Less than a year after Amazon (NASDAQ: AMZN) acquired Whole Foods Market, food retailers are still shaking to their cores. This so-called “grocery war” has racked up its first casualties: veteran competitors and internal executives.
The acquisition has brought plenty of worry to the grocery sector and its suppliers. This is especially true when you consider the e-commerce giant’s tendency to slash prices to attract customers.
And it looks like those worries have blossomed to include new tensions within Whole Food’s corporate structure, as well…
Gone Grocers
The grocery business is in the midst of a radical disruption, squeezed by a range of new competitors, like Amazon and even Dollar General.
Tops Markets and Southeastern Grocers were the first to fall victim to Amazon’s influence over the industry.
Tops, the 56-year-old chain with over 160 stores in New York, Pennsylvania, and Vermont, filed for bankruptcy late last month. This was following years of mounting debt.
Southeastern, which owns more than 600 Winn-Dixie, Harveys, and BI-LO stores across seven states in the southeast, announced a refinancing agreement on March 15th. It also announced that it will file for bankruptcy by April 2018.
The back-to-back filings have fanned fears that some supermarket chains won’t make it through the industry’s current turmoil. This turmoil is replacing the “retail apocalypse” that’s already hit American malls all across the country.
Analysts say the upheaval could determine where consumers shop and what food is available to them. Already, Winn-Dixie has said it will close 94 stores. And Tops could end up shuttering its weakest locations.
Phil Lempert, an independent food retail analyst at Supermarket Guru and also the author of several books about the grocery business, said the following about the state of the entire industry after Amazon’s entry: “I think we’re going to see a lot of chains fail. There are some retailers who have innovated and stayed ahead of the trends. But they have been the exception.”
Tops and Southeastern carry enormous debt loads. These loads are the result of management by private equity firms. Because of their high-interest payments, the companies have been unable to adapt to the changing market environment, unlike chains like Wegmans.
So, it’s become nearly impossible for them to remain competitive…
Corporate Casualties
Amazon’s impact on Whole Foods seems to have caused a mass exodus of executives from the once independent organic supermarket operator.
The Seattle e-commerce giant is known for focusing on slashing costs. And it’s now keen on driving new innovations and boosting sales at Whole Foods. As a result, a slew of executives has left the company.
They’ve opted to jump ship rather than wait to be pushed out by Amazon.
The Wall Street Journal reported that more than a dozen executives and senior managers have left since the deal closed in August 2017. Some were asked to stay on with the new company, but others were urged to leave.
The issues seem to stem from the age gap between executives at Whole Foods and Amazon.
According to the WSJ, some of the more senior Whole Foods executives balked at reporting to and taking orders from their younger Amazon counterparts. Others seem to have left amid frustrations with the e-commerce giant for dropping the ball when it came to explaining the details of its plans to integrate Whole Foods into its business.
But both companies have said that they work well together and share the same customer focus.
“We…have maintained our distinctive culture while embracing many of Amazon’s leadership principles,” John Mackey, Whole Foods CEO and cofounder, said in a statement.
Meanwhile, Steve Kessel, the Amazon senior vice president overseeing the organic grocer, said the deal is off to a “great start” and the two companies look forward to “many years of future success together.”
Still, the executive exodus on the Whole Foods’ side is raising worries among employees and suppliers. They worry that its unique approach to natural food won’t last under Amazon.
That’s all for now.
Until next time,
John Peterson
Pro Trader Today