision to return to it. Even as the chain risks alienating the faithful, the Amazon-era price cuts haven’t erased its “Whole Paycheck” reputation among the broader population, according to Bishop.

Since the acquisition, sales in Amazon’s physical retail segment—predominantly Whole Foods in-store sales—have grown by less than those of mainstream grocers such as Kroger and Albertson’s, as well as natural food chains Sprouts Farmers Market and Natural Grocers. Foot traffic is below pre-acquisition levels, according to mobile phone data analyst Placer.ai.

Numerator, a researcher that relies on shopper panels, estimates that physical Whole Foods stores account for 1.3% of the US grocery market, down a bit since the start of the pandemic. Amazon’s overall slice of the grocery market—including its own online grocery business, deliveries from Whole Foods stores, and sales from its new line of Fresh supermarkets—has gained share during that time, to 1.6%, Numerator estimates.

Spokespeople for Whole Foods and Amazon said that these data are misleading and that sales, basket size, and number of unique customers have all grown since the acquisition. Whole Foods has opened roughly 60 stores since the deal, with 50 more in the works, though it’s also closed several underperforming locations and abandoned its line of smaller “365 by Whole Foods” stores.

Tony Hoggett, Amazon’s physical stores chief, says any suggestion that the company is unsatisfied with the deal is “simply wrong,” adding that it’s “incredibly happy with the growth and success of Whole Foods Market over the last five years.” Hoggett, a former executive at British grocery giant Tesco Plc who joined Amazon in January, is more engaged with Whole Foods than previous Amazon executives, according to people at Whole Foods who’ve worked with him. There are signs that he’s more tightly integrating the chain into Amazon’s other grocery operations, such as a recent move with Whole Foods executives who oversee marketing and real estate, which gives them those responsibilities at Amazon Fresh grocery stores. Fresh’s product managers have relied on their Whole Foods counterparts for guidance on organic standards, store design, and other topics. The newer chain has 41 stores, less than 10% of the number of Whole Foods stores. If it develops into a national operation, Amazon Fresh will owe that in part to Whole Foods.

Whole Foods, meanwhile, is testing Amazon’s more technology-heavy approach. Its stores in California and Washington, D.C., have installed Amazon’s cashierless “Just Walk Out” system of people-tracking cameras. Amazon’s Dash Cart, which lets people using a specially designed basket full of cameras skip the checkout line, is planned for one store in Massachusetts. The biggest change in Whole Foods stores since the Amazon deal, though, may be installing a technology rudimentary enough to have been pioneered long ago by competitors who aren’t owned by trillion-dollar internet companies. In 2018, Whole Foods executives finally began installing self-checkout kiosks, which they’d resisted for fear they were impersonal. The pace of adoption has increased in the years since. Nicole Davia-Wescoe, president of Whole Foods’ Northeast region, says she’s rushing to put more of them in place in her stores. “We need to be relevant,” she says.

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