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Daily news and analysis about the food tech revolution

Whole Foods

Analysis: Here’s Why Amazon & Whole Foods Make Perfect Sense

Blockbuster news this morning: Amazon is acquiring Whole Foods for $13.7 billion.

Needless to say, this is a huge deal. My immediate thoughts are this:

This deal signifies Amazon’s entry into physical brick and mortar in a big way. The company, which has been toying around with future store concepts like its own bookstore and the Amazon Go grocery concept store in Seattle, is betting big on physical store formats in the future.

The company can no longer simply be called an online retailer. They are now truly omnichannel.

This gives Amazon a flagship store network for food (and other products) for pickup and delivery in markets around the country. The company, which has been building out its distributed pickup locker network in places like 7-11 around the country, as well as slowly expanding the reach of Amazon Fresh, now has its own nationwide network of storefronts that they can leverage in the rollout of both.

The combined company also provides an opportunity to experiment with loyalty program benefits for the company’s Amazon Prime members. Imagine Whole Foods promotions for Amazon Prime members and even having special shopping hours for members of its subscription-loyalty club. Amazon can make finally take its loyalty program and extend physical retail benefits, not unlike members of Costco or other membership stores have been doing for years.

Perhaps most importantly, the integration of Whole Foods provides the perfect format for Amazon’s future-forward shopping concepts that they’ve been experimenting with in their Amazon Go concept store in Seattle. While I don’t see Whole Foods going cashier-less anytime soon, I do think IoT-powered shopping could ease buyer friction in the purchasing process. Expect Whole Foods to become sensor-packed stores that analyze and understand their clients better than anyone. I also expect Amazon to integrate its own technologies such as Alexa into the shopping experience and even find ways to promote its own Amazon replenishment platform Dash in-store.

Of course, it goes without saying the Whole Foods customer is not the everyman, mass-market customer. The company, which pioneered the organic grocery movement in the early 1980s, attracts a high-income crowd that is willing to pay a premium for products. It’s not the Safeway or Target customer. That said, this is exactly the type of customer that already probably spends lots of money on Amazon.

It’s a good fit.

Last point: I think this deal is an admission by Amazon that continued high-growth is dependent on further expansion into physical brick and mortar. While online commerce will no doubt continue to grow, after spending a decade experimenting with Amazon Fresh, the company has learned that getting greater wallet share in areas like fresh produce and grocery requires physical store fronts, no matter how much Amazon spends on things like drone delivery.

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You Can Now Drink Juicero Juice At Whole Foods For $5 A Pop

If four hundred bucks is still a little steep for you get into the Juicero business, don’t worry: if you live in southern California, you can now head down to the local Whole Foods and throw down some Green Zing for five bucks a glass. The two companies announced this week that Juicero cold-pressed juice will be available at 11 locations across southern California.

Whole Foods is a perfect match for Juicero. The food retailer’s high-income shoppers expect to pay a premium for healthy and fresh food, and $5 a glass is a bargain compared to what you pay at your local juice bar.

For Juicero, this is just another move further into the pro market. As I wrote last June, the company has been finding early success in the pro market ever since the launch of the cold press juicer, in large part because Juicero provides a way for on-site pressing without the huge cost of a professional presser or having to put a giant machine in a space-constrained kitchen.

The company started its relationship with Whole Foods last spring when the food retailer launched in Silverlake, California. Under this new expansion, each location will feature four to seven juice blends and from one to three Juicero machines. Consumers will insert their own packs and pour their own juices in the store.

What strikes me most about this announcement is the pricing. It’s unusual that a price at retail would be lower than that for the home consumer, but that’s exactly what we have with this new announcement. A glass of juice at Whole Foods will go for $5 vs. $7 per pack for the Juicero home consumer.  Normally retail pricing is higher since the store has to add in its own margin. My guess is Whole Foods made the lower price a requirement of doing business and Juicero complied.

Lower pricing is a trend lately for Juicero, which dropped the price of the juicer to $399 (from $699) a couple months ago. The company’s new CEO, Jeff Dunn, comes from the high-volume packaged good food market (Coca Cola and Campbells) and looks like they are trying to push down the gas pedal on Juicero’s growth.

The Year in Food Delivery

Despite a distinct cooling off of investment in the food delivery space this year, some big names like Uber, Google, and David Chang threw their hats in the ring.

That’s because the online food delivery market is estimated around $210 billion, with companies like FreshDirect raising $189 million in the past 12 months. It’s become such a pervasive part of our way of life that Google even added a food-delivery shortcut to Maps. And there are plenty of food-delivery crowdfunding projects to go around.

But enough with the numbers. Here are the highlights in this space over the past 12 months.

More Big Players Joined the Party

This year everyone wanted a piece of the pie. Google started to ship fresh food to customers in California through Google Express. Instacart and the Food Network launched a meal-kit delivery service, and Square acquired startup Maine Line Delivery in Philadelphia to boost Caviar. Meanwhile Facebook and Foursquare made it easier to order food from within their apps through Delivery.com.

