Whole Foods and Instacart end partnership, 56 workers let go

Whole Foods and Instacart announced earlier this month that the two companies have "mutually agreed" to end their delivery services partnership, effective May 15. As a result, 56 Philadelphia-area workers have been laid off.

The end of the Whole Foods - Instacart relationship did not come as a surprise to industry analysts, many of whom predicted the change since Amazon purchased Whole Foods in 2017. Whole Foods currently offers Prime Now, a one- and two-hour delivery service in more than 60 U.S. cities, including Philadelphia.

Instacart remains a strong presence in the Philadelphia market, as it has relationships with Reading Terminal Market, CVS, Aldi, Sprouts Farmers Market, Sam's Club, Wegmans, Acme, and Costco. Overall, the company is in 5,500 cities and delivers from nearly 20,000 stores.

"The U.S. is nearly a $1 trillion grocery market, and last year we saw almost every major grocer in North America bring their delivery business online in a significant way," said Instacart CEO Apoorva Mehta in a statement last year. "We believe we're in the early stages of a massive shift in the way people buy groceries, and we expect that one in five Americans will be shopping for their groceries online in the next five years."

Amazon reportedly to launch supermarket business; Philly in the mix

Amazon plans to launch a new retail grocery business, according to a report in The Wall Street Journal. The report stated that Amazon already plans to open a grocery store in Los Angeles - possibly before the end of this year - and has signed leases to open two more in early 2020.

In addition, the company is in discussions to open grocery stores at shopping centers in Philadelphia, San Francisco, Seattle, Chicago and Washington, D.C. The Journal also reports that Amazon is considering potential acquisitions of existing small-to-medium size grocery chains.

"I would speculate this is a traditional grocery play that leverages the best of Amazon technology and shopper insight," said Danny Silverman, CMO at Edge by Ascential. "As Amazon continues to look for ways to capture the last mile through physical retail, they need to test and find propositions that speak to different shopper segments. Whole Foods is a relatively narrow proposition, (Amazon) Go is small footprint and (Amazon) Fresh is delivery-only. A more traditional grocery play would cover critical gaps in their current model."

Price comparison finds Whole Foods and Acme as most expensive in Greater Philly

A December story on Philly.com reported the findings of a Consumers' Checkbook study that compared prices of 19 grocery stores in the region. The lowest prices? Walmart. The highest? Whole Foods.

"When Amazon purchased Whole Foods last year, many consumers were excited by the prospect of paying Amazon-like prices for Whole Foods-quality products," said Checkbook Executive Editor Kevin Brasler. "But we're not there quite yet."

Checkbook staff members checked prices on 154 common items, and they surveyed thousands of consumers to assess the quality of the products and services offered at the stores. Although Whole Foods scored poorly on price, it was one of the highest rated grocers.

Unfortunately for Acme, it was not only one of the highest-priced grocery chains, but it was also one of the lowest rated. Only Whole Foods was more expensive.

The highest rated store in the region was Wegmans, and their prices came in at three percent below average.

No plans for more Whole Foods 365 stores

Whole Foods announced last month that the company will not open any more Whole Foods 365 stores, but the 12 existing stores will remain in business.

The smaller 365 stores were launched in 2016 and featured Whole Foods private-label products in an attempt to lure customers who wanted to avoid the full-sized stores, also known at the time as "whole paycheck." However, since Amazon's acquisition of the company, many of the same private-label brands have become available in the regular stores.

Instacart and Whole Foods to end partnership

Instacart said earlier this month that it will "wind down" its nearly five-year old partnership with Whole Foods. Instacart plans to lay off 243 of its 1,415 Whole Foods personal shoppers. However, the company said it expects to place more than 75% of its affected personal shoppers in similar jobs at other retailers in their area.

Industry experts had anticipated this move ever since Amazon purchased Whole Foods in 2017. As of June 2018, all Whole Foods stores in the U.S. were connected to Amazon Prime, and Prime Now delivery is currently available at Whole Foods stores in 63 cities.  In addition, Prime Now Pickup is offered at stores in 22 markets.

Despite losing the Whole Foods account, Instacart continues to expand, and currently works with more than 300 retailers. The click-and-collect Instacart Pickup program is expected to rollout soon to nearly 200 grocery stores in 25 metro markets.

Study reveals that Whole Foods' prices have not improved under Amazon

A study conducted by Senior Analyst Chuck Grom from Gordon Haskett in New York found that prices at Whole Foods haven't changed much in the year since it was purchased, despite Amazon's promise of lower prices.

