Post Acquisition, Whole Foods Makes Changes

|

If Amazon’s acquisition of Whole Foods Market was a marriage, as executives have referred to it in the past, then the two retailers are still in the honeymoon phase. Even so, post-nuptial changes are already evident: some are the product of Amazon’s guiding hands, others are the result of previously announced changes at the natural grocer.

Here are a few of the big changes brands should be paying attention to.

Global Gets Data Driven

With the shift in category management from the local, regional level to global, Whole Foods told suppliers at last month’s Expo East that categories would be more data-driven in order to allow regional teams to focus on customer experience and operations. As part of the shift, the retailer will provide a unified third-party merchandising plan for in-store execution, such as new shelf and category sets. The company will also centralize timelines chain-wide for new item launches, resets and promotions.

Under the new system, suppliers will be asked to pay for those third-party merchandising services. In the past, these tasks have in part been accomplished by brokers; company executives told suppliers that the role of brokers will be evolving, but remain important. Still, there’s a question of what impact paying both merchandisers and brokers will have on suppliers or on broker fees.

GMO Policy Gets Clarification

Whole Foods executives said that the company was still on target for a September 2018 deadline for GMO transparency initiatives during their meetings at Expo East. After this deadline, Whole Foods will insist that food and beverage brands that are not third-party verified as non-GMO or organic and contain “risk ingredients” declare on their packaging that they may contain genetically modified ingredients.

Brands that do contain a significant amount of a risk ingredient and do not want to carry the label can either seek non-GMO verification for the entire product or non GMO verification for only the risk ingredients within.

Risk ingredients include corn, soy, sugar beets, canola, cotton, alfalfa, zucchini, summer squash and papaya and any products made from their derivatives. If a product has less 0.9 percent of its weight derived from risk ingredients, it will not have to make the declarations.

Whole Foods will not require animal-based products to ensure that their livestock only received non-GMO feed. For example, a products with eggs in it and no risk ingredients will not be required to include a claim stating that they may include ingredients “produced with genetic engineering” regardless of animal feed.

To further clarify the new labeling regulations, the retailer recently released its fourth update of its GMO labeling policy.

One notable addition to this version is that products that are or “appear to be made” by Whole Foods cannot contain any ingredients that would require a GMO declaration and must be developed to avoid GMO ingredients. This will impact a wide range of products including private label, bulk, meat, seafoods, prepared foods, specialty, bakery and produce items.

If any of these items that may “appear to be made” by Whole Foods contains more risk ingredients than 0.9 percent of its weight, it must be certified non-GMO or organic in order to remain on shelves.

One thing Whole Foods will not accept on packaging is a QR code or phone number to find out if a product contains GMO items.

Demo Opportunities Shrinking

According to the Wall Street Journal, there may be a fewer samples available when consumers visit their local Whole Foods. The retailer has decided to put a stop to demos and sampling by outside brand representatives.

Many smaller brands have noted these sampling opportunities allow them to explain what are sometimes more complex products, such as puffed chickpea snacks, and conduct unofficial “focus groups” to gather consumer feedback on what is — or is not — working.

Whole Foods did not comment to the Journal about how, if at all, it plans to offer brands new ways to interact with consumers. Some regions previously have offered the option for brands to pay for in-store “culinary specialists” to demo their product. Right now, there are regional variations in safety standards, dress codes and sampling regulations.

A shift to regulating demos also has the potential to impact store marketing and events, as many locations often held demo-centric evenings such as “chocolate fest” and local brand nights.

One possible new model might come from the retailer’s smaller format 365 stores, which rolled out a demo program this past March. Under that program, brands must pay a $15 fee per demo and are only permitted to use demonstrators who are employed by the brand itself. Third party independent contractors or demo agencies are also not permitted. 365 stores have previously streamlined other aspects of demoing, such as standardizing supplies provided and auto-shipping product to stores before a demo.

SaveSave