California Baby, a maker of all-natural hair and skin care products for babies, children and adults, is pulling its products from Whole Foods Market after 23 years, according to a report by Yahoo Finance.
Jessica Iclisoy, the company's CEO and founder, told attendees at an industry conference last week that her company's 23-year relationship with the grocer isn't the same under new owner Amazon. “They’re changing their business but that doesn’t work for me," she said. "Our visions don’t necessarily dovetail."
Whole Foods has recently established merchandising fees for suppliers and barred brokers from its stores. An earlier report from Yahoo Finance noted the grocer is also clashing with its new owner over product standards.
California Baby is not the first supplier to cut ties with Whole Foods, but the $80-million brand is the largest one to do so. In December, Betsy Langton, CEO and founder of Betsy's Bar None snack bar company, made a similar move. Langton said she was concerned last fall after Whole Foods told suppliers that to keep doing business with the company, vendors would be required to pay an outside food safety auditor and a product photographer.
Betsy's Bar None is a small business, but it has other outlets, mainly on the West Coast, that still carry its products, plus it sells them online. The same is true for California Baby, which also sells its products at Walmart and Target stores.
Whole Foods isn't likely to worry over these suppliers removing their products since others are available as substitutes. But it will no doubt annoy fans of the removed products and could intensify concerns other vendors have about the direction Whole Foods is taking post-acquisition.
Buying decisions used to be made locally but are now being centralized to cut costs and make operations more efficient. This approach, along with the supplier fees, was instituted before Amazon acquired Whole Foods, but they seem to fit with the e-tailer’s mainstreaming priorities for the retail chain. Disputes over product standards, meanwhile, reflect a culture clash that many expected — but that could rattle supplier and consumer confidence in the chain.
The grocery chain was concerned enough about the growing unease to schedule a meeting with vendors in March to calm their fears and explain the new operating regime. It's not clear what went on at that meeting, but it points to growing discontent with a grocer previously well-known for discovering and nurturing brands.
Not all vendors are unhappy with the new way of doing things at Whole Foods. Hain Celestial has reportedly been seeing big sales increases there, while United Natural Foods, the company's main wholesaler, got a commitment from Amazon to buy more than $22 billion in goods between now and 2025.
Other changes could soon see Whole Foods carrying Amazon private-label brands and even stocking Coca-Cola products, which would really constitute regime change for the retailer. Amazon is generally taking aim at the retailer's exclusive product assortment with an eye toward relaxing its standards and attracting more in-demand products and a broader customer base.
It's hard to tell how the situation will finally shake out, but it's clear that the selection available at Whole Foods is shifting to larger companies and fewer local ones. This will no doubt raise margins and bring down prices, but it risks turning the natural and organic pioneer into just another mainstream grocer.