Amazon’s recent acquisition of Whole Foods won’t just change how some Americans shop for groceries. This new e-commerce-driven partnership — along with the growing consumer preference for fresh, wholesome foods it seeks to exploit — is already creating ripples up and down the food supply chain.
Consider this merger’s potential impact on the nation’s food manufacturers. Food processors tend to think big. Their systems are designed to process foods with long shelf-lives and in quantities large enough to distribute through a national food supply chain.
But study your local grocery store or meal delivery service, and you’ll find consumers are spending less on heavily processed, preservative-laden products, and more on locally grown organic produce and convenient, ready-to-eat dishes that are made up of ingredients whose names they can pronounce.
In the long run, this trend could spell trouble for companies accustomed to producing and maintaining large inventories of shelf-stable products. To remain competitive, many of these food processing companies will need to adapt their business models to fit this new food world.
That may require rightsizing their food manufacturing plants and operations, shifting production from a small number of “mega-factories” that make products for national distribution, to smaller, regional production facilities that produce smaller batches of preservative-free products that have been customized to regional tastes and preferences.
Changes to the food processing business model are not likely to stop there. After considering the Whole Foods-Amazon merger, for example, food companies may want to rethink their own supplier, customer and distribution relationships.
That could mean procuring more fresh, raw materials or choosing organic sources. Or it could lead to the design of more flexible, high-speed processing equipment that supports rapid product changeovers. It will almost certainly require food processors to gain greater visibility into seasonal and regional consumer preferences so they can produce products on demand.
As with any market disruption, these changes will not always be easy. But they will result in a food industry with smaller, more diverse inventories of high quality, wholesome products that consumers prefer to buy. And that’s good news for everyone.