Why Whole Foods' Small Suppliers Think Amazon Will Be Good For Them
The last few months have not been easy ones for the small companies that supply Whole Foods with quinoa and kale. As big investors demanded a shake-up at the company, maybe even a takeover by a much bigger supermarket chain, Janey Hubschman felt that the fate of her own company, Epicurean Butter, was also at stake.
"The fact that their sales have not been great affects every single product that is in Whole Foods, and their reputation affects everything that is on the shelf," says the Colorado businesswoman, who has been selling to Whole Foods since 2005.
Brian Nicholson, the president and CEO of Red Jacket Orchards, which sells apples and juices to Whole Foods, was worried by rumors that private equity firms might acquire the food retailer.
Then, on June 16, the long-anticipated takeover announcement came, with Amazon as the winner, and many small food companies actually breathed a sigh of relief.
Despite Amazon's huge size, and its reputation for squeezing out small businesses in sectors such as bookstores, these food companies think the online behemoth's entry into their business could be a good thing.
For some, it's because Amazon is familiar. Robbie Stout of Ritual Chocolate in Utah uses Amazon to buy parts for his factory. Bebe Goodrich of Icebox Coffee in Alabama said Amazon is a tremendous part of her life as an entrepreneur and mom of two kids. And Hubschman says, "I have a box with that little smiley face on my door four times a week. I love Amazon."
And paradoxically, many small food companies look at Jeff Bezos' company, which changed the way people shop, and see a hint of their own desire to shake things up in a food industry that is still dominated by powerhouse manufacturers selling to conventional grocery stores.
"Whole Foods came in as an innovator and others changed to catch up, carrying natural and organic foods," said Sylvia Wyant, CEO of Zest Brands LLC, which makes cakes and cookies that meet the paleo diet. "I see Jeff Bezos and Amazon as innovators, and I see the grocery business needing innovation."
The problem is, Amazon-style innovation hasn't always been kind to small businesses or to the types of products Whole Foods peddles. Searches for "artisan" or " local" on Amazon Prime Pantry pull up only a couple dozen results, mostly packaged items like white cheddar popcorn or crackers.
In fact, little about Amazon is local, save for the boxes arriving at your door. Their mission is to "build a place where people can come to find and discover anything they might want to buy online." Whole Foods, on the other hand, built a regional purchasing model that gave stores considerable autonomy in finding local products. At least, that was the case until early 2016, when Whole Foods shifted all its nonperishable buying to its Austin, Texas, headquarters.
"I think Amazon's track record in other sectors indicates they are not deeply invested in creating a decentralized model," says Leah Douglas, a reporter and analyst with the Open Markets program at the New America think tank.
Amazon could help bring down prices at the stores known for taking your "whole paycheck," but that is more likely to benefit customers and to come at a cost for producers.
Despite all that, small suppliers persist in their hope, perhaps simply out of instinct. After all, they built their ideas and products from the ground up through optimism. Potentially, they say, Amazon will open new and better distribution channels, helping them sell products through an online platform with immediate name recognition. The cost of getting products from manufacturing to a retailer the traditional way eats away at profit for businesses like Zest, Wyant says.
"It is hard as a small company to go from a concept to the shelf and then from the shelf to the cart," says Indea Leo, the founder of Lillabee, which makes allergen-free baking mixes in Colorado. Lillabee was discovered by a Whole Foods representative while selling at a farmers market and later received a product development loan from the company. "We think there is going to be a lot of exciting possibilities of bypassing the shelf altogether and reaching a wider customer base."
While suppliers remain optimistic, more information is still needed before the crystal ball of kombucha and asparagus water clears. The deal will be subject to regulatory approval before it is finalized, and neither Amazon nor Whole Foods has said what will change once the two companies are married.
Nicholson, the third-generation apple grower, wonders what this means for the future of groceries. His family recently planted new trees to meet growing demand.
"How might we be selling things when that fruit comes available in 10 years?" he says. "I don't know."
Editor's Note: Whole Foods Market and Amazon.com Inc. are two of NPR's corporate sponsors.
Mollie Simon is the NPR Business Desk intern.