The Friday Report: June 29th, 2018

Quick wrap up of a few hot topic newsworthy stories in the supply chain logistics industry

Amazon Pops PillPack into its Portfolio of Acquisitions

Industry disruptor Amazon recently made an important investment.  Amazon announced that it is buying online pharmacy PillPack.  Shares of Walgreens Boots Alliance, CVS Health, Rite Aid, Cardinal Health, Amerisource Bergen and McKesson dropped precipitously on the day of the announcement while Amazon stock opened slightly higher.

Innovator PillPack organizes packages of medication with the specific number of drugs that patients are advised to take at specific times then delivers them.  The pharmacy innovator helps consumers manage refills and shipping.  Powered by a team with extensive pharmacy experience and a focus on technology solutions, PillPack has increased steadily in value and in 2016 was reported to be valued at $330 million.

Ever a market disruptor, Amazon has an interest in keeping healthcare costs down. The heart of the value of the PillPack acquisition by Amazon is PillPack’s license to ship prescriptions to 49 U.S. states.

Last year, Amazon obtained pharmacy licenses in 12 states.  In January, a new healthcare company was formed for employees of Amazon, Berkshire Hathaway and JPMorgan Chase to contain rising health care costs.

According to Loop Capital, this acquisition establishes Amazon’s ability to rapidly expand in the pharmacy market.

Conagra Brands Eats Pinnacle Foods

Conagra Brands Inc. announced recently that it plans to purchase Pinnacle Foods for a cool $8.2 billion, sending a chill through the frozen food industry.  The acquisition would create the second largest frozen food business in the United States.  With annual sales of $11 billion, the new conglomerate would pair Conagra Brands Inc. including Marie Callender’s, Egg Beaters, Reddi-wip, and Healthy Choice with household name brands including Birds Eye, Gardein, Earth Balance and Duncan Hines.

But why?  Industry studies indicate consumers’ growing taste from fresh, locally sourced, healthier food items.  Both Pinnacle Foods and Conagra Brands Inc. own packaged food brands.  The packaged food industry has been experiencing slow growth and marked disruptions but brands that consumers find more authentic and to their liking.

The frozen food category is currently experiencing double the growth rate of categories including dairy or dry packaged grocery goods and has $344 billion in industry wide grocery sales. 

 This is double the sales of fresh and perishable items.

Reasoning for the acquisition includes cost synergies by combining both brands and increased negotiating power with retailers.  The brands complement each other.  Pinnacle Foods owns health conscious brands Gardein, Udi’s, Earth Balance and Glutino.  The assimilation will enable Conagra Brands to tap into a new range of consumers.  Both companies have proven successful in rejuvenating older brands to make them appealing to younger consumers.


Kroger Throttles Driverless Cars for Grocery Delivery

A new partnership with autonomous car company Nuro and grocery giant Kroger is making grocery home delivery possible.  Solving the last mile delivery challenge has been problematic for grocery retailers, especially since most of the products purchased in grocery stores are perishable and subject to damage.  Combine this with the diverse range of conditions in which consumers are found and the problem seems impossible to solve.

Nuro was founded by Google engineers in 2016.  The autonomous car company was developed specifically to transport goods.  Nuro designed its vehicles to have a slimmer profile and is working on a new iteration of vehicles with refrigerated technology to prevent spoilage of perishables.  Consumers will need to be at home to receive deliveries which can be scheduled in advance.

Partnerships in the grocery and retail industry between retailers and last mile delivery providers and technology solutions are not new. Walmart has established a relationship with Postmates for online grocery delivery to consumers, for example.  Kroger is looking a step beyond mere collaboration, however. 

Investing in British online grocer Ocado, Kroger plans to build automated warehouses throughout the United States.  Eventually Kroger intends to roll out Ocado, autonomous delivery and other technology solutions for its customers to reach 100% of America.

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