As published in a September story by Forbes.com, in seven pricing studies of a basket of 108 items over the course of a year following the acquisition, Grom found that the basket's aggregate price was just 0.8% below the price before the acquisition was completed. In addition, compared with Whole Foods' first round of price cuts in the Fall of 2017, the basket price actually inched up 1.3%.

Whole Foods to finally open in Newtown Square, PA

Long after the Whole Foods building was constructed at Ellis Preserve in Newtown Square, PA, it was announced that the store would open in January. Steve Spaeder, from Ellis Preserve developer Equus Capital Partners, said Amazon's purchase of Whole Foods delayed the opening by a year and a half.

Study shows that consumers still prefer visiting supermarkets for groceries

Despite all the hype around online ordering and delivery services, a recent study conducted by TABS Analytics found that conventional supermarkets and Walmart are overwhelmingly the top destinations for regular grocery shopping.

Of the 1,000 U.S. adults surveyed, 75% said traditional grocery stores were the retail venues they regularly visited to buy food and beverages (more than six times per month), and 57% cited Walmart.

However, compared to last year, 2% fewer people named supermarkets and Walmart as the places they regularly shop for food and beverages, and 2% - 4% more customers named dollar stores, drug stores and discount grocery stores. Target, Trader Joe's and Whole Foods saw gains as well.

Just one in six consumers said they regularly shopped online for groceries.

Whole Foods taking a small bite out of Trader Joe's traffic

In the past year, Whole Foods has increased foot traffic at the expense of Trader Joe's, Walgreen's and Dollar Tree, according to Sense360, a California-based company that tracks location data from millions of smartphone users. The data covers Whole Foods locations that are within a mile of competing stores.

In addition, the number of shoppers who visited a Whole Foods at least six times in the past year increased to 11 percent in August as compared to 9 percent a year earlier, according to surveys by consumer products research company Tabs Analytics.

As for the competition for grocery dollars between Amazon / Whole Foods and Walmart, a former Amazon executive said that Amazon is "willing to experiment and be totally misunderstood for long periods of time. Walmart is built to deliver pallets to 4,000 stores and Amazon is built to deliver packages to millions of homes. Who do you want to bet on: the pallet people or the package people?"

United Natural Foods to acquire Supervalu

United Natural Foods announced that it plans to acquire Supervalu for $2.9 billion in cash. According to Supermarket News, the deal would create a large, diverse food distributor serving traditional grocery stores via Supervalu, and natural/organic product retailers though United Natural Foods, whose primary customer is Whole Foods.

The acquisition is expected to result in Supervalu's exit from the grocery retail business. Supervalu operates 114 supermarkets under the Cub Foods, Hornbacher's and Shoppers banners. Save-A-Lot had been owned by Supervalu until 2016 when it was acquired by Onex Corporation.

In recent years Supervalu has struggled to compete with larger grocery companies and online food retailers, and as a result has stepped up its wholesale operations. Wholesaling now accounts for 78% of total sales, up from about 44% two years ago. The company's wholesale arm serves a network of 3,437 stores.

The deal is expected to close in the fourth quarter of this year.

Amazon launches 30-minute curbside pickup at Whole Foods

Amazon announced earlier this month that it has launched a new curbside pickup service for Amazon Prime members at select Whole Foods stores. The service is currently available in Sacramento, CA and Virginia Beach, VA, and Amazon plans to expand it to other cities later this year.

Through the service, customers can place orders via Amazon's Prime Now app and have their groceries loaded into their car when they arrive at Whole Foods. Pick-up in an hour is free for orders of $35 or more, and $1.99 on orders less than $35. A 30-minute window is available for $4.99 with no minimum order.

Amazon also announced that in markets served by Prime Now, Prime customers can order from Whole Foods using Amazon Echo smart speakers and have the items delivered within two hours.

Amazon brings Whole Foods into the mix for Prime Day

Amazon announced earlier this week that it plans to offer Prime customers $10 to spend on Amazon for Prime Day when they make a purchase of $10 or more at Whole Foods between July 11 and 17. Prime Day begins at 3:00 pm on July 16 and runs through July 17.

Here's how it works. Once a Prime member gathers up at least $10 worth of Whole Foods products, the member must then scan her Prime code in the Whole Foods or Amazon app at checkout. A $10 credit will then be applied to her Amazon account for use on Prime Day. A linked phone number can also be provided at checkout in lieu of the Whole Foods or Amazon app.

Whole Foods is involved in other Prime Day offers as well, including discounts on grocery delivery through Prime Now, and double rewards for eligible Prime members when they use their Prime Rewards Visa card.

