Whole Foods CEO hints at another brand under Amazon

[June 20, 2017]  By Jeffrey Dastin and Lisa Baertlein

(Reuters) - After Amazon.com Inc. completes its takeover of high-end grocer Whole Foods Market Inc <WMF.O>, it might launch another brand with different standards, the grocery chain's chief executive said in remarks reported in a securities filing on Monday.

Amazon plans to keep the natural grocer's high standards, Whole Foods Chief Executive John Mackey said, adding, "They’re not stupid enough to go change that." The filing contained a transcript of a town hall meeting for Whole Foods employees.

But Mackey, at the Friday town hall, said, "Over time, there could be other formats that evolve that - that might - wouldn't be branded Whole Foods Market, potentially, wouldn't be our standards."

The remarks offered a preview into how e-commerce giant Amazon might turn around the sluggish sales of Whole Foods since announcing on Friday it would buy the company for $13.7 billion, including debt. Industry observers have said that Amazon may add a selection of discounted, non-organic food to distance the chain from its "Whole Paycheck" nickname.

Whole Foods already has a separate store, called 365, which offers private-label goods and lower prices than its typical formats. The company has needed to tread a fine line between introducing more conventional and affordable products, while maintaining the allure of a premium brand.

"That’s their dilemma," said Roger Davidson, who oversaw Wal-Mart Stores Inc's <WMT.N> global food procurement and now is president of Oakton Advisory Group. Mackey is "being pulled both ways."

The Whole Foods chief said Amazon's technology will help the grocer transform from "class dunce" into "valedictorian." Amazon, which made a splash last year with a checkout-free grocery store, has said it has no plans to automate the jobs of Whole Foods cashiers.

John Mackey speaks at the Milken Institute Global Conference in Beverly Hills, California, U.S., May 2, 2016. REUTERS/Lucy Nicholson/File Photo

Technology is just one way Amazon stands to change Whole Foods and its culture, though.

Amazon's focus on frugality contrasts with Whole Foods, known to have higher costs than peer grocers.

"It’s too early to talk about how benefits and compensation may synch up," Mackey said of the topic, after jesting that Whole Foods employees will get free Amazon devices on merger day.

And Amazon has plenty to learn about bricks-and-mortar grocery.

Amazon's Worldwide Consumer chief, Jeff Wilke, said at the town hall that Whole Foods' healthier options helped change how people think about food. A misstatement about his breakfast, though - quinoa, blueberry "and some other vegetables" - became a joke.

"Those aren't vegetables," jested Mackey. "We're learning."

(Reporting by Jeffrey Dastin in San Francisco; Editing by Sandra Maler and Leslie Adler)

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