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Whole Foods Announces New Merchandising Policy -- A Very Risky Departure from How It Has Conducted Business for Decades

There have been many stories since Amazon closed on its deal to acquire Whole Foods, such as prices going down, prices going back up, electronics being sold in the stores, and shelves being empty.

However, the one piece of news that could have the biggest impact is Whole Foods implementing a new merchandising policy which would charge brands doing over $300,000 in sales either 3% (for groceries) or 5% (for body care). Additionally, vendors can no longer do their own demos for free — they’ll be required to use and pay a Whole Foods-designated company to do them. Furthermore, brokers will no longer be allowed in the stores.

“It remains to be seen whether this new policy is a positive or a negative, and the company may see this as an opportunity to lower costs for shoppers,” said Michael Besancon, former Senior Global Vice-President of Purchasing, Distribution and Communications at Whole Foods.

“On the other hand, there is also concern how this impacts smaller brands. Historically, brokers have played an essential role in helping smaller brands scale from regional or local players to national ones. Yet, with brokers not being allowed in the stores to help merchandise products and to educate team members, smaller brands may face a more difficult path to becoming a household name across the country. Additionally, since small, independent brands are often responsible for the most unique and cutting-edge products, we as an industry have reason to be concerned that this new policy could hamper important innovation,” he concluded.

Other industry experts and organic food company executives that I spoke to, all of whom wished to remain anonymous because of their relationship with Whole Foods, said that manufacturers are pushing back against this new policy and are either saying ‘no’ to Whole Foods or offering a lower rate than 3%. They also expect fireworks at the supplier meeting at Expo West in March.

Additionally, I was informed that this was not a move driven by Amazon. Rather, it was something in the works well before Whole Foods was acquired.

The anger about this program is not limited to outside vendors. Sources have also been telling me that stores and regional vice presidents “hate this program and that there is real pushback internally.”

However, not everyone is upset about this new merchandising policy.

“It is great for us and makes the independent grocery shine. Not only do we love demos, but we love brokers. Assuming the broker is well-educated, it is the next best thing to having the manufacturer or owner come into the store and talk to the staff,” said Tony Antoci, CEO of Los Angeles-based Erewhon, widely regarded as the best organic market in the country.

Whole Foods is an iconic brand in America, and one of the reasons that it became so revered over the years was because it viewed small brands as true partners and did whatever it could to help promote and grow them.

In return, brands felt tremendous loyalty to Whole Foods and always sought to launch exclusive products with the grocer. Shoppers soon came to view Whole Foods as the store with the widest selection of both everyday and hard-to-find, innovative organic products.

The question now is whether this new merchandising policy will alienate vendors and employees to the point where the shopping experience gets compromised and pushes customers to go elsewhere, all with the goal of capturing a piece of that 3% margin.

What Whole Foods has been doing for decades is working, and changing this is an enormous risk.

As is, some shoppers are not thrilled at the prospect of their beloved market now owned by the world’s biggest online retailer.

“Since Amazon bought Whole Foods, our business is up 10%. Literally, within two weeks, we saw a huge uptick,” said Erewhon’s Tony Antoci.

(We reached out to Whole Foods for comment on this story and did not hear back. If we do get a response, we will update you in a future newsletter.)

Have a great day!

Max Goldberg, Founder

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This Week's Quick Hits

Quick Hits

* It appears that Michael Pollan’s The Omnivore’s Dilemma will soon become a movie, with the phenomenal Frances McDormand penning the screenplay.

* Congrats to long-time company executives Gero Leson and Mike Stacy, who were each promoted to Vice President at Dr. Bronner’s and played a key role in helping the company surge well past $100 million in 2017 revenues!

* And another congrats to organic baby food company Once Upon a Farm for receiving its B-Corp certification!

* Founder/CEO Minh Tsai and his Hodo Soy Beanery, an organic artisanal tofu company, will be hosting an event in San Francisco on February 5th called Tofu Evolved. These events always sell out, so get your tickets early.

* Here is my recap of Tofu Disrupt in NYC, which was truly an amazing night.

* There is now a cryptocurrency linked to the price of organic bananas in Laos called Bananacoins.

* Mendez Fuel, which sells its own pressed organic juice at its gas station in Miami, has opened the doors to its first upscale, stand-alone convenience store. Once the kitchen is built, it will be serving acai bowls, fruit and vegetable smoothies, and avocado toast topped with a tricolor vegan cream cheese spread.

* Want to hang out with Martha Stewart and take a trip to the Svalbard Global Seed Vault in Norway? Here’s how.

* The documentary called Knife Skills was just nominated for an Academy Award in the Documentary Short Subject category.

* The 40-minute film is about the opening of Edwins, a Cleveland restaurant that employs formerly incarcerated individuals who are beginning their careers in the restaurant industry.

* According to Anthony Bourdain, “Restaurants are for those of us who don’t, won’t, or can’t fit in elsewhere … Knife Skills is the compelling, funny, heartbreaking and thoroughly human story of one such place.”

* Here is the trailer, and it will be playing on January 29th at the Irvine Film Festival in Costa Mesa, CA

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