By: Greg Simpson
If you’ve been following the conversation lately around online versus brick and mortar (i.e. you haven’t been under a rock) , you might have heard once or perhaps a thousand times that the coveted last mile may be the only thing that stands between us and Amazon world domination. We are led to believe that the ultimate winners and losers in the fresh grocery space will ONLY be dictated at that final mile marker.
Along with Amazon’s recent announcement of one and two hour delivery for, recently acquired, Whole Foods (in 4 test markets), through its Prime NOW program, the race to your doorstep was already crowded with offerings direct by grocery and club stores, delivery startups like Instacart, and Shipt, acquired by Target at the end of 2017. The increasing competition comes amidst a backdrop of both UPS and FedEx’s public acknowledgment, that they are entering the short haul direct to consumer space, with their new zone 1 option.
This arms race is clearly not going to end well for some. But, maybe the battle of fresh won’t be completely fought on the pavement or even in the air to your door. Investors to Amazon may have stumbled upon the unlikely battleground, the food wasteland.
Why Does the Food Wasteland Matter?
An article published in the Wall Street Journal on Food Waste last week suggests that Green Century Capital Management and other investors may have concerns about Amazon in relation to the environmental impact and cost of wasted food, currently an industry wide 55 billion dollar a year problem.
“This is such a sizable and tangible issue for a company as large as Amazon,” said Leslie Samuelrich, president of Green Century. “We are just trying to assess the business risk.”
While Amazon is not required to disclose its food waste plan because of food being less than 1% of its operating expenses and assets last year, it does suggest that this could become a broader issue as Amazon penetrates the market. This seems to be an area where existing supply chains, who deal with fresh in their distribution channels, might have an advantage.
How Do We Move Forward?
Enter Walmart, big data and our friend … the Banana. As a Walmart vendor we know that the banana is one of their highest selling items. Getting the freshest product from farm to fork is complicated. And our friend the banana travels from seven countries in Latin America to over 4000 Walmart Stores. In a recent blog post, Walmart talks about leveraging machine learning and big data to improve the quality of fresh produce for sale in their stores. Their intelligent food system, Eden, helps Walmart keep track of food freshness all along the supply chain.
According to Parvez Musani, Vice President – Supply chain Technology, “Eden’s suite of apps helps Walmart associates better monitor and care for fresh fruits and vegetables that are waiting to be shipped from distribution centers to stores. That could mean more efficiently ripening bananas, predicting the shelf life of tomatoes while they’re still on the vine, or prioritizing the flow of green grocery items from the back of the store to the shelf.”
According to the retail giant, Eden’s implementation has already reduced waste by $86 million and they hope to eliminate $2 billion of waste over the next 5 years. Musani suggests that someday soon, Eden will be able to recalculate the freshness factor and re-route the shipment immediately. And those bananas . . . Are not just in store or at your doorstep on time, the customer is satisfied with a high quality product. This supply chain could become incredibly efficient.
So while Amazon may have a decided advantage in online sales, most of the product they sell doesn’t have a shelf life. In the final analysis, they may have to learn something from an unlikely source . . . A banana.
Categorized in: Insights and Perspectives