Food Revolution on Aisle Seven: Amazon Will Be a Game Changer
Originally published in the Seattle Times, September 1, 2017.
We are in the age of mass personalization. With its bid for Whole Foods, Amazon is bringing mass personalization to the food system and upsetting the order that has reigned since the end of World War II.
WHEN Netflix was sputtering five years ago, and we stopped having DVD players in our computers, I’ll admit to being skeptical of this upstart making its own TV shows — but Netflix wasn’t.
The company had the data that showed people watch anything with Kevin Spacey, had a tendency for binge-watching and — voilà! — along came “House of Cards,” the first show to be released as an entire season. Netflix knew that people search for quirky dark comedies with strong female leads and — pow! — along comes “Orange is the New Black.”
It should not be a surprise, then, that Amazon followed suit with its own programming, which turns out to be successful with the same level of scientific predictability.
The great technological opportunity of our time is combining highly personalized services with unlimited scale.
The great technological opportunity of our time is combining highly personalized services with unlimited scale. If I look on Facebook, Instagram or Twitter, I see a curated list of news and updates (and advertising) that is all about me. Uber provides everyone’s private driver. Amazon helps complete my online order with suggestions of exactly what I ought to get based on what else is in my shopping cart.
We are in the age of mass personalization. And with its bid for Whole Foods, Amazon is bringing mass personalization to the food system and profoundly upsetting the order that has reigned since the end of World War II.
Since the war, our food policy, reflected in the federal farm bill, has been to keep food abundant affordable and safe. In the words of Greg Page, former CEO of Cargill, the U.S. federal government ensures there is enough food at the price of just $1 for every person on Earth.
This is a food policy focused on production, in particular, of calories and protein (think corn for ingredients, wheat for bread, soy for livestock feed). The consequence of this policy is profoundly depressed commodity prices, so Midwestern row crop farmers cannot make a living, and the foods of “Fast Food Nation” — empty calories that lead to diabetes, so cheap that portion sizes keep doubling every few years. It’s a food policy that doesn’t satisfy anyone, really.
At the other end of the food system, look at consumers: While “legacy brands” like Hellmann’s are declining, organic brands like Sir Kensington’sare experiencing meteoric growth. That reflects consumers’ increasing desire for food to reflect our values, tastes and aspirations. Nearly all legacy food brands have flat or declining sales, while the smallest exotic food brands are proliferating and succeeding. Since retailers don’t make money on Cheerios anyway (because the product amounts to a commodity), they show an increased willingness to put Nature’s Path, Cascadian Farms or Bob’s Red Mill on the shelves because they can make more money — and consumers want those brands.
Whole Foods is, of course, the originator and master of trying out the latest in niche-food offerings that come into the mainstream. Whole Foods caters to the complete menu of fringe trends: both vegan and meat-centric paleo, both nut-centric superfoods and nut-free hypoallergenic snacks.
While big-box stores usually are terrified by smartphone-wielding consumers making price and feature comparisons, Whole Foods has gone out of its way to empower its customers with information on just those hyper-personalized decisions that drive each sale: witness its engagement with the Sage Project, which lets you explore each Stock Keeping Unit along any imaginable ethical, practical or physical axis. With all that background, it should not surprise you that the big losers in the stock market following the acquisition announcement were old industry food brands like General Mills and Kraft Heinz.
What Amazon has done, by accident or intention, is to upset the entire postwar food system to be driven by the consumer backward, rather than from corn subsidies forward.
So what Amazon has done, by accident or intention, is to upset the entire postwar food system to be driven by the consumer backward, rather than from corn subsidies forward. Not only will people get to buy their organic spelt, einkorn and emmer-filled breakfast cereals, but their willingness to pay more will propagate backward to farmers who suddenly can make a living because they are not growing the same winter wheat that every other farmer is pouring into grain elevators. The more consumers desire foods with particular attributes, like diverse plants, sustainable production practices and even terroir, the more the farm system becomes de-commodified and gives farmers a viable path to making a living. Wouldn’t that be nice for rural America?
What this will quickly expose is a food-supply chain that is almost exactly the opposite from how Amazon is used to operating: Where manufacturing and shipping electronics is a modern masterpiece of innovation, growing and shipping produce and specialty foods is little different from how it was at the turn of the century, save for the trucks and cellphones.
While Amazon thrives on runaway hit products whose production can be ramped quickly, food-supply chains, especially with organic or specialty ingredients, take years or decades to develop, and remain highly opaque to even the food brands who create them. Amazon is quickly going to find itself on the phone with Georgia peanut farmers if it doesn’t learn quickly how to modernize the supply chain of organic and specialty foods.
Adam Wolf is CEO of Arable.