"I invented that business model. Bezos must pay me homage..."
Posted on 03/13/2018 6:22:38 AM PDT by Red Badger
Tensions between Whole Foods Market and some of the most important brands it sells in its stores will come to head on March 19. The grocer notified certain vendors about the meeting last Saturday. A key issue discussed will be Whole Foods' efforts to centralize its merchandising.
Tensions between Whole Foods Market and some of the most important brands it sells in its stores will come to a head on March 19, when they will congregate for a recently announced summit, sources familiar with the situation tell CNBC.
The grocer notified certain vendors about the meeting by email last Saturday. It is set to reassure the brands of relations after Whole Foods' sale to Amazon. It comes after a rocky few months for the grocer, which has been trying to shift from a local orientation to a national one, without sacrificing the selection and relations that set it apart from larger peers like Kroger and Albertsons.
Some of those efforts, like its move to centralize purchases, preceded its sale to Amazon. However, any change the grocer makes is drawing more scrutiny amid the uncertainty following Amazon's acquisition.
Meantime, Whole Foods' limited communication about the status of these changes has been a point of frustration, according to multiple vendors that spoke to CNBC.
A major point of debate for its larger vendors is the new servicing fee, proposed in the last few months, which will charge vendors for Whole Foods' efforts to centralize its merchandising, sources said. Still, some of the sources noted their reliance on Whole Foods as a customer gives them little power with which to bargain.
Traditionally, with both Whole Foods and most grocers, food companies could pay brokers to help manage everything that happens from the grocery stock room to the shelves. The distance from the back room to shelves has been called some of the most expensive mileage on the planet.
These brokers fulfill a number of functions, but their key role is to make sure products are displayed well and taken care of. That could mean anything from making sure there are more granola bars on the shelf when those bars are on sale, keeping the freshest yogurt on the top of rack, or strategically hiding under-stocked goods. Brokers can also use the relationships they wield to make their case for more shelf-space.
Now, Whole Foods wants to control that process, and will charge some companies roughly 3 to 5 percent of sales for the service. The shift was first reported by the Washington Post.
Vendors are not happy. Some say that fee is too high. Others note that being forced to use Whole Foods' systems hurts their relationship with their personal brokers, on whom they rely for the rest of their grocery business. By paying Whole Foods to do the merchandising, vendors have less money and less product to give their brokers that manage relations with other retailers.
Whole Foods hasn't disclosed its reason for shifting to this model, but one key advantage that it could give them is data. Brokers represent multiple brands and work with multiple retailers. Cutting them out of the process means Whole Foods limits the number of people that know what goes on in its stores and who can share that information with others.
Whole Food's parent, Amazon, of course, is a master — and fiercely protective of — its data management.
Whole Foods confirmed it's holding a supplier meeting the week of the 19th, adding that it has nothing more to share at this time. Broader Changes
The changes come as both Whole Foods and the industry it helped launch undergoes transformation.
Organic products are now available in nearly 20,000 natural food stores and nearly 3 out of 4 conventional grocery stores, according to the U.S. Department of Agriculture. That means Whole Foods is competing in one of the fiercest competitive retail environments; the act of simply selling "organic" is no longer sufficient on its own to bring customers into its store.
Many of these brands congregated at the industry's annual largest convention, Expo West, this past week in Anaheim, California. Amid the revelry and morning yoga classes, was a fight for investment, attention and shelf space.
Under that competitive backdrop, few brands said frustrations with Whole Foods were sufficient enough to drive them away from the Austin grocer towards competitors like Kroger, Albertsons and Aldi. The retail environment is too tough and the number of similar rivals too vast.
Meantime, the grocer last Tuesday emailed employees its refreshed core values, a document that CEO John Mackey spent weeks putting together, alongside senior leadership, according to an internal memo obtained by CNBC. Its "statement of interdependence" had last been updated in 1997, according to the document, before that, 1992 and 1988.
The decision to make updates, which referenced Amazon as the company's owner, was driven by Mackey and not Amazon, sources told CNBC.
Most companies treat people like numbers. The Amazon break policy is pretty common in manufacturing.
“Whole Foods has been making some pretty piss poor business decisions lately. It’s mind boggling.”
I worked at WFM corporate headquarters. It’s still the late 60’s there.
I was just looking at the financials for Whole Foods.
What is clear is that its profit margins are not above the average for the supermarket industry as whole.
Yet, having shopped there, the prices of many things it sells are above average compared to elsewhere for similar items.
That leads me to think the higher prices at Whole Foods is not because it makes more money than other food markets, but that it pays more for many of the goods it sells. If that were not the case, if it was getting bargains from its suppliers and marking things up immensely, its net profits would be different, larger than they are.
That changes the picture for me about the Whole Foods suppliers complaints.
I never shop there, though I admit they HAD a good Business Model. They sure got the unwashed Hippies in, ‘The People’s Republik of Madistan’ to part with their grocery dollars, that’s for sure!
Oh, I’m sure that’s part of the plan. They’ll gut Whole Foods and keep what they want.
Then some other smart people will give the PUBLIC what it wants via some other means similar to Whole Foods.
PUBLIX.........................
Whole Food's parent, Amazon, of course, is a master — and fiercely protective of — its data management.
Doing business with Amazon - even as a small seller - always requires giving away your supplier information. And if what you are doing is profitable enough, they will immediately cut you out and make and sell your product themselves.
It was a genius scam to get thousands of small American companies to share their profitability secrets by offering a (largely false) promise of broad market exposure.
The Chinese business model....................
The whole point of Whole Foods used to be that they did not even stock products with a long list of undesirable ingredients. If one of the ingredients you didn’t want to ingest was on the list, you didn’t even need to read the products labels in their stores. I wonder if Bezos now wants to pare down the list of what Whole Food won’t stock, which as another FReeper said, flies in the face of the Whole Foods business model.
He probably has a ‘hobby’.
Our WF is located between a Bass Pro Shop and Lowes Building Materials...........
Not familiar with that store; we don’t have them here. But, good for them!
“Amazon wants to stock Coca-Cola into Whole Foods.”
There is a homegrown food co-op in my old hometown that went into debt to build a nice store downtown and ended up having to add people to its board which formerly consisted of long hair granola types.
The new members were bottom line oriented and voted in white bread, twinkies, coke and cheetos, etc.
The hardline tree huggers who shopped in the old store for over 30 years stopped doing business there.
Your post reminded me of a time I watched a young kid buy a $45 dollar bottle of truffle oil with an EBT card at whole foods.
"I invented that business model. Bezos must pay me homage..."
“I never saw a more entitled bunch, rushing hither and yon with no concern about bumping or cutting off other folks”
I go out of my way to annoy those folks.
Publix is the kind of store that charges $5.75 for a jar of Hellman’s mayonnaise, then puts a $2 coupon in their ads and tells you your saving $2 at checkout when you can get that same jar of mayonnaise at Walmart for $3.75 everyday..............
Needed a couple of odds-and-ends at Christmas, and couldn't get near the local grocery (literally, no parking spaces. Lines to get in the door). Instead, I went to Publix, walked right in, picked up the 3 things that I wanted, stepped through the checkout - no waiting - and walked out.
Sez me, if a grocery store is empty right before Christmas, it won't be in business long.
Publix is literally within walking distance of my house, but we shop at Winn-Dixie or Walmart, or Big Lots, unless it’s just a ‘couple’o things’...................
..and another thing they, Publix, do is fake ‘BOGO’ stuff.
You’re actually paying for two of whatever it is, they just double the price on the sign...............
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