Michael Movitz was interviewed by Supermarket News about pricing outlook related to the Amazon/Whole Foods deal. Article by Mark Hamstra | Aug 08 2017
The structure of the natural products industry could limit how much Amazon is actually able to reduce prices at Whole Foods, as many observers believe it will try to do once its pending $13.7 billion acquisition is finalized. While the price differential between natural/organic and mainstream products has been narrowing, and many retailers, including Whole Foods, have expanded lower-cost private label lines, the lifeblood of the industry remains many of the smaller producers that operate with high standards and production costs. The acquisition might provide Amazon with new insights about these cost structures, said Michael Movitz, founder and managing partner at The Movitz Group, a Lincolnshire, Ill.-based consulting firm. “This industry philosophically operates on standards, so there are lines that won’t be crossed,” he said. “There are probably learnings that Amazon will gain — at some point you have to value the product and the stakeholders in bringing the product to market.” The breaking news this morning of Amazon’s acquisition of Whole Foods Market is as about exciting as it gets! This combination of businesses unleashes the power of new possibilities and potential from giant influencers Amazon & Whole Foods, a la Jeff Bezos and John Mackey. For grocery retailers, it adds even more pressure (read: opportunity) to a retailing environment already faced with the uncertainties of transition as ecommerce disrupts traditional retail models.
WFM CEO John Mackey’s nearly 40-year journey to bring us better food, improving the lives of its shoppers, has resulted in a transformation on American food culture, food retailing, personal health and social benefits to farmers, workers, and supply Twenty years ago, functional beverages emerged with the introduction of RW Knudsen’s Simply Nutritious juices – a groundbreaking combination of the brand’s signature delicious fruit juice blends with vitamins, minerals and herbs previously relegated to capsules and tablets in a pill bottle, and formulated for use occasions and consumer need states. Up to that point, the closest thing was vitamin C & calcium enriched orange juice. Simply Nutritious was the convergence of an erstwhile concoction, based on the foresight of consumer desire for a nutritional boost without taking a pill.
Functional foods & beverages is a platform for a new generation of iterations using superfoods, botanicals, probiotics and other elements of nature, as consumer demand for consumption to be way more than calories, drives innovation (and essentially, for all things to have ‘functional benefit’, save for the indulgent dessert, but even that is changing at the edges). And let’s give a nod to personalized nutrition thanks to personal/wearable technology and commercialization of blood tests that will put an end to governmental one-size-fits-all nutrition and dietary recommendations. More on that later. The mobility of food & beverage trends into personal care and household categories is thus a natural evolution of consumer lifestyle desires we’re familiar with: to incorporate and employ the ‘foods’ (read: ingredients) they eat to be the ‘foods’ they rely on for all aspects of their well-being – in body, on body, in home/surroundings. This notion is not new, and in fact up until now, the cosmeceutical trend begun 15 years ago or so was the convergence of supplements and personal care. However, a new wave of foods, processes, scents, packaging, and forms are on the rise in personal care and household products - this time taken from food & beverage trends - that seem to signal the melting away of boundaries between ‘in body, on body, in home’. Combined with personal nutrition and technology capabilities, nothing is off limits and everything is possible. This is the beginnings of personal care & household product’s “functional beverage movement”:
Our Trend Watch: Personal Care & Household Product’s Functional Beverage Movement report highlights ways to freshen up for Spring and a starting point to think about how pervasive and boundless these trends have become. Bag of chips or pretzels? That's so 20th century! Form, frequency & content rule the trend line of snacks now. Micro Eating Occasions now drive "snacking" and consumers are looking for nutrient dense and satisfying, familiar and innovative foods, all in a convenient form.
In advance of an upcoming conference, I was asked to provide a 200 word response to the following question: How can food businesses influence the buying decisions of consumers who mistrust the industry and turn to peers and personal networks for food ideas and advice? My original answer was about 50% longer than permitted so I trimmed it to fit the conference limit. I felt like sharing my original though, below. I welcome feedback and especially additional ideas....
Leadership, mission, and purpose. Whole Foods continues to demonstrate these distinguishing characteristics through the opening of its latest store last week in Englewood, one of the most crime ridden and lower income areas of Chicago. The median income of this neighborhood is $20,500, about one-fourth the average of where most WFM stores operate. It’s also a food desert. Residents historically have had to either travel long distances (likely on public transportation) or settle for buying their groceries from a convenience store (ie, a gas station). Think about that – imagine your food selection was limited mainly to highly processed bagged and boxed snacks, bars, and canned goods. Thanks to Whole Foods and support from the City of Chicago, residents have access to fresh, wholesome, healthy, nurturing food and nutrition, and resources to improve their lives. According to Whole Foods Market, it worked very closely with the community to ensure it heard their voices, met their needs, and made the store about them. The City of Chicago is also committed to this initiative: it sold the land to the developer where this WFM store now sits, along with other retailers including Starbucks, for $1. The market value was $3.1 million, according to the Wall Street Journal. With two-thirds of 2016 elapsed and planning for next year soon upon us, it’s a good time to assess the forces shaping the business environment and consumer culture, and their impact on the natural consumer products industry. And boy are there impacts and changes afoot.
This is not the usual natural industry update because this is no longer the usual environment. In today’s Sprout’s Farmer’s Market Q2 16 Earnings Release call, Sprouts highlighted its continued strength in top line, bottom line, and comp sales trends. It also fielded a question from a financial analyst that represented the short term view institutional firms take, the financial pummeling investors in public natural product stocks have taken, and the skepticism that the financial community has for how much runway exists for wellness in America.
The last 18+ months of competitive headwinds and deep investments to reinvent themselves in the new normal have taken their toll on stock prices at Whole Foods, UNFI, Hain, and others. True that stock price is a reflection of recent as well as predicted future performance, and aside from the “I’ll believe it when I see it” cautionary approach of sell side analysts, part of the pessimistic outlook within the financial community stems from three things: I attended the Campbell Investor Day conference today. Of the many take aways, the overriding notion is that Denise Morrison, Campbell CEO, gets it.
Denise clearly outlined the macro trends and rapid changes occurring in the marketplace and underscored Campbell’s commitment to being a leader in this environment. As it soon became apparent, this wasn’t just talk. What makes this CEO overview different is that the majority of macro trends affecting the food industry are directly aligned with the values and enduring philosophies of the natural products industry. In fact, a sizeable portion of the three-hour event was spent on topics front and center to it: transparency, being purpose driven, plain-labeled GMO claims, animal welfare concerns, supply chain traceability, fresher food, clean labels & ingredients, and more. Unlike many other CPG companies who are following and trying to catch up with the trend, and who mention these terms as if they are on the outside looking in After a decade of going it alone, Whole Foods Market is returning to cooperator status, a move that will empower its manufacturer supplier partners to provide more sophisticated insight back to the retailer, and help Whole Foods make more informed decisions accounting for broader market dynamics. The move is part of Whole Foods’ strategic nine-point plan to evolve and improve its trajectory, as the natural products industry has also expanded and evolved in many awesome ways the last several years. How did we get here and why is this news? |
About The Author...Michael Movitz has more than 25 years natural/organic products industry experience across retail, manufacturer, broker and market research organizations... Archives
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