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Nearly two years after Amazon acquired Whole Foods for $13.7 billion, a new supermarket chain could help the e-commerce giant sell more groceries to more people, gather valuable data and continue feeding its Prime loyalty flywheel.

Since its marquee grocery acquisition, Amazon has pushed down prices at Whole Foods stores in an effort to net more customers. But refashioning a store commonly known as “Whole Paycheck,” at which analysts noted prices were typically 15% higher than the competition, has proven difficult. Although Prime members get some special savings and more conventional brands have appeared in the aisles, reports have noted little to no change in the retailer’s average basket prices. Last month, The Wall Street Journal reported that Whole Foods prices are actually starting to creep up as suppliers battle inflation and other headwinds.

Although its exact positioning is unclear at this point, Amazon’s new chain will presumably be more in line with a traditional supermarket. It may lean toward a value offering popularized by discounters like Aldi and Lidl, which would allow Whole Foods to maintain its positioning toward the high end of the market while the new brand would reach a more mainstream audience.

“If I’m Amazon, I’m thinking of opening a store more conventionally driven, more price-oriented than Whole Foods,” said Neil Stern, senior partner with McMillanDoolittle, in an interview with Grocery Dive following Friday’s news.

Amazon acquired Whole Foods after struggling to grow its online food and beverage business, including its AmazonFresh brand. News of the new chain further proves that the e-commerce powerhouse needs physical stores in order to succeed in grocery, sources said.

“Grocery is still a store-based business. Amazon didn’t upend the grocery industry with Whole Foods, so now it’s taking matters into its own hands,” Matt Lindner, senior e-commerce analyst with Mintel, told Grocery Dive.

Amazon would use its new stores as distribution points for its growing grocery e-commerce business, WSJ reports. Same-day delivery through Whole Foods has reached more than 60 markets while store pickup touches more than 20. Both services offer an option for Prime members that waives the fulfillment fee — a move that addresses the price sensitivity many shoppers have toward online grocery shopping.

In addition to delivery from the unnamed new chain and from Whole Foods stores, Amazon’s physical footprint would allow it to build out AmazonFresh — which exited several markets back in in 2017 — and generally get food and beverage orders to shoppers faster and cheaper than before. Earlier this week, Amazon’s Happy Belly private label launched its first milk and dairy products, available only through AmazonFresh.

Perhaps most importantly, a conventional supermarket chain would offer yet another avenue for Amazon to collect consumer data and learn how to sell more cereal, produce, meat and other groceries to consumers. The company’s ability to adapt and learn — not to mention its $850 billion market cap — puts it in a class all by itself in the supermarket industry.

“Amazon grocery stores will certainly use their expansive shopper data to merge the in-store and online grocery experience,” Sylvain Perrier, CEO and president of grocery e-commerce provider Mercatus, wrote in comments emailed to Grocery Dive.

One big question mark in all of this is how Amazon would integrate its bleeding-edge technology into new stores. Whole Foods locations won’t see its cashier-free Amazon Go technology, company officials have said, but a new chain’s stores, at just 35,000 square feet, could be ideally suited.

For conventional grocers like Kroger and Albertsons, which haven’t yet seen their bottom lines impacted by the Whole Foods buy, this news signals a new competitive challenge. These chains have accelerated their rollout of store technology and online shopping, straining their profitability as they struggle to insulate their businesses.

A new grocery chain from the world’s largest e-commerce company could signal an even faster rollout of online and in-store innovation. If Amazon brings the same low-price strategy it employs online to the new stores, it could also mean even more heated price wars in crowded markets across the U.S.

“Amazon has that brand recognition and association in the mind of the consumer that if you shop online, you’re going to get the lowest price anywhere,” Lindner said. “If Amazon can bring that low price model to grocery chains, especially where the profit margin is so low, then it could be a game changer.”

Source: Grocery Drive

Marks & Spencer has formed a £1.5bn online delivery joint venture with Ocado to bring M&S’s ready meals to internet shoppers for the first time.

M&S will pay £750m for a 50% share of Ocado’s UK retail business to form the new business, which will trade as Ocado.com. The venture will not start trading until September 2020 at the latest, when Ocado’s present deal to deliver Waitrose products expires. Only 10% of the products on sale at Ocado.com will be M&S-branded goods.

Steve Rowe, Marks & Spencer’s chief executive, said he had “always believed that M&S Food could and should be online” and combining M&S’s food with Ocado’s technology and delivery network was a “win-win” and “compelling proposition to drive long-term growth”. He added: “Our investment in a fully aligned joint venture with Ocado accelerates our food strategy as it enables us to take our food online in an immediately profitable, scalable and sustainable way.”

