We have long said that Grocery is one of the last areas of e-commerce penetration and although many have tried (Ocado for example) most have failed with a pure play e-commerce offering. This is mainly due to the complex nature of the supply chain and the fact that a large part of the product base is perishable.
We have followed a number of “foodtech” businesses for the last 5-10 years and competing with the integrated nature of traditional store based retail has been very hard.
The market view is that Whole Foods give Amazon access to both local distribution hubs (historically called stores) and a very integrated and unique supply chain. Whole Foods has a strong presence in North America and a few stores in the UK but has great coverage in the US in demographically richer neighbourhoods (Whole Paycheck).
But for FMCG brands the creation of Amazon as a retailer and a potential competitor will be an interesting area to watch. We suspect a number of brands may have to increase there own technology investment and this might be based on so called “acquihires” of struggling startup in the sector.
Good news for brands – but not fantastic news for investors who have paid high multiples to fuel the burn within a number of these companies.
Long term we think this is great for the consumer, great for Amazon shareholders and fantastic for brands that have well developed e-commerce capability – allowing them to leverage the investment that Amazon is making in this sector. Not great for Walmart though!