Certain Prime member savings and benefits became available at all U.S. Whole Foods locations in late June.

Amazon adding Prime perks at Whole Foods

After several weeks of speculation, the news broker earlier this month that Amazon is planning new Whole Foods benefits for its Prime members. According to a CNBC report, "the new perks will bring the might of Amazon's membership program to the grocery industry, folding Whole Foods into a network other grocers are struggling to compete with."

The report also stated that about 75 percent of Whole Foods shoppers are Amazon Prime members, but less than 20 percent of Amazon Prime members shop at Whole Foods.

Sources told CNBC that Whole Foods will begin offering Prime members an additional 10 percent off of already discounted products. The discount would be in addition to perks that have already been rolled out, including free delivery of Whole Foods products to Prime members in certain locations, 5 percent cash back when members use the Prime Visa rewards card at Whole Foods stores, and other exclusive member deals.

The news of these new perks has come at nearly the same time Amazon announced a $20 annual fee increase for Prime membership, and a couple weeks after Whole Foods announced the end of its loyalty program.

For food retailers, the new perks turn Whole Foods into a more formidable competitor, expanding its reach well beyond its 400 store footprint and combating the grocer's major weakness - high prices.

Amazon considering larger Whole Foods stores to aid storage and distribution efforts

A recent report stated that Amazon "is betting on its online delivery business by investing in bigger Whole Foods Market locations across the U.S."

These larger Whole Foods stores (50,000 - 80,000 SF, according to a Bloomberg report) would include storage facilities that could hold electronics, books and fitness gear from Amazon.com. It's unclear at this time whether the extra space would be used solely as a distribution center, or whether customers would be allowed to shop there. What is clear is that the move is meant to consolidate business operations and provide for faster delivery to customers.

Markets with large numbers of Amazon Prime subscribers are the prime targets for the larger Whole Foods stores.

Some reports have stated that Amazon may be interested in Toys R Us and Babies R Us stores, which could be used for Amazon showrooms or be used as distribution centers, but the list of bidders for the initial group of soon-to-be-vacant stores did not include Amazon.

Investments in grocery-anchored centers grew in 2017

Investments in grocery-anchored shopping centers grew by 5.3% last year compared to 2016, according to a report issued by Chicago-based Jones Lang Lasalle (JLL). The increase makes the grocery-anchored segment one of the few retail sectors to see real growth.

The report also stated that grocery store openings declined by 29% in 2017, with several retailers cutting back on expansion plans and others shutting stores as they attempted to avoid bankruptcy.

"Grocery is considered to have a moat around it to defend against e-commerce, and because of that, these assets are seen by retail property investors as a safe investment," according to JLL.

A Supermarket News article points out investing in supermarket-anchored centers is not 100% safe, as Amazon and other e-commerce firms make inroads into the market. As a result, many shopping centers run the risk of dying, like their regional mall counterparts anchored by weak department stores.

Tops Friendly Markets (upstate New York) filed for bankruptcy last month, and Southeastern Grocers (Bi-Lo, Winn-Dixie, Harveys) may file this month. A&P, once a major player in the grocery industry, filed for bankruptcy and liquidated in 2015.

Not surprisingly, shopping centers anchored by strong operators like Whole Foods, Sprouts, Trader Joe's, Kroger, ShopRite, Wegmans and Publix are among those that have the greatest investment potential.

Amazon introduces home delivery from Whole Foods

On Thursday Amazon introduced free two-hour delivery of certain Whole Foods Market items between the hours of 8am and 10pm in select zip codes in Austin, Cincinnati, Dallas and Virginia Beach. Orders can be made via primenow.com or the Prime Now app.

Amazon expects to expand the service across the U.S. later this year.

According to Amazon, Prime customers can shop for thousands of Whole Foods items, including produce, bakery, dairy, meat, seafood, floral and everyday groceries. Select alcohol is also available for delivery. Prime members receive two-hour delivery for free, and "ultra-fast" delivery within one hour for $7.99 on orders of $35 or more.

Many traditional supermarkets already offer home delivery services. Ahold (Giant, Stop & Shop) was one of the originators with Peapod, ShopRite offers delivery provided by individual stores, and Acme partnered with Instacart earlier this year to delivery orders "in as little as two hours."

Sprouts willing to acquire or be acquired

Sprouts CEO Amin Maredia said earlier this month that the company is open to acquisition talks, and at the same time is open to purchasing another business.

