Suppliers Predict Benefits for New Brands in WFM/Amazon Combo

In the face of the recent tidal wave of headlines surrounding Amazon’s acquisition of Whole Foods Market, that’s one supplier’s immediate message to those fretting over the deal.

Other conclusions have come more slowly: At first, few suppliers were sure what to make of the deal, with numerous food and beverage companies reserving their comments. Now, after more than a week’s reflection, many have told NOSH they are excited about the potential sales opportunities the partnership could provide, expressing enthusiasm for how it will maintain or even enhance Whole Foods’ reputation as a launching pad for small brands.

“I’ve heard so much chatter in the last week,” Tim Fiorino, national sales manager of seafood company Wild Planet, told NOSH. “All of this is just opening new doors for the entire industry to continue to grow with the progression of how we go to market. It’s good for the industry to always be pushing the buttons of how we can improve, not only with the products we bring to the industry, but also by improving the value… [So] my message to the industry is quite simple: Please don’t freak out.”

Broadening the Basket

In recent years, grocery has looked to e-commerce as a channel that can add sales revenue and reach consumers, especially millennials. The market has not only been responding to this, but growing–and fast. A much-cited survey by Neilsen and FMI predicted that about 20 percent of grocery sales will take place online by 2025. In 2016, Amazon alone crossed the $1 billion grocery threshold, and in its first quarter in 2017, Amazon saw $350 million in grocery sales.

Despite the growth, Amazon’s grocery progress has been hampered by consumers’ hesitancy to “fill their carts” with fresh or cold-chain groceries, especially when products are shipped across the country during the warmer months. Chris Campbell, co-founder and CEO of Chameleon Cold-Brew, said he thinks the deal could be a game-changer in that regard.

“Whether you’re getting Chameleon or you’re getting a gallon of milk, along with air filters and a board game, it’s not going to be anything but good for us,” Campbell said. “So you could get an entire breakfast kit delivered to your house, forks, knives and napkins, too, if you need them, and we’d like to see Chameleon as part of that order.”

Though Whole Foods has been slower in integrating digital platforms, the retailer has long been considered a crown jewel for emerging natural brands. Historically, suppliers have wanted to align with the retailer because of its commitment to quality, its attention to customer experience, and its willingness to help launch innovative products and categories. From Annie’s and RX Bar to Suja and Health-Ade, all have used Whole Foods, at least in part, as a launch pad.

The crown jewel of emerging brands

It’s no secret Whole Foods has sailed choppy waters as of late. The company has seen some of its share of organic, natural and cutting-edge offerings move into more conventional accounts like Kroger and Costco in recent years, battering its revenue growth and share price. Through it all, however, Whole Foods has managed to keep its reputation as a discovery platform for consumers looking for new and natural products. Post-acquisition, many suppliers believe this merger will only help consumers find even more innovative brands.

“A strong partner like Amazon should help Whole Foods improve efficiency in a number of areas, [and] hopefully this will allow Whole Foods to continue its position as a leader, incubating concepts and ideas within the natural and organic industry,” David Koretz, CEO and COO of SlantShack Jerky, said. “SlantShack is a brand that benefited from Whole Food’s local forager program, many fellow Brooklyn companies were developed through similar a process, that early innovation has its footprint across the natural and organic industry.”

The synergies of the two platforms may be especially beneficial to brands that are still looking to use online as a testing ground before making their way to shelves. Shauna Martin, founder and CEO of Daily Greens, thinks Whole Foods will stick to their core values on this– and that straying from those values is not something Amazon would want either.

“They’re buying Whole Foods for the very essence of what [it] is, which is a place where they’re at the forefront of figuring out the next great category and the next new thing that everybody needs in their lives to stay healthy,” she said.

The tried-and-true strategy that has in the past worked for brands like whole food-focused RX Bar and HPP baby food company Once Upon A Farm (OUAF), helping them break into and evolve their respective categories.

“There are a lot of small innovative brands on Amazon and I think both places could be a discovery platform for the other,” Cassandra Curtis, CEO of OUAF, said. “So if you are doing well on Amazon and Whole Foods sees that, I think that would even increase your opportunity to get shelf space in Whole Foods. And vice versa, is you’re in Whole Foods, but not on Amazon and are doing really well, I think Whole Foods would also serve as a discovery platform for getting on Amazon. So I think if anything it will actually improve the chance of local smaller brands getting into the store.”

Amazon is considered a discovery platform of its own. During a presentation at BevNET Live Summer 2017, Keith Anderson, senior vice president of strategy and insights for Profitero, said more product searches happen on Amazon than on Google, and called the website “one of the most overlooked” influencers in consumer decision making. Still, if brands are not on the first page of a search, their chances of being discovered and purchased drop drastically. This is where the Whole Foods model becomes enticing.

“We always think about it consumer-first. Our experience is that Amazon and Whole Foods pretty much do the same,” Sam McBride, RX Bar’s Chief Sales Officer, said. “So anytime two parts of the industry get together we think long term it is a good thing for the consumer, which is good for everybody.”

McBride added that the bulked up online forum will provide new brands with even more of the much needed data they need to grow their sales, build a community around their core consumers, and improve their branding before bringing products to brick and mortar retail. Because of this, he thinks the partnership could potentially have a powerful impact on exposing even more, and potentially younger, new brands to more consumers — and at a faster pace than ever before.

But that’s only if the retailers actually have a channel strategy that embraces both brick-and-mortar and e-commerce, according to Adam Hertel, ‎Senior Vice President of Sales – Grocery & Alternate Channels at tea maker ITO EN Inc. Hertel said the massive tech implementation that Amazon will likely pursue at Whole Foods seems likely to further move the chain toward a centralized top-down context. Hertel said Whole Foods’ recent move toward centralization, making the global grocery team in Austin the driving force on assortments, is already getting some regional backlash “from the regions that used to be able to call their own shots.”

Otherwise, the brands caught in the transition will continue to wait for the retailers to sort out their relationship.

Source:

https://www.bevnet.com/news/2017/suppliers-predict-benefits-new-brands-wfmamazon-combo

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