Tim Steiner, the chief executive of Ocado, described the deal as a “transformative moment in the UK retail sector” that would combine “two iconic and much-loved retail brands set to provide an unrivalled online grocery offer”. Steiner added also that the joint venture would allow Ocado to “grow faster, add more jobs, and create more value as we lead the channel shift to e-commerce here in the UK. We are very excited by the many opportunities ahead.”

Source: The Guardian

On the e-commerce front, Sprouts officials said they’ve begun trialing store pickup through Instacart at select stores. The service, which Instacart launched nationwide last year, complements Sprouts home delivery service through the e-commerce provider, now available at more than 200 of Sprouts’ 313 locations.

During yesterday’s earnings call, Nielsen said Sprouts will introduce a white-label platform in the second half of the fiscal year that plays up the retailers’ branding and offers a more “unified” experience for shoppers.

“We’ll also be able to get better content personalization offers to our customers and partner with our vendor community to put the right type of promotions out there in order to offset some of these costs,” he said.

The company also reported significant growth in its private label products last year. Store brand sales grew 26% growth year over year and now comprise about 13% of the company’s total sales.

While Sprouts appears to have beat fourth-quarter earnings expectations, the company’s guidance for 2019 has fallen short with investors. Still, Sprouts leadership remains optimistic about last quarter’s earnings and the direction of the company in the coming year, despite an uncertain end to 2018.

The unexpected resignation of CEO Amin Maredia in December led to the largest one-day drop in stock prices in the company’s history. Since then, interim co-chief executive officers Brad Lukow and Jim Nielsen have stepped up to run the business. During Sprouts’ fourth-quarter earnings call, the pair reported that a search is still underway for a replacement CEO.

“In 2018 we continued to evolve and improve the Sprouts business model by focusing on the latest consumer and industry trends,” said Lukow on the earnings call. “Our focus on product innovation, guest experience and ongoing training and development of our team members continue to underpin the success and growth of the Sprouts brand across the country.”

Lukow reiterated Sprouts’ plans to open nearly 30 stores in 2019, with nine store openings anticipated in the second quarter when the state enters New Jersey, Louisiana and Virginia. According to Lukow, this year about 50% of new stores will be in existing markets and 50% will be opened in new markets, while historically about 70% of new stores were placed in existing markets and 30% opened in new ones.

In addition to store growth, Sprouts has continued to roll out store remodels and is focusing heavily on expanded deli departments and more convenient meals, with remodeling completed at half of Sprouts’ locations. These new locations offer customers elevated deli offerings such as a salad bar, prepared meals and freshly squeezed juice, Nielsen said on the earnings call.

In its earnings press release, Sprouts announced that it has voluntarily reclassified certain expenses on consolidated statements of income presentation to provide greater transparency and enhance comparability with industry peers.

Source: Grocery Dive

The locations of Kroger’s newest automated facilities highlight two very interesting parts to its Ocado strategy.

By planting a CFC in Florida, where aside from a smattering of Lucky’s Market locations it doesn’t have a store presence, Kroger is showing it intends to use the facilities to reach new markets. Kroger may place the facility between Orlando and Tampa — two cities separated by about 80 miles that have the density to support a high-volume e-commerce operation and have experienced significant population growth in recent years.

The move adds a new dimension to a grocery battle that’s unfolding in a state dominated by Publix. The legacy company has a first-class store fleet, unrivaled customer loyalty and same-day delivery as well as pickup through Instacart. In recent years, though, Walmart has challenged the grocer with remodeled stores and a growing e-commerce business, while new players like Sprouts Farmers Market, Aldi and Earth Fare have elbowed their way in.

Kroger’s move amounts to a hefty bet on e-commerce shopping — and particularly the pure-play online grocery model that has proven challenging for the likes of Amazon and Ahold Delhaize.

Its Mid-Atlantic CFC, meanwhile, can serve as a support center for its Kroger and Harris Teeter locations. CEO Rodney McMullen has said the automated warehouses would help supply click-and-collect orders. In a recent interview with Grocery Dive, e-commerce expert and Brick Meets Click chief architect Bill Bishop said the facilities could eventually stock store shelves, too.

A question mark with both facilities — and with the Ocado model overall — is speed. Its massive CFCs can quickly and cost efficiently assemble orders, but they have to be located outside metropolitan areas, making on-demand delivery problematic. Ocado is set to test a one-hour delivery service called Zoom next month in London, and CEO Timothy Steiner has indicated the service will eventually come available for its international clients.

Earlier this month, Ocado’s main fulfillment center in Andover, England, which handles 10% of the company’s orders in the country, experienced a massive fire. Nobody was hurt in the blaze, and the company plans to quickly rebuild, though experts are beginning to question the safety and stability of the CFC model in light of the incident.

