"Robots, Drones" Mean Mass Layoffs For Whole Foods Employees

When describing the logic behind Amazon's blockbuster acquisition of Whole Paycheck Foods, a deal that made the "greedy bastards" over at Jana Partners $400 million richer in just a few months, Credit Suisse analyst Stephen Ju explained that he views this acquisition as "an offensive expansion move to accelerate its progress in the largest consumer spend category. In other words, Amazon is paying roughly 3% of its enterprise value for an improved position in an addressable segment that amounts to ~$1.6 trillion according to the US Dept. of Agriculture’s ERS, especially as progress at Amazon Fresh (in terms of regional rollout) has been admittedly slower than we expected."

He may be correct in the long-run but in the medium-term, Amazon Foods faces major hurdles, including a significant slowdown in how much Americans spend at food and beverage stores...

... and the arrival of German mega-discounters Aldi and Lidl on US soil, eager to steal market share by offering products below cost, already prompting a panicked response by the likes of Walmart (see "The Germans Are Coming... And Their Groceries Will Cost Up To 50% Less Than Wal-Mart").

But the biggest risk facing the combined company in the short-term is the same one that follows every acquisition: "synergies" and how these will change the corporate culture at Whole Foods. In his letters to employees, this is what Whole Foods CEO John Mackey said:

Dear Team Members,


Today marks the beginning of an incredible new chapter in Whole Foods Market's history. In my nearly 39 years as co-founder and CEO, I could have never dreamed of this happening, but I am excited to announce that Whole Foods Market has entered into an agreement to merge with Amazon at a terrific value for our shareholders.


This partnership presents an incredible opportunity to take Whole Foods Market's mission and purpose to new levels and best positions our company and our Team Members for future success.


* * *

As you know, we are in a metamorphosis phase. While everyone processes change differently, this is an exciting new step to fulfill our higher purpose. Together, we have built an amazing company and have positioned ourselves to deliver outstanding value for Whole Foods Market shareholders -- which includes many of you.

But not all, and as Bloomberg reports the initial step in the integration will be wholesale "cost-cutting", i.e., mass layoffs to boost margins in what is already a cutthroat industry. Jeff Bezos "will try to keep the grocer’s reputation for premium fresh foods while cutting prices to shed its "Whole Paycheck" image." To do that, "Amazon expects to reduce headcount and change inventory to lower prices and make Whole Foods competitive with Wal-Mart Stores Inc. and other big-box retailers, according to a person with knowledge of the company’s grocery plans. That includes potentially using technology to eliminate cashiers."

As a result, Whole Foods employees are on edge about the monumental changes about to take place and as Reuters adds, some employees "expressed fears ranging from layoffs to the loss of their laid-back corporate culture."

They have good reason to be worried, because what comes next is a wholesale deflationary replacement of the existing labor force with "robots and drones."

Carmen Clark, 37, a six-year employee at a store in Mount Pleasant, South Carolina, said some workers worry that Amazon-led automation could lead to job cuts. "Everybody's been kind of joking that it's going to be robots and drones," Clark said of potential changes from Amazon, which uses robots in its warehouses and is testing drones for delivery.

For now, Clark said she is giving Amazon the benefit of the doubt. "I have purchased from Amazon for five years. It's a good company," she said.

And she is right... if referring to consumers and shareholders. For employees it will be vastly different: Amazon is said to be considering extending the cost-cutting effort with the no-checkout technology it’s developing at its Seattle convenience store, “AmazonGo,” according to Bloomberg. The technology lets people pay with smartphones without seeing a cashier or going to a checkout kiosk, which would help Amazon differentiate itself in the brick-and-mortar setting and reduce labor costs at Whole Foods stores. The employees remaining would help improve the shopping experience, while terminating many of the company's existing workers.

It is those same workers that Reuters approached for interviews in California, New York, Illinois, South Carolina and Rhode Island. While many said they had been told by managers not to speak to reporters, some expressed their concerns:

Some workers at the nonunion grocery chain wondered whether Amazon, known for its hard-driving culture, would mean big changes to their pay, benefits or employment. "I think that they are a very profit-driven company, so there might be some streamlining as far as labor," said Sasha Hardin, 28, of the Mount Pleasant store, who has been with Whole Foods for 6-1/2 years.


A Los Angeles deli worker in his 30s, who is expecting his first child this summer, is worried about layoffs. "I want to keep working," said the worker, who did not want his name used.