NYC darling chef David Chang decided to blow up the entire idea of a nice restaurant by launching Ando, a restaurant that only does deliveries, and he raised the bar on delivery food everywhere by launching Maple, his own delivery service that promises a daily delicious menu.

Plus, where would the year be without a few gimmicks? Taco Bell and Whole Foods both came up with ChatBots that help you order food or suggest recipes, respectively, solely through the power of emojis. And Domino’s will now let you order pizza with one tap on your Apple Watch.

The Year of UberEats

So far I haven’t mentioned the biggest player, though: Uber. The company has had quite the year in food delivery. It shut down Instant Delivery in New York City, then launched UberEats in both the U.S. and London. Next UberEats drivers staged protests over the way the pay structure has been changed, and in November a courier filed a lawsuit against the company for missing food delivery tips. Yikes.

All of this commotion from big names and turmoil within UberEats suggest that the food delivery space is still young enough that no one has solved some of the primary problems within it. Companies are grabbing on to any stronghold they see (emojis! self-driving trucks! drones! more drones!), without regard to the longevity of the solution. Uber has faced the brunt of this fast-paced growth, but we expect to see more struggles in the coming years for other players as well.

Eat Local

This year the quest to eat healthily expanded even more into food delivery. Whole Foods hinted at a “meal solution spectrum” with some sort of delivery component in the future. Good Eggs, which many thought was defunct by this point, rose from the ashes with a $15 million round of funding to help it deliver local, quality food.

And Amazon, never one to be shown up, expanded its Amazon Fresh program to Boston, among other major cities. The difference here is that Boston customers can shop from local markets, a feature that we imagine will be implemented elsewhere if it’s successful in Beantown.

You Say Potato, I Say Share Economy

In such a young and moneyed space, different business models are flying around faster than those drones I mentioned earlier.

Some want to deliver fresh ingredients to customers to help simplify cooking at home. Juicero, for example, delivers prepackaged ingredients for green juice, made in its blender that doesn’t even require cleaning. Similarly, Raised Real wants to deliver ingredients for homemade baby food, thereby making it that much easier to make your baby’s food from scratch (sounds ambitious to me).

Speaking of raising babies and tapping new markets, Drizly raised $15 million for its liquor delivery service, among other parts of its ecommerce model. And DoorDash added alcohol to its food delivery options in California (what about the rest of us?!).

Meanwhile Foodhini calls itself a “for profit social enterprise” and delivers ethnic food made by immigrant chefs: Foodhini and the chefs each receive $2.50 from each meal, after costs.

And BringMe wants to out-Uber Uber by combining delivery with the share economy in Fairfax, VA, enlisting regular folks to deliver food as “bringers.” There are already a few models out there like this, such as Favor in Texas and Tennessee, and we expect to see more too.

Of course, while all of these business models are innovative and interesting, none of them beat the ultimate and original delivery food: pizza.

Whole Foods Gets Into Food Tech With ChatBot And Meal Kits

Shopping at Whole Foods is going to get a little bit easier with some new expansions into food tech. The natural grocery chain unveiled a new guided recipe integration with Facebook messenger designed to make grocery shopping and meal planning easier.

ChatBot is Whole Foods’ first foray into the world of AI, but not into recipes themselves. For years the company published printed booklets, free to any customer, with pages of cooking ideas and suggestions based on the season and time of year. ChatBot is like a digital, smart version of those leaflets, responding to queries for recipes in Facebook Messenger with suggested links.

And the best part? You don’t even have to use words – ChatBot recognizes food emojis and throws out ideas based purely on pictures. Of course, beyond fruit, pizza and other random fast food items, you will have to inevitably use text if you want real help building your dinner plan for the week.

Whole Foods executive Jeff Jenkins told Venture Beat, “we are living in the ‘expectation economy,’ where consumers expect to have information at their fingertips, and we want to keep innovating to meet our customers where they are.”

In a quieter move following the ChatBot launch, Whole Foods hinted in their third quarter investment call that meal delivery kits is a strong area of interest and a product they plan to introduce in the future. Initially citing meal kit popularity as a point of competition for the company, Ken Meyers, Executive Vice President of Operations later stated that they are committed to the category and plan to reveal a full strategy down the line.

Meyers elaborated, “…with the creation of our culinary team led by Tien Ho, he’s now put together a really great group of leaders for us in the company. And it’s part of what we’re looking at with what we call our meal solution spectrum, which we’re really excited about because it’s going to address all aspects in which we want to bring food to our customers.”

It’s clear that traditional grocery stores are facing disruption from the food tech space and the increased investment in startups and non-traditional systems. With meal delivery on the rise and an increased desire for convenience, affordability and simplicity, it’s likely we’ll continue to see more big chain grocers using technology to bring customers through their doors.