As Coresight Research noted recently, “The fire highlights the risk of the centralized distribution model, which is virtually unique to Ocado in the U.K. online grocery space; most of Ocado’s online grocery rivals in the U.K. rely heavily on in-store picking, dispersing risk of disruption among hundreds of local stores.”

The company doesn’t appear to be making any public shifts to its strategy after the fire and the decision to announce two more CFCs shortly after the incident shows that it remains committed to its current model for the time being.

Source: Grocery Dive

If you think this is going to be yet another column admonishing you for not doing enough to curb the amount of single-use plastic in our waste stream, you can relax. You don’t need a lecture at this point.

You might already know, for instance, that global consumer culture has generated more than 8.3 billion metric tons of plastic since the middle of the last century, and that we currently produce 300 million tons of it a year, half of which is made up of items used only once. And you’re probably aware that roughly 8 million metric tons of this discarded plastic ends up in the ocean, where it threatens marine life of all kinds. It’s unlikely anyone needs to tell you that every year we throw enough plastic away to circle the planet four times, or that a mass of plastic waste floating in the middle of the Pacific Ocean is three times the size of France.

So instead of piling on to the guilt you probably already feel, allow me to offer a glimmer of hope. Increasingly there are signs—not big ones, but signs all the same—that a new generation of businesses and manufacturers, and even some of the older ones, are ready to change the way products are packaged and delivered so that single-use plastic is all but removed from the equation. Right now, these companies’ actual impact on the waste stream is small. But if their solutions catch on and become the norm, the impact could be tremendous.

Last week brought news of a start-up called byHumankind, which delivers a variety of personal-care products directly to the doors of its online customers. At first glance, this doesn’t appear to be anything particularly new. But what is novel is the role of plastic in this most familiar of transactions. It’s practically nonexistent. Mouthwash comes in the form of a tablet that dissolves in water. Shampoo comes in a bar, like soap, and arrives wrapped in paper. Deodorant is delivered at first in an elegantly designed plastic container—but refills come paper-wrapped and ready to be popped into the original holder, turning what would typically be single-use plastic into something that can potentially last for years.

Another new startup, Loop, carries out its mission of reducing plastic waste by leveraging the popularity of other brands. Its creators describe Loop as a “circular shopping platform,” which sounds oh-so-disruptive but is actually just a fancy way of describing what used to be relatively common only a few generations ago, when the milkman would come around delivering fresh milk in glass bottles and collecting the empties from the previous week.

Loop has updated this admittedly quaint-seeming idea for the modern era. A wide range of products from big-name personal-care, household, and food and beverage brands come to you in durable, reusable containers. When you’re finished with them, you can either ship the containers back to Loop or schedule a pickup. That triggers the next shipment to come your way. Once returned, your discards are sanitized and refilled with products to be sent out to another customer, posthaste.

Loop is still in the pilot stage; it will begin testing its model in the New York City and Paris markets this spring. One of the people behind it, Tom Szaky (CEO of TerraCycle, a company that specializes in recycling hard-to-recycle items) has cited the travesty of ocean plastics as a primary motivator in getting the new company off the ground. Brian Bushell, the founder and CEO of byHumankind, writes on the company’s website that the idea for his start-up came while he was on a small boat off the coast of Thailand, exploring “tiny, uninhabited islands, in an environment I’d expected to be untouched,” when his boat became surrounded by plastic waste. “I’d expect to see these things floating in Manhattan’s East River, I thought. But here?”

A big part of Bushell’s pitch to customers—beyond the quality of the products he’s selling—is the opportunity to keep five pounds of single-use plastic out of the waste stream every year, “just by getting ready in the morning.”

With their emphasis on refillables and circular shopping, byHumankind and Loop join a vanguard of young, forward-thinking companies that are building sustainability into their business models, rather than simply offering customers a “green option” or vowing to reduce the carbon footprints of their operations and supply chains. This movement also includes zero-waste, packaging-free grocery stores like Brooklyn’s Precycle or Idaho’s soon-to-open Roots Zero Waste Market, where customers bring their own containers and buy items loose or in bulk. This new wave of entrepreneurs are banking on the idea that consumers are sick and tired of feeling like they’re hastening the end of humanity every time they buy hair conditioner or yogurt.

Whether their hunch is correct remains to be seen. (Zero-waste groceries can prove to be a tough sell even in famously progressive cities like Austin, Texas.) But certain retailing and cultural phenomena—online shopping, direct-to-consumer delivery, improvements in storage and shipping technology, and a growing environmental awareness among millennials, whose proclivities guide the decisions of some of our biggest brands—are definitely converging in ways that make it easier to opt out of plastic packaging.

Today, sure, it’s just a noteworthy trend. But with the right timing and the right amount of public buy-in, today’s trend might actually become tomorrow’s industry standard.

Source: EcoWatch