How Whole Foods-Amazon Deal Could Upend Grocery

Seeing Whole Foods products first in Amazon searches? Breezing through the grocer's stores with an app that scans affordable fruits and seafood?

Those are among the possible scenarios that unnerved the food industry last week, when Amazon announced a $13.7 billion megadeal to acquire Whole Foods. The two companies have not yet detailed how their proposed union might change the experience for customers. But the deal has the potential to boost the outsized ambitions of Amazon CEO Jeff Bezos and Whole Foods chief John Mackey, each of whom has already radically altered the way Americans shop.

Amazon is a retail juggernaut hunting for ways to dominate groceries. Whole Foods is fighting to broaden its appeal while preserving its reputation on quality.

Here's how a tie-up could help both companies advance their goals.

The Whole Foods of Everything

Like other grocers, Whole Foods is increasingly pushing its store brand products, most notably those under the "365 Everyday Value" name. If the deal goes through, those items could get prime real estate on a massive platform outside the chain's 440 U.S. stores.

Amazon, in instantly acquiring a stable of its own grocery staples such as pizza sauce and peanut butter, could decide to give them favored placement in its search results. While some 365 products are on the site now, they're through third-party sellers who charge higher prices than found in stores.

Amazon already has shown an interest in boosting its own brands. After introducing its "AmazonBasics" batteries, for instance, the site made them the top result for "batteries" searches over Duracell and Energizer, notes James Thomson, a former Amazon employee who was in charge of bringing in new sellers to the site.

Doing so with Whole Foods brands as well would help lower costs -- and possibly diminish Amazon's reliance on packaged food makers like Kraft Heinz and PepsiCo.


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