A small footnote in Amazon's annual report shows the kind of financial commitment the company is making to the grocery business, beyond the $13 billion it spent last year on Whole Foods.
Amazon's "unconditional purchase obligations," a required disclosure for future payment agreements, ballooned to $24.2 billion in 2017, according to its 10-K filing last month. Amazon had just $1.6 billion of such obligations prior to the Whole Foods deal, and never had more than $2 billion in company history.
After acquiring Whole Foods, Amazon took on an additional $22 billion in contractually obligated future purchases. The balance, which also showed up in Whole Foods' filings for the first time in November, is almost entirely tied to the grocery chain's prior contract with its largest supplier United Natural Foods (UNFI), based on CNBC estimates and prior filings.
Big multi-year supplier contracts are rare for the e-commerce giant, which is known for signing short-term agreements that put constant pricing pressure on its suppliers. The grocery business is new territory for Amazon, and the disclosure reflects its long-term plan to turn Whole Foods into a major revenue driver.
"It is definitely a clear signal of Amazon's commitment and confidence to make the Whole Foods deal work," said Patrick Badolato, an accounting professor at the University of Texas who has followed Amazon for years in his class. "There's a huge commitment to keeping many of the core Whole Foods products there."