Whole Foods hires BCG to support large change programme
American grocery group Whole Foods has hired The Boston Consulting Group (BCG) to help the company save $300 million in baseline costs, following the store’s acquisition by Amazon earlier this month.
On Monday, August 28th, Amazon completed its bid to purchase high-end grocer Whole Foods. The foods group hosted a town hall meeting earlier in the year with staff in order to discuss the deal, which was expected to be tied up later in the second half of 2017. However, a Whole Foods shareholder vote approving a deal, along with a Federal Trade Commission decision to allow the Amazon-Whole Foods acquisition to continue, meant that Amazon have now concluded proceedings.
The shareholders meeting, which gathered at Whole Food's headquarters in Austin, Texas, saw the merger with the internet giant approved subject to regulatory approvals, and other customary closing conditions. The $13.7 billion deal marks the biggest retail deal of 2017 so far.
Whole Foods will now undergo a large change programme, which the company has hired consulting firm Boston Consulting Group to oversee. At the aforementioned town hall meeting in June, CEO John Mackey said he was intent on change, in order to overhaul the reputation of the grocer, whose high-end organic produce has been labelled as over-priced by critics previously, suggesting the groups 90,000 employees may be in line for drastic alterations to their roles.
Framing the debate as a drive to improve customer service, rather than reducing the pay and conditions of employees to subsidise lower prices which could attract more consumers, Mackey said at the meeting, “We wanna make this deal, because we think they can help us evolve quicker and better than we could do on our own. So I don’t want people goin’ away, thinking that nothin’s gonna change around here. Cause things are going to change.”
Mackey’s statements, which became publicly available due to a filing with the Securities and Exchange Commission, included mention of a plan to shave $300 million off their cost structure, as Amazon prepare to push for a number of large mark-downs in pricing. On the first day, reports circulated that prices had been slashed by the new ownership by as much as 43%.
According to the current Whole Foods CEO, that’s where BCG come into play. "We’ve hired Boston Consulting Group, who’s come up with some amazing analysis of things that we can do to reduce our cost while improving our service to our customers. So this evolution’s gonna continue,” Mackey said, concluding, “We do think our partnership with Amazon is gonna help us do that more skillfully and, hopefully, faster."
BCG recently narrowly missed out on a contract from the Croatian government to AlixPartners, which would have seen them restructure the country’s largest foods group Agrocor. Now the Boston-based firm will work to trim $300 million from Whole Foods’ expenditure base.
As budget discounters Aldi and Lidl continue to bulk up their own presence in the US meanwhile, other grocers will more than likely follow suit. Top retailers in the UK including Sainsburys and Tesco have increasingly been looking to cut costs to keep pace with the German stores, and the American supermarket sector is likely to experience a similar trend.
