News that Amazon is buying Whole Foods Market for US$13.7 billion probably did not make a big impact in the minds of prairie grain farmers busy monitoring for pests and spraying weeds.
However, it could create a food retail sector shake-up that would vibrate down the food chain.
The stock markets and business analysts were consumed by the news.
The word “transformative” turned up a lot in the news stories looking at the deal.
Share prices fell for most of the publicly traded companies that retail groceries, from global giant Walmart to Canada’s Loblaws and Sobeys. The market expects that profit margins will narrow even more as grocers compete not only among themselves but also face the force of nature that is Amazon.
With a market capitalization of $487.8 billion, Amazon is the world’s fourth biggest corporation and the world’s biggest retailer.
It is the leader among growing online shopping sites that threaten the survival of former retail giants such as Sears.
Will food retailing be any different?
The Whole Foods acquisition gives Amazon a network of almost 460 stores, mostly in North America. There are 13 of them in Canada. Whole Foods is not a major player in the big picture of North American food sales, but it is the dominant player in selling organic food to an upscale, youthful demographic.
Amazon has sold food for a while, but it has not been a big seller for the company.
Analysts think that Amazon-Whole Foods could make a bigger splash if it can harness Amazon’s ability to use technology and size to drive down costs and figure out how to home deliver produce and other fresh food.
It could also increase its presence in the fast growing field of pick-up and home delivered meals.
And all this is also reinforced by the growing legion of Amazon Prime subscribers, which from what I read is sort of a membership environment where users increasingly turn to Amazon to supply all of their needs.
If you are a grain or livestock producer, you’ll likely never sell directly to Amazon, but eventually you might feel the indirect effects of this deal.
Amazon’s effort to pressure suppliers for better deals could work back through the supply chain, resulting in lower prices paid to farmers.
If you are an organic produce farmer, then you could be tied a little closer and feel the effects more quickly and directly. But then again, maybe you would benefit if the Amazon-Whole Foods partnership can expand the organic market.
This deal also should be of interest to farmers already directly connected with consumers through farmers markets, on-farm stores, restaurant supply or community shared agriculture.
The Amazon-Whole Foods deal is designed in part to take advantage of two consumer trends — buying almost everything online and having it delivered, and growing interest in knowing how your food is grown.
This deal will likely spread these trends even further and faster. There could be opportunities for small producers to capture a niche part of it by adding in the local food, person-to-person connections that some consumers are also looking for.
You might not have the resources to home deliver, but as community-shared agriculture already shows, some consumers like the convenience of picking up a box of fresh food without having to trudge though the grocery aisles.