Whole Foods has a corporate culture that prizes inclusive decision-making, such as allowing workers to vote on benefits every three years and disclosing executive pay.  "I've heard that Amazon's culture is really cutthroat. That worries me," one bagger at a Providence, Rhode Island, store said.

Another major question is how the cultural change will impact the shopping experience, and whether it will accelerate what is already its worst sales slump since going public in 1992. Speaking to Reuters, at least one customer was concerned that an Amazon purchase would further distance Whole Foods from its roots as a purveyor of premium, organic and specialty foods.

"This store has become a money-making machine," said Tony Castro, a 40-year-old private chef, who shops daily in Whole Foods' sprawling downtown Los Angeles store.

Ironically, none other than CEO Mackey predicted failure for Amazon as it tried to enter the grocery space: two years ago, Mackey predicted imminent doom for rival Amazon in the fiercely competitive grocery business. "Amazon Fresh is their Waterloo," said Mackey, known paradoxically both for his earthy passion for organic foods and his imperious business swagger. "What’s the one thing people want? Convenience. You can’t do that with distribution centers and trucks."

* * *

But no matter whether Bezos' gamble on "bricks and mortar" pays off, two things are certain: between the aggressive push by Germans to steal existing market share, and Amazon's disruptive, "price-cutting" entry into the grocery sector, prices across the industy are set to slide, resulting in yet another deflationary impulse hindering the Fed's tightening efforts, as noted yesterday:

The other sure thing is that while the company's employees count the days until the pink slip arrives, shareholders stand to reap the profits. As CEO Mackey said, "we have positioned ourselves to deliver outstanding value for Whole Foods Market shareholders." And none more so than the "greedy bastards" whom Mackey was blasting just a fey days prior.

As for Bezos' ultimate vision, Bloomberg sums it up best:

The deal is stunning many of Amazon’s closest observers and then, upon a moment’s reflection, finding a comfortable place in their understanding of the limitless ambitions and wily determination of Bezos, the world’s second-wealthiest man. In a sense, the surprising deal is preordained by his mission to construct the everything store: A company that delivers everything to everyone, at the best possible price and within the shortest amount of time.

In other words the creation of a monopoly unseen since the Gilded Age, and one in which the Trump adminitration may have a final say.


Sudden Debt Cognitive Dissonance Sat, 06/17/2017 - 13:24 Permalink

What this article is missing is that it's going to destroy American farming. You know... retailers have a nasty habit of cutting the cost of their suppliers to fight competition.This article means also that farmers will lose another 10 to 20% on their products when selling to the stores.And how many farmers can handle that these days? They're working at a loss already.Inflation is here but these games are hiding it untill it explodes.And  the farm payroll is actually still pretty big in America.In Europe, these games destroyed the farming comminity to near extinction. We've lost 70% of our farmers in the last 15 years.And in a growing world where food surplusses are going down... this is fucking dangerous.

In reply to by Cognitive Dissonance

MEFOBILLS FoggyWorld Sat, 06/17/2017 - 15:11 Permalink

will soon have robots to plant and robots to harvestThis is a virtuous cycle.  The robots harvesting and helping will displace immigrant, especially south mexican and central american amerindian labor.  This labor already is a burden on American social structure.  Do the math:  Maria shits out 15 kids at $X dollars per pop.  Then there is the education costs, supplemental assistance, etc.  It quickly adds up to very large numbers.A farm robot workforce will be supplied by American engineers and overseen by American technicians. https://www.amren.com/videos/2017/03/welfare-who-are-you-supporting-rac… With regards to Bezo's, that is a non-virtuous cycle.  The predatory hedge fund is run by Jews of course.  And they hypothecate the "credit" from nothing, to then buy Whole Foods.  This then puts a debt ball-and-chain on whole foods future, which means prices have to go up.  Or, supposedly Bezo's can find new efficiencies.  In a sovereign money system, Bezo's would have to borrow existing money, perhaps the savings of his employees.  That then would be a more virtuous cycle, as any future productivity cycles back to the workers, whose money made them part owners.It always reduces to the money system, the most important subject that people ignore.www.sovereignmoney.eu

In reply to by FoggyWorld

waspwench MEFOBILLS Sat, 06/17/2017 - 16:29 Permalink

 You are assuming that Maria and her 15 kids are sent/go back from whence they came once they are no longer needed.   This would happen if the loss of jobs resulted in their losing income.   What does happen, however, is that Maria and her 15 kids are given more welfare/housing/medicaid/food-stamps, etc. and  the US taxpayers foot the bill.   A select few get richer because they don't have to pay salaries, and taxpayers get poorer because we are supporting Maria and her 15 kids.Question:  why are continuing to "import" workers for whom there will be no work and who will ultimately add to the burden on our social structure?

