Amazon Poised to Disrupt the Grocery Industry

Brian GermanAgri-Business

Whole Foods and Amazon announced their $13.7 billion merger deal on June 16, sending a wave of concern through the grocery industry. Whole Foods’ first day of operation as part of Amazon saw prices on popular items drop by a third.  More discounts are expected in the future in their effort to shed the grocer’s reputation for high prices.

grocery industryIn a Whole Foods in downtown Los Angeles, the price of organic Hass avocados was slashed by 33 percent. Boneless rib eye prices dropped nearly 18 percent, while the price for “responsibly farmed” Atlantic salmon filets declined almost 29 percent.  For some products, Whole Foods’ prices were lower than big name competitors in the area.

Amazon was already making waves in the food industry before the Whole Foods announcement. Amazon Technologies has filed over 110 food related trademarks. A portion of those trademarks involves the phrase “single cow burger.”  Amazon is already marketing their Wagyu beef burgers, made from grass-fed cattle raised in California, as being produced from a single cow instead of trimmings of multiple animals like most other burgers.  While there is no evidence showing single-cow burgers are any safer, tastier or have less impact on the environment, the inference is still being made to consumers.

The company hopes to soon be selling substantial quantities of beef and other proteins, potentially making Amazon a major player in the beef industry.  The future could see the company holding enough leverage to potentially force changes to systems of production, such as environmental stewardship and sustainability.

Analysts are predicting that Amazon’s move into the food business will address the demand for affordable, quality food products delivered quickly.  However, analysts also estimate that overall prices in Whole Foods stores will need to be reduced by 10 to 15 percent to effectively compete with competitors in the grocery industry.