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Organic Growth: is Amazon’s Purchase of Whole Foods a Healthy Deal for Consumers?


Saturday, June 17, 2017


On June 16, 2017, Amazon announced that it will acquire organic supermarket Whole Foods Market, the first national “Certified Organic” grocer, in an all-cash transaction valued at approximately $13.7. As a recent article in The New York Times noted, the deal will “instantly transform the company that pioneered online shopping into a merchant with physical outposts in hundreds of neighborhoods across the country,” and, ”Amazon could use its $99-a-year Prime membership service, which gives customers free, two-day shipping and other benefits, to offer Whole Foods customers a better price on groceries.”


Indeed, it’s easy for the average consumer to assume that what the deal will mean for them is fast and easy access to organic food at great prices. But discussions with other stakeholders in the food industry reveal that the implications of the deal are a bit more nuanced than that.


Matt Hand, founder and owner of the organic Hand Picked Farm in Flemington, New Jersey, reflects on what such a partnership might mean for the farming industry. While it’s true that more people will have access to organic foods, “I only see the Amazon merger moving the needle closer to industrial organic farming. Overall, I feel that the organic label has been compromised by conglomeration,” he says. “If people care about small family farms and truly fresh foods, this is a bad deal. But if more people want to feel good with the ‘organic' label, then it serves that purpose. At the scale of industrial farming, organic is not offering a whole lot more than conventional farming; it is just a different set of inputs—many of which you wouldn’t want to rub on your skin or apply without protective gear.”


 Naturally, one concern for farmers like Matt is how such food industrialization will affect the livelihoods of farmers. “Deals like this one take organic agriculture into the large-scale industrialized food distribution system as opposed to a patchwork of family farms, through Amazon’s buying and distribution system. This makes it harder for small farms to compete against the price and convenience,” he explains. “The quality, freshness and connection to the food [with Amazon] will never match local farms, but I’m sure there is a tipping point for eaters where they may trade those values for cheap convenience. I think people drawn to CSA and farmer’s markets for the quality won’t be switching to Amazon or Whole Foods—but it could make new customers harder to get.”


Ayla Withee, MS, RD, LDN, owner and CEO of Boston Functional Nutrition, echoes Matt’s concerns about the dilution of the organic label. “USDA organic labelling has so many loopholes that consumers may not realize that their products are not truly organic (i.e., no different than any other conventionally produced product), so I have mixed feelings about farming and food production being scaled to this level,” she says. “Advocates will say it increases access, but quality and our connection to our food supply always suffers in some way.”


But the potential pitfalls don’t stop there, according to Ayla; she says it’s also important to consider issues such as food safety when production is scaled and fair wages for farmers. Overall, she believes the merger is “probably not a good thing for consumers.”


Why not? “My gut reaction is that we haven't seen it play out well for consumers when food and farming is scaled and there isn't diversity and competition in the market,” she says. “I don't think that's unique to the food industry—we see hospital mergers being blocked because of implications on choice for care and coverage all the time.”


Michael Forman, Director of Operations for Foodcellar Market, an all-natural and organic food grocery store with two locations in Queens, New York, has a different view on what the Amazon deal will mean for market competition.


“The four words that have always been associated with the grocery industry are grit, determination, hard work, and bravado. If you walk into any grocery store, you will see these tenacious characteristics in action either on the sales floor or in the back of the house as employees work to keep the shelves stocked, receive product shipments and manage their teams and workflows,” he says. “Amazon's entry into the retail grocery space will pave the way for a new set of words that will be synonymous with the grocery industry: innovation, technology, data-driven, and advancement.” 


Michael believes the merger could be good news for both consumers and the grocery industry. “Amazon is already testing a new checkout-less concept called Amazon Go that fully eliminates cashiers and checkout lines and will allow grocery stores to operate with only a handful of employees. This will significantly reduce labor costs and will allow the Whole Foods/Amazon stores to sell products cheaper than their competitors,” he says. “I also believe that this will force other major grocery stores and providers such as Kroger's, Safeway, and Wal-Mart to either find a partner who can help them adapt, or cause them to fade away with the times—just like Amazon's Kindle did to Borders Books.”


Clearly, there are many perspectives to consider and no shortage of stakeholders in the food industry who will want to weigh in. On the front-end, though, does any of that really matter to the average, Amazon Prime-membership-carrying consumer? What most of us will see in the light of our computer screens is food we believe is good for us, at a cost-savings we can appreciate, accessible with the touch of a button. In a world where we’ve collectively chosen to use smartphone technology that is more powerful than the computers that put a man on the moon to get cookies delivered at 3:00 am, maybe having some kale shipped directly to our front doors is exactly what we need.

 
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