In reply to by MEFOBILLS

SoDamnMad Sat, 06/17/2017 - 11:43 Permalink

Dear Whole Foods Team Members. It was a great ride and I am happy to step off with a hell of a lot of money in my pockets. Thanks for your hard work.  Best of luck to you all.  (You'll Need it)John Mackey

MEFOBILLS ebworthen Sat, 06/17/2017 - 15:32 Permalink

It is a canard. Bezos is proposing using an energy inefficient system that uses reaction mass for lift.  Then he is proposing that your toothpaste be adjusted such that this inefficiency is priced in.You can wait a day for your toothpaste to be delivered by automated electric vehicles, that would be a lower price.  Also, people do not want noisy drones buzzing about overhead - they will not be pleased, and I expect that many shotguns will be deployed.All Bezos has to do is create a focus group, then create a "drone" experience for them.  Then collect data.  Bezos is making a lot of mistakes, he is not that smart. 

In reply to by ebworthen

therover Sat, 06/17/2017 - 11:47 Permalink

Its the start of the growing season here in NJ. I will continue to buy my fresh fruit and veggies from local farmers even at a premium if need be. Fuck those corporate scumbags. 'A great deal for the shareholders'...go fuck yourself. 

Cognitive Dissonance therover Sat, 06/17/2017 - 11:54 Permalink

Think local and spend local. I purposely spend my money locally if at all possible, even if that means I pay a higher price. If it is available locally I purchase it locally.And both the shop owners and customers recognize and appreciate that those Damn Yankees are putting their folding green on the counter. If you relocate to a small community it is imperative you integrate completely.Now if I could just figure out how to speak that damn mountain accent. ;-)

In reply to by therover

Anteater SweetDougisaTwat Sat, 06/17/2017 - 12:04 Permalink

AMZN is a dry-goods resale network. The world's biggest ( unless you believe Jack Ma) flea market slash department store. AMZN is programmers and warehouse workers. Bezos is going to have to learn the word 'perishable'.They have no, none, zero fresh food experience, and no bricks and mortar staff, so it is highly, highly dishonest to claim on ZH that 'robot drones are going to replace all the Whole Food staff'.Did Alex Jones just swing by for coffee with Tyler?In fact, there is more and more intellectual dishonesty on ZH, like a creeping gray JonesTownisy. At any moment I expect Tyler to pass a round of grape koolaid and encourage everyone to drink.AMZN-Whole Foods is like the best flea market you've ever been to, and you can get through the checkout line in just about 10 seconds, if that's your thing. Then the box of gew-gaws and snicker-snacks will show up 2-3 days after you needed them, lol. 

In reply to by SweetDougisaTwat

MEFOBILLS Anteater Sat, 06/17/2017 - 15:38 Permalink

AMZN is trying to increase the touch frequency of its distribution network.  This is why Bezos offered to deliver U.S. mail.Whole foods is a play for more distribution.  I think it was a mistake, the grocery industry runs on small margins and some players are killer competitors.  Whole foods prices higher margins than normal,  for the shopping experience and organic higher quality.And yes, there is no way around the perishable problem.

In reply to by Anteater

MEFOBILLS U4 eee aaa Sat, 06/17/2017 - 16:47 Permalink

The girl that gets pink slipped, and then goes on welfare, is a cost shifting.Bezo's makes money, while the cost is born elsewhere, mostly by taxpayers.  The Farm lobby does the same now.  Your lettuce is 25c cheaper because of Mexican labor picking it.  But, your social costs are much higher because of cost shifting to fund mexican kis in American skools, hospitals, retirement, etc.  The farmer then takes wage arbitrage to the extent the market lets him.Exxon takes its profit on panama flagged ships, so it avoids paying U.S. income taxes.  And on and on.The U.S. should dissolve, there is too much rent-seeking going on.  Small countries and small goverments are better.

In reply to by U4 eee aaa

wmbz Sat, 06/17/2017 - 11:51 Permalink

"For now, Clark said she is giving Amazon the benefit of the doubt. "I have purchased from Amazon for five years. It's a good company," she said.Poor naive child! When they put the boot in the crack of your ass on the way out the door, you may then understand just how "good" they are.

DavidFL Sat, 06/17/2017 - 11:54 Permalink

This is a silly story. First - Whole foods is the highest cost supplier of groceries in any market. Second - for a host of reasons, airborne drones will not be used to deliver food or other packages, not in our lifetime. Peak Stupidity!