Amazon sells three books by the CEO of Whole Foods, John Mackey. Now, Mackey is using his most creative communications skills to sell the Whole Foods team on his latest business endeavor — the pending acquisition of the company by Amazon.
He’s got plenty of good material. Amazon’s $13.7 billion deal to acquire Whole Foods will no doubt alter the grocery food scene. Industry observers have been discussing the many ways the merger can boost Amazon’s food offerings while improving Whole Foods’ data insights.
At a town hall meeting before employees, Mackey promoted the deal with much enthusiasm, comparing it to the culmination of a whirlwind romance (just about six weeks) that will lead to a healthy marriage.
“They’re the perfect company for us. There’s no better company in the entire world for Whole Foods Market than this company right here. We just hit the lottery, gang. This is gonna be so incredibly wonderful.”
But the deal was also formed incredibly fast. On a highly practical level, there are many areas the two teams apparently have much to figure out.
1. Culture shock
Whole Foods employees should expect change to their culture after the deal is final, Mackey told them at the town hall meeting. “It’s inevitable. But it doesn’t necessarily mean it’s a bad thing. We’re going to evolve.” A key element of the Whole Foods culture is morale, which is supported by generous compensation, including stock options. Many workers asked about benefits, PTO and culture. “It’s too early to talk about how benefits and compensation may sync up or how quickly. That’s a very important cultural value. I do think, over time, things will evolve at Whole Foods,” Mackey said. He added that Whole Foods workers could be presented professional opportunities with Amazon they might not have had with the natural grocer. “As the companies are integrated, there’ll be opportunities for many of you, if you are interested in them, probably workin’ for … Amazon.”
2. Sprouts doubt
Amazon, through its Prime Now business, has a grocery-ordering partnership with Sprouts Farmers Market, a Whole Foods competitor. That partnership, through which Amazon Prime Now provides digital grocery ordering and delivery services for 10 Sprouts stores, is planned to expand twofold in 2017 and further in 2018, according to a story in Supermarket News, which quotes Bradley Lukow, CFO of the Phoenix-based retailer. Lukow said the Amazon team told him it is “business as usual,” but acknowledged it’s a bit early to predict. He did say Sprout negotiated terms in its contract and was “very clear in the contract that should either party decide to end the relationship there is a long transition period to give ample time to redirect to another platform.”
3. Rewards are a-rollin’
In its most recent quarterly report, Whole Foods said it planned to roll out its tested rewards program to all U.S. stores by the end of 2017. The new program combines elements of Whole Foods’ My 365 Rewards and pilot programs, but it’s relatively young and learning. The Amazon Prime membership program, with an estimated 80 million members just in the United States, is capable of collecting enough high-level customer insights to make a small meal of the Whole Foods program. Further, an estimated 62% of Whole Foods shoppers are also members of Amazon Prime, according to The Wall Street Journal. The Whole Foods rewards initiative could possibly be absorbed into the Prime platform, with lots of benefits for both parties as Amazon could glean insights about the habits of in-store shoppers. The trick will be avoiding confusion, especially for early-adopting shoppers.
4. Makes naturals mainstream
During the town meeting to discuss the Amazon deal, both Whole Foods and Amazon executives assured employees that the quality standards of Whole Foods would not change. “We’ve been assured,” CEO Mackey told gatherers. Jeff Wilke, Amazon’s CEO of Worldwide Consumer, added, “I think it would be crazy to change them.” However, making all-natural and organic foods so accessible will transform the industry from niche to mainstream — meaning less exclusive. And that inevitably will open the door to questions about quality. Amazon could use its technological strength, however, to communicate the quality, sourcing and care of foods provided by Whole Foods.
5. The CEO question
Mackey plans to remain at the helm of Whole Foods after the merger, and as CEO will apparently work most closely with Wilke, but Amazon CEO Jeff Bezos oversees all of them. Bezos has been described as a highly competitive risk-taker, while Mackey is known as a conscious capitalist. Mackey, in selling Whole Foods, is attempting to be freed from a group of Wall Street investors who are pressuring his company on performance. Some reports indicate Amazon is a safer option than another grocery chain that would likely focus on cutting costs and improving the margins. However, Bezos could very likely want to see Whole Foods more competitive on price, especially if other supermarkets further adopt or are acquired by digital sales.
In closing his town hall meeting, Mackey told employees that Whole Foods would be a “far, far better company a year from now than we are today.” In five years, he said, employees should buckle up because it will be “utterly incredible.”
“And it’s gonna be crazy. And it’s gonna be wild. And it’s gonna be great opportunities for the people in this room.”
Still to be seen is whether it will be a natural fit for the consumer.