Will Amazon's purchase of Whole Foods impact ready meal manufacturers and distributors?

Amazon’s purchase of the Whole Foods grocery chain is sending shivers up the spines of the Australian food and grocery market. But should it? Will it impact the ready meals market in Australia?

Amazon is pretty good at shipping books around the world but books don’t come with the same needs as the movement of food. Books don’t have to be kept frozen below -18°C or refrigerated below 5°C. If the books get stuck somewhere for a couple of days the customer mayn’t be happy but at least the books won’t be off.

Shipping food, especially fresh and frozen food, is a fraught business. You can’t leave a card at the purchaser’s door letting them know that you called and they can pick up their food at the local post office. If you say you are going to deliver at a certain time that fits in with the purchaser’s schedule you have to deliver at that time.

USA Today claims Amazon’s move will be a “challenge for companies that deliver groceries such as Fresh Direct and Peapod, and ready-to-cook ingredients and recipes to customers’ doors, like Blue Apron and Sun Basket.”

However, in spite of 20 years of availability, online grocery purchases still only represent 2% of US grocery sales (and there is no reason to assume there is a higher uptake in Australia). Even though Amazon was responsible for 43% of all online sales in the US last year, this doesn’t mean they are equipped to rethink the entire process of food sourcing and distribution in an instant.

These issues must have been part of Amazon’s reasoning when it spent $18 million purchasing Whole Foods with its 460 retail stores spread across 42 US states. These sites will serve as distribution and pick-up places for online purchases and they will also serve as retail stores. Maybe Amazon realises that online isn’t going to suit the majority of consumers for a long time to come and that physical stores are not dead yet.

So why is the market in such a flutter? The answer is probably that Amazon entering the market is a harbinger of change rather than an immediate threat to the viability of the current food marketing regime.

As always with change, there will be those that take up the challenge and fly and those that refuse to adapt and flounder. It will be interesting to see how Amazon, with its “razor-thin margins”, delivers fresh and perishable food to the door in a timely manner without compromising the quality of the food.

Image credit: ©stock.adobe.com/au/alexbrylovhk