Amazon + Whole Foods? It’s Not Working


I took plenty of heat back in June when I said the $13.7 billion Amazon-Whole Foods merger “would be a surprising setback for the internet giant.”

Looks like I was right.

The first cracks in the supposed synergies of these two very different companies are already starting to show.

Shoppers noticed the deteriorating quality of the fruit first. You can find plenty of posts like this one on social media:

I took plenty of heat back in June when I said the Amazon-Whole Foods merger “would be a surprising setback for the internet giant.” Looks like I was right.

(Via Twitter)


Of course, if you look hard enough, you can always find disgruntled people to complain loud and long about one thing or another. Maybe it’s just a one-off sort of thing?

But you can find signs elsewhere.

The Amazon-Whole Foods Merger & “Conventionalization”

For instance, according to, Whole Foods CEO John Mackey noted in a speech to industry insiders that the Amazon-Whole Foods merger has been challenging, while optimistically believing “I do think Amazon and Whole Foods are going to do major stuff together.”

Fair enough. But reading between the organic tea leaves, analysts at Barclays believe “Mackey’s comments could be an indication that integration is occurring at a slower-than-expected pace, or that his tenure at the combined entity could be short-lived.”

I’ll go a step further. It means both. I predicted these problems when the deal was announced in June:

Amazon is the company where data and ‘purposeful Darwinism’ reign. … By design, it’s a tough, unforgiving corporate environment. … Then there’s Whole Foods, where the company’s success has always focused on squishy, very un-Amazonian ideals — such as employee happiness and workplace satisfaction for its 91,000 employees.

Barclays recently sent a team of analysts into Whole Foods stores to make their own conclusions. They came up with this disturbing (for Amazon shareholders) trend: “the ‘conventionalization’ of Whole Foods is underway.”

In other words, forget the exclusive (and expensive) focus on organic. Sell the same food and beverage goods you can buy elsewhere (and which Amazon can buy cheaply in huge, bulk quantities).

The Barclays analysts made another interesting insight. Innovation — new foods, new packaging, unique products you can’t find elsewhere — is a big reason behind the rapid growth of chains like Trader Joe’s, and Whole Foods.

But what about now with the post-Amazon-Whole Foods merger version of the grocery chain, where low costs matter most?

“If Whole Foods pulls back on food innovation,” writes Barclays, “we believe it would represent an opportunity for the rest of the industry because innovation remains a traffic driver.”

Amazon vs. Wal-Mart

There’s a final point I want to make. Where’s the incredibly low prices Amazon promised?

According to the Gordon Haskett research firm, a basket of 110 items at a Whole Foods store in New Jersey was just 1.1% lower than when Amazon completed the merger with the grocery chain in August. All the PR stories about new low prices at Whole Foods don’t jibe with the new pricing data.

Amazon will have to do a lot better. And the pressure is on if it hopes to truly compete on the bricks-and-mortar front with Wal-Mart, which — as I pointed out in June as well — “has finally figured out how to sell stuff through the internet with Amazon-style numbers.”

In fact, the prices of the two companies’ stocks make that statement quite well.

I took plenty of heat back in June when I said the Amazon-Whole Foods merger “would be a surprising setback for the internet giant.” Looks like I was right.


Since June 16 (when the Amazon/Whole Foods deal was announced), Inc.’s stock (Nasdaq: AMZN) is up about 18% — while Wal-Mart Stores Inc.’s stock (NYSE: WMT) is up 30%.

The point being that…

  • Without “food innovation”…
  • Without reliably eye-catching displays of fresh fruit and veggies…
  • Without sharply lower prices…

The Whole Foods deal is looking more and more like a bust. Amazon could just as well have made a bulk real-estate deal to purchase clusters of shuttered grocery store properties around the country and achieved the same goal — a bricks-and-mortar national retail presence — at a lot less cost.

Kind regards,

Jeff L. Yastine

Editor, Total Wealth Insider

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  • Back in the early to mid-1990s, Whole Foods bought out, I think it was, 8 specialty stores in the Greater Boston area. The original chain was called Bread & Circus, started with only 30K and one store long before that. It was a VERY successful group of stores, and catered a LOT to the more “extreme” natural / organic natural food market, like me. (Although I was NOT as extreme as quite a few of the people I knew back then.) They were GREAT stores, because I was into stuff like unsweetened carob covered almonds and whole grain croissants as my worst forms of junk food, and some of the more unusual macrobiotic and other items.

    We were VERY concerned when Whole Foods came in, because we assumed they would “water down” the product lines at Bread & Circus. We were correct. Whole Foods became know to people like us as more of a “transition” store, for people just getting into the idea of natural / organic foods. Much of the stuff we liked at Bread & Circus disappeared. A few other stores popped up, as well as the revitalized Food Co-Ops, that partially filled what was lost when Bread & Circus was replaced by Whole Foods. Not that Whole Foods was “bad.” Just not as good as Bread & Circus.

    Over the years, Whole Foods has expanded it’s product line to have more of the stuff we had gotten used to at Bread & Circus, but not all the way. Too, I was living in Atlanta in the mid to later 90s, and the local Kroger store was developing a surprisingly good range of natural foods. That’s when Harris Teeter opened up, and amazed us with their innovations, including the several mini-cafes within the store with semi-exotic foods, which was VERY cool. —Never had to leave the place! — They never went the way of, say, Bread & Circus, but you COULD eat pretty clean and healthy.

    So, us “purists” had expected — SOME DAY — for MORE Bread & Circus type stores to pop up, but were disappointed. As the Krogers of the world, then Trader Joes, etc., showed up, they had “just enough” stuff to satisfy most people’s tastes, and Whole Foods took care of the “middle market.” Now, even Safeway and Fry’s provide much of what it takes to satisfy people like me to SOME degree, but only maybe 70 or 80%.

    I would STILL have to drive an hour and a half north to Prescott (I live in Phoenix now) to get a Scone made with whole grain spelt flour and similar stuff at the little privately owned specialty coffee & baked goods cafe up there, IF they are still even open. (I haven’t been to Prescott in YEARS. It’s a long way to go for a scone!) Maybe someone makes those down here in Metro Phoenix somewhere, but I’ve not found them.

    So, Bottom Line is, the Natural / Organic food market is STILL in its infancy, and a LONG way from what Gerald Celente predicted in his trends forecasting book, *Trends 2000.* We are inching the way there, but with a LOT of setbacks along the way, such as the current and unfortunate trend with Whole Foods. Maybe that’s why the CEO of Sprouts is doing so well? That store is pretty good, though up till now, even Whole Foods had stuff I could not get at Sprouts.

  • marc williams

    Also Giant is making a big push with their Nature’s Promise brand, which I love. No need to shop two stores for most items. I will say that Whole aFoods still wins the the meat department.

  • David

    This should be great for my compost pile, but rather expensive…don’t cha know?(thanks Highlandtown for the inspiration.)

  • Marga Doerr

    I have been in 2 maybe 3 Whole Food stores – am not an organic food nut, but eat healthy – it was before Amazon took over and I was totally underwhelmed. Over priced stuff, thought maybe they would have a decent protein bar LOL – huge amount of bars – not one of those to be found – all high in sugar and bad carbs

  • Marga Doerr

    BTW Mr. Lynn, I would eat those unsweetened carob covered almonds and whole grain croissants – haven’t seen any of those anywhere – wouldn’t have to be organic/natural for me even! LOL