Whole Foods is left behind in Amazon’s virus-fuelled boom

Bloomberg

With millions of Americans still sheltering in place and cooking their own meals, the grocery industry has been one of the few bright spots in an otherwise battered US economy. Unless, that is, you are Whole Foods Market, the upscale chain acquired three years ago by Amazon.com Inc.
Trips to Whole Foods in September were down 25% from a year earlier, according to Placer.ai, which tallies retail foot traffic from some 30 million mobile devices. Some of the decline is due to consumers consolidating shopping trips and buying more groceries online, but the traffic decline at Whole Foods is much steeper than at Walmart Inc, Kroger Co and Trader Joe’s.
Visits to Albertsons Cos, meanwhile, actually increased last month, compared with a year ago. And though Earnest Research estimates that Whole Foods sales (including online) rose by as much as 10% during the pandemic, some rivals are posting twice the gains.
“Everyone is buying more everywhere, but total customers are actually down for Whole Foods,” said Michael Maloof, who tracks consumer habits for Earnest Research. “Whole Foods is in a uniquely horrible place.”
Amazon doesn’t break out Whole Foods sales, so getting a complete picture of the chain’s travails is difficult. But few grocers were more awkwardly positioned for the pandemic, analysts say.
The stores were rarely a one-stop destination before the outbreak even for fans. The company expanded its prepared meals sections for office workers seeking lunch or dinner on the go, but now those customers are homebound. And Whole Foods shoppers who have time to visit stores often confront long lines and aisles crowded with gig workers paid to fetch online orders.
Meanwhile, despite expectations that the world’s largest e-commerce company would use Whole Foods to re-invent food shopping, Amazon has opted to open a separate chain called Amazon Fresh. Some analysts have even soured on the $13.7 billion acquisition. Bill Bishop, a longtime grocery industry consultant and founder of the consulting firm Brick meets Click, says the deal was probably well-thought out at the time but in retrospect was a “strategic error.”
In an emailed statement, a Whole Foods spokeswoman said: “Whole Foods Market continues to grow, and we strongly dispute this portrayal of the health of our business. In addition to offering a safe in-store shopping experience, we’re proud we’ve been able to rapidly expand grocery delivery and pickup to meet the needs of customers.”
Presented with the data points used in this story, she didn’t specify which, if any, were inaccurate reflections of the grocer’s business. The spokeswoman also declined to discuss the company’s sales performance. Chief Executive Officer John Mackey has said in recent interviews that sales of meats and other categories surged during the pandemic on buying from shoppers cooking at home. Co-founded in 1980 by Mackey in Austin, Texas, Whole Foods helped fuel the organic food movement. By stocking products shoppers couldn’t get anywhere else and setting high quality standards, the chain drew loyal fans and was able to command prices other retailers couldn’t—earning it the epithet “Whole Paycheck.”
The grocer shied away from a cookie-cutter approach to new stores, instilling a quirky, down-home vibe even as it grew to hundreds of locations through expansion and acquisitions.
But after rising interest in healthier food led mainstream grocers to stock organic items, Whole Foods struggled to keep its growth going.