Milling & Baking News - July 4, 2017 - 7

Editorial

Amazon's message for baking

t has been 20 years since Peapod, Webvan and other was established Amazon has managed to build a stagon-line services burst onto the scene with the prom- gering market capitalization of $475 billion, a figure in
ise of revolutionizing how consumers obtain their the realm of Google ($573 billion) and Apple ($762 bilgroceries. While these businesses faded following great lion). By contrast, The Kroger Co., arguably the most sucinitial fanfare, grain-based foods companies have seen cessful U.S. supermarket chain over the past decade, has
e-commerce as a disruptive force for food gradually ap- a market capitalization of a mere $20 billion. Kroger is
proaching on the horizon ever since and have grappled not Amazon's principal target. Instead, success in grocerto ﬁnd ways to adapt. This prospective change moved ies will be crucial for Amazon as it jousts with Wal-Mart
far closer to imminent reality June 16 when Amazon. Stores Inc. ($230 billion market capitalization), seeks
com announced it would acquire Whole Foods Market, to offer a more comprehensive portfolio of consumer
Inc. in a transaction valued at about $13.7 billion.
goods, explores Supplemental Nutrition Assistance ProThe announcement was followed by a veritable gram participation and considers local delivery. It has
flood of speculation about what such a transaction been suggested that the grocery business will provide
would mean for food retailing and distribution as well Amazon crucial critical mass as the company contemas the food processing industry.
plates final delivery of its products.
The clear message from the
For example, since Whole Foods'
How the various pieces of
sales index heavily toward store announcement is that Amazon Amazon's on-line puzzle will fit
is hell bent on becoming a
brands, a number of analysts sugtogether remains to be seen. Eargested the acquisition would be
major force in the budding
lier this year, AmazonFresh was
good news for private label and
available in 21 metropolitan areas
on-line food business.
would spell trouble for branded
around the United States as well
food companies. Others focused on what kinds of as in Tokyo and London. In 2016, Amazon chief finaninvestments, principally technological, Amazon may cial officer Brian Olsavsky said, "We continue to bebe expected to make in Whole Foods to enhance ef- lieve consumables, groceries are a key part of the officiency and reignite same-store sales growth.
fer to customers," he said. "We are playing with very
The truth is that much if not most of what will un- different models to see which works and for what
fold from an Amazon/Whole Foods combination is needs." Bakers generally have been pleased workimpossible to know. What is clear is the seismic change ing with Amazon, particularly the retailer's no-return
that could emanate from this transaction relates not to policy and the simplicity of warehouse delivery.
Amazon's interest in brick-and-mortar stores but to
At the 2014 annual meeting of the Grocery Manufacprobability that the acquisition will hasten the time turers Association, presenters urged food companies
when many more consumers purchase their groceries to gain an understanding of the Amazon system. "It is
on-line. The clear message from the announcement is imperative we know how to play with them," said Dan
that Amazon is hell bent on becoming a major force in Cooke, general manager of global e-commerce at Kelthe budding on-line food business.
logg Co. Particular guidance included a suggestion to
In the 10 years since Amazon began seriously pursuing tap into Amazon's vendor services and to learn how
the food business through the launch of AmazonFresh in to market products effectively on Amazon's web site.
a community near the company's Seattle headquarters,
Changes in the mix of products consumers purchase
executives have acknowledged some of the challenges in the future certainly may be shaped by the models
that stymied the 1990s pioneers. But given Amazon's that emerge in the explorations of Amazon, Wal-Mart
dizzying success as an on-line retailer, efforts to become and others. Grain-based foods will be a part of the mix,
a leader in food sales principally through further build- but innovation and nimbleness will be required to take
ing out Whole Foods' physical stores simply would not advantage of the opportunities that will inevitably remake sense. After all, in the 23 years since the company sult from the exciting changes finally at hand. MBN
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