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One month after Amazon bought Whole Foods, some investors and suppliers are losing enthusiasm

  • After an initial spike, Whole Foods foot traffic has petered out.
  • Whole Foods is moving toward centralization and great efficiency at a quicker pace, making some suppliers nervous.
  • Amazon shares are down 3 percent since the beginning of the month amid a broader tech sell-off.
A customer shops for produce at a Whole Foods Market.
Getty Images
A customer shops for produce at a Whole Foods Market.

One month after the Amazon-Whole Foods deal, some initial enthusiasm is wearing off, and skepticism among customers, suppliers and investors is rising.

Early stats from inMarket, a location data research firm, shows that Whole Foods' share of visits — its stake of total grocery traffic in the US — jumped 16 percent week-over-week in the first three days after Amazon officially took over. The following week though, foot traffic was down 3.6 percent week-over-week on average.

Wall Street initially cheered the news as well, but one month on, enthusiasm has waned. Amazon shares are lower by 3 percent since the beginning of September. While much can be attributed to a broader sell-off in tech names, RJ Hottovy, analyst at Morningstar, says that investors have taken a wait-and-see attitude toward the acquisition. "Price cuts are great, and it's brought back traffic," he says, "but is it sustainable?"

Whole Foods suppliers are also expressing mixed feelings about the deal.

Under Amazon's management, brand representatives will no longer be able to promote their products in-store at Whole Foods — a potential blow to upstart brands that use in-store reps to educate customers on new products. One supplier who works with brokers tasked with visiting local stores tells CNBC that it may move away from some broker relationships. The supplier wished to remain unnamed because it hadn't yet spoken to its partners.

Kyle Garner, CEO of Organic India, which sells teas, spices and wellness supplements in Whole Foods stores, says that a centralized model could hurt his business. Under the previous model, he says, Organic India could prove itself in one or two regions and then use the data to expand nationally. He says the changes could make it harder for up-and-coming brands to compete.

"We are a national brand, but not one of the larger ones," he says. "Our ability to drive a strong relationship at the national level may be difficult."

Lindsay Rosenberg, founder of Cherryvale Farms, has been selling to Whole Foods regionally since 2012 and is hoping to sell nationally next year. She also thinks it will become difficult for upstart brands to launch at stores under the new model.

"Whole Foods was the only place in the past we could go where we could afford to launch on a regional level. We couldn't go to a Safeway or Kroger," she says. But she says suppliers will find other ways. "Young brands are going to get creative — go online or find other retail outlets that do appeal to their audience."

Some suppliers aren't worried, however. Paddy Spence, CEO of LA-based Zevia soda brand, says the Amazon-Whole Foods partnership is providing the best of both worlds.

"Even though they're taking away local reps, the education isn't going away," he says. "Whole Foods has succeeded by educating shoppers about the attributes of the products they sell, and I don't see that changing. That's what's allowed Whole Foods to succeed, and it's a big component of what's allowed Amazon to succeed."

In a statement, the company reiterated its commitment to local suppliers.

All Whole Foods Market stores will continue to sell local products, and our buyers remain committed to discovering and incubating local and innovative brands. Local suppliers and products are crucial to the success of the company and our ongoing work in category management helps streamline processes that ensure each store has the best possible curated selection of local and national products available for shoppers.

Meanwhile, other supermarkets are looking for openings to steal unhappy suppliers. Earlier this month, Kroger announced plans to roll out a website aimed at luring more local brands to its stores.