From Business Insider:
“Amazon is integrating Whole Foods more deeply into its core business, in a major reorganization that it hopes will reinvigorate its grocery business under new leadership.
“In an internal memo last week, Whole Foods CEO and Amazon VP of Worldwide Grocery Jason Buechel explained how the restructuring will bring the two companies closer together.
“The plan includes a new leadership team and a change that will bring Whole Foods corporate staff under Amazon’s employee programs, including performance reviews and pay structure. The changes will happen over the next 12 months, but won’t affect Whole Foods frontline warehouse and in-store workers, according to the memo, a copy of which was obtained by Business Insider.
“The previous structure failed to leverage ‘the breadth of talent, resources, and knowledge’ across Amazon’s grocery ecosystem and Whole Foods, Buechel wrote. The new approach, he added, is meant to streamline operations.”
The story goes on to say that “this is Amazon’s latest effort to recalibrate its grocery strategy and revive momentum at Whole Foods, which it largely kept independent since buying the company for $13.7 billion in 2017. Amazon and Whole Foods have struggled to align on a unified growth strategy, leading to repeated reorganizations and strategic shifts over the years, BI previously reported.
“Under CEO Andy Jassy, Amazon has taken similar steps to more closely align other subsidiaries, such as One Medical and Audible, with its broader corporate culture.”
Amazon has confirmed the changes to BI, while emphasizing that Whole Foods has been a “successful and growing grocery business” seeing more than 40 percent sales growth since 2017. Amazon does not break out its grocery sales, but does say that combined, Whole Foods and Amazon Fresh did “tens of billions of dollars in sales last year.”
The story goes on:
“In the memo, Buechel said the changes are based on feedback he received during his first 100 days as Amazon’s grocery leader. (Buechel was named Whole Foods CEO in 2022, and then was given responsibility for all of Amazon’s grocery business earlier this year when his predecessor, Tony Hoggett, decamped for Marc Lore’s startup, Wonder.) A ‘unified employee experience,’ he said, can help drive faster growth as the previous team structure created friction, ranging from inconsistent tools and policies to incompatible technologies.
“As part of the transition, Amazon will review Whole Foods’s employee compensation, benefits, levels, and titles. While employees will now adopt Amazon’s compensation model, combining base salary with stock awards, their overall pay is expected to remain largely the same. Some roles and reporting structures may change, too, according to the memo.
“Amazon’s grocery division recently implemented similar changes with its tech staff and was encouraged by the results, the memo added. Whole Foods employees are now urged to use their Amazon work emails to receive important announcements, though their Whole Foods accounts will remain active.
“Buechel described the broader initiative to streamline operations and enhance connectivity across teams at Whole Foods, Amazon Fresh, and Amazon Go as ‘One Grocery’.”
The new leadership team for Amazon’s grocery business is made up of a combination of Amazon and Whole Foods executives. Noticeably missing from the list, BI points out, are two former Tesco execs – Claire Peters, VP of Amazon Fresh, and Peter Bowrey, VP of Fresh Operations — who Hoggett brought on during his Amazon tenure.
KC’s View:
Andy Jassy continues to say that he is firmly committed to the grocery business, so I guess we have to take him at his word. I’m sure he will remain committed until things get to the point where diminishing returns make that commitment obsolete.
I’ve long predicted that eventually Amazon will get out of the bricks-and-mortar grocery business, except for Whole Foods, which will remain a valuable and viable asset. It seems likely to me that Amazon will do with Amazon Fresh what it did with its bookstores, fashion store and four-star stores – decide that the format just isn’t worth the time, trouble and investment. It will simply make more sense for Amazon to focus on leasing/selling its physical retail technology to other retailers, turning an endeavor that is a money suck into a revenue generator.
I see no reason, despite this new reorganization effort, to change that prediction.
Let’s be clear. Amazon has an incredibly robust online grocery business. It seems to me that there are so many ways that it could continue to build out that business, growing it significantly, at a time when we continue to see e-grocery growth overall. (Seventeen percent of total grocery sales by 2030 is being predicted by experts, and seems totally reasonable. From there, how long to get to 20 percent?)
Maybe this new reorg will work. Maybe. But let’s be clear-eyed about the foundation with which the company is working. Whole Foods is a strong grocery player that many people would argue has lost a step or two since its halcyon days. And Amazon Fresh, at least for the most part, seems to consist of stores that are mediocre at best, utilitarian rather than innovative, offering very little in the way of differential consumer advantages.
This is not a situation in which one plus one is likely to equal three.
In the end, I continue to believe, the math simply isn’t going to work for Amazon. A reorganization of its grocery business leadership may buy some time and instill some hope, but I’m still waiting for a reveal of a single, compelling and transformative insight into physical retail that will define and justify this side of its business.
There’s an old Italian proverb: Hope is the last thing ever lost.
But sometimes – and I hate to say it – hope isn’t enough. It certainly isn’t a strategy.
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