"This is an interesting time to be looking at M&A from both perspectives," said Maredia. "There's certainly one element we can control, which is looking for interesting opportunities that would fit well in our portfolio. The second is to the extent we get a gesture, we'll put our fiduciary hat on and look at the Sprouts brand, and evaluate it and do the right thing for shareholders."

Sprouts is seemingly on a crash course with Amazon, which since its Whole Foods acquisition has promised to make organic products more affordable. However, Maredia says Sprouts' sales have accelerated since Whole Foods started discounting certain products.

For now, Sprouts main focus is on conventional grocers. Maredia believes most grocery stores have not kept up with the consumer. And although some conventional grocery stores (Kroger, for example) have slowed growth, Sprouts plans to expand by about 30 stores next year, with the goal of eventually increasing from 285 to 1,200 stores.

The company's plan is to fuel its growth by leveraging its advantages in fresh foods (which account for about 25% of their total sales) while investing in private label, technology and an enhanced deli offering.

Whole Foods to open soon in Exton

West Whiteland Township Manager Mimi Gleason said Whole Foods is on schedule to open at PREIT's Exton Square Mall in January. Although Whole Foods has not confirmed an opening date, company representatives appeared at a late October Board of Supervisors meeting and received approval for the transfer of a liquor license.

In addition, Whole Foods spokesperson Rachel Dean Wilson said they are now looking for about "150 passionate, food-focused individuals to fill positions across departments ranging from cashier to meat cutter to cake decorator."

The store, which has been built on the site of a former Kmart facing Route 100, will have a full bar for those sitting at the pub or the rooftop terrace, according to Gleason.

A Whole Foods store has also been constructed in the Ellis Preserve development in Newtown Square, PA, but no opening date has been announced.

Supermarkets in malls proving to be a win-win

Here in Greater Philadelphia, we are getting used to having supermarkets at the mall (Wegmans in Montgomeryville, Whole Foods in Plymouth Meeting, Sprouts coming to Moorestown...), but it's still a new concept in many parts of the county. Industry analysts believe we will see several more supermarkets lease space in malls in the coming years.

"With the fast-paced nature of America, shoppers want to be as efficient as possible when running errands," said Displaydata Marketing Director Paul Milner. "Grocery stores in malls could give Americans the benefit of a one-stop shop for all of their needs... This transition is another step towards providing shoppers with the advanced and friction-less shopping experience that the American consumer demands."

Milner also sees supermarkets in malls as a winning proposition for landlords. Mall owners, often stuck with a declining retail property, can transform their asset into a destination allowing consumers to complete all of their shopping in one place. He warns, though, that parking could be a deterrent if shoppers have to carry their groceries too far.

Amazon/Whole Foods working on new formats; AmazonFresh cuts service

Amazon revealed during its third quarter earnings conference call that it is working with Whole Foods executives on new grocery store formats.

"There will be a lot of work together between Prime Now, AmazonFresh, Whole Foods, Whole Foods products on the Amazon site, (and) Amazon Lockers at the Whole Foods stores," according to Amazon CFO Brian Olsavon.

Olsavon also said the company plans to open more Whole Foods stores.

Meanwhile, Whole Foods said last week that it will add in-store pop-up shops in select stores that feature technology products from Amazon. The stores will also provide information about Amazon's Prime membership and Prime Video offerings.

AmazonFresh

Amazon announced earlier this month that it would discontinue its AmazonFresh grocery delivery service to select zip codes around the country. Customers in several states, including New York, Pennsylvania, New Jersey and Delaware, have reported receiving notices that the service would soon end.

According to a Planet Retail RNG analyst, Amazon's Prime Now service, which provides grocery delivery in under two hours, appears to be more successful than AmazonFresh, which has been economically challenging to operate.

"There is some internal rationalization happening for Amazon in grocery as it integrates the Whole Foods stores into its business," said the analyst. "While Instacart does have almost three-and-a-half years remaining on an agreement with Whole Foods to be its exclusive perishables delivery provider, I think Amazon long term will take this over, delivering groceries from Whole Foods stores using its own Prime Now program."

"Amazon's move today away from the AmazonFresh program is a clear second step in integrating Whole Foods, with many more moves to come," said Spencer Millerberg, CEO of One Click Retail. "AmazonFresh on its own has not gained sufficient momentum in 10 years since it launched, while Whole Foods items on Amazon have been growing around 8% per week since launch."

Analysts agree that Amazon will likely expand its e-commerce efforts in areas where Whole Foods operates in order to leverage the retailer's brick-and-mortar presence.