Amazon’s annual report shows that it’s thinking long-term when it comes to Whole Foods, with the online retailer’s unconditional purchase obligations increasing to $24.2 billion last year.
According to CNBC, that amount is beyond the $13 billion it spent last year on the national supermarket chain.
Before the Whole Foods acquisition, Amazon had just $1.6 billion of purchase obligations — and that amount never exceeded more than $2 billion in company history. After the purchase, Amazon took on an additional $22 billion in contractually obligated future purchases, mainly due to Whole Food’s contract with its largest supplier, United Natural Foods (UNFI).
Experts say that Amazon’s disclosure shows it is focused on turning Whole Foods into a major revenue driver, especially since the company’s disclosure extends until 2025.
“It is definitely a clear signal of Amazon’s commitment and confidence to make the Whole Foods deal work,” said Patrick Badolato, an accounting professor at the University of Texas. “There’s a huge commitment to keeping many of the core Whole Foods products there.”
Maintaining a relationship with UNFI has another benefit for Amazon — it gives the eCommerce giant access to health and personal care products. UNFI’s Select Nutrition subsidiary sells “more than 14,000 health and beauty aids, vitamins, minerals and supplements.”
“It shows a very strong commitment to its health and personal care category,” said Joe Hansen, a consultant from BuyBox Experts. “It’s Amazon’s way of getting direct access to brands.”
Amazon’s health and wellness sales grew 30 percent in 2017, bringing the total segment to $2.5 billion. Earlier this year, the company started offering an exclusive line of 60 over-the-counter health products that range from over-the-counter medications to hygiene products.
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