Did Amazon Just Invest in Natural Refrigerants?

In August, Amazon completed its $13.7 billion purchase of Whole Foods Market Inc., and the e-commerce giant now owns the upscale grocer Whole Foods, which is based in Austin, Texas, and has more than 460 stores in the United States, Canada and the United Kingdom.

Amazon currently operates fewer than 100 distribution centers in the U.S., so the Whole Foods acquisition will expand the online retailer’s logistics network.

“A heavy Amazon investment in naturals could be enormously influential in achieving economies of scale and bringing prices down across the whole industry.”

–Danielle Wright, executive director of the North American Sustainable Refrigeration Council

Since Whole Foods has taken the lead on natural refrigerants and has been one of the more progressive chains in piloting advanced systems using natural refrigerants, wide-scale adoption of natural refrigerants by Amazon could help drive greater adoption within the grocery industry.

“Let’s face it: no one knows at this point what Amazon’s intentions are with respect to the future of refrigeration at Whole Foods Market, and both Amazon and Whole Foods have been completely mum on the subject. If I had to guess, I’d say that Amazon might be open to investing in more natural refrigerant technology, because that’s an investment that makes sense if you’ve got a long-term perspective,” said Keilly Witman, owner of KW Refrigerant Management Strategy.

“One thing we know about Amazon is that they focus more on a long-term vision than I feel the supermarket industry is used to doing. Think of all of those years when Amazon first got started and they lost money year after year. The company accepted those losses because they knew their long-term vision was solid,” Witman said.

“Also, as part of the tech industry, Amazon is likely more comfortable with the idea of paying high upfront costs to bring newer technologies to the mainstream, Witman explained. “That has to bode well for natural refrigerants. A heavy Amazon investment in naturals could be enormously influential in achieving economies of scale and bringing prices down across the whole industry.”

Danielle Wright, executive director of the North American Sustainable Refrigeration Council, said the natural refrigerants industry is trying to figure out how to build economies of scale faster. “If you talk to any grocer, they know we’ll eventually achieve those economies, but in the meantime, nobody wants to be on the bleeding edge. They’re all waiting for prices to come down, and prices won’t come down until manufacturers achieve economies of scale. It’s a big catch-22,” she said.

For grocers, investing in natural refrigerants could ease companies’ regulatory burden, as these refrigerants are exempt from the EPA’s Section 608 regulations. Section 608 of the federal Clean Air Act, which outlines refrigerant management regulations. “If you eliminate that record keeping burden, that is one less thing for you to worry about,” Wright said, adding that natural refrigerants are future-proof.

However, Witman said she doesn’t think Whole Foods’ use of natural refrigerants factored into Amazon’s decision to acquire the grocer. “In mergers and acquisitions that involve supermarket companies, it’s unusual for refrigeration to be discussed as part of the deal,” she said.

Wright said natural refrigerants are not yet the standard choice for grocers, but they are further along than they were just two years ago. “There were just a few systems years ago and now there are hundreds. That is a lot when you figure it takes a long time for new technologies to be adopted in an industry run on tradition,” she said.

One challenge for grocers is there isn’t an easy option for retrofitting old systems with natural refrigerants, so the technologies typically are considered only during new store construction, Wright said.

Wright added she would also like to see utilities provide incentives for natural refrigerants, which would spur investment.

Witman said traditional grocers don’t jump on board with trends quickly, but Amazon may be different. “Amazon was created by people who imagined a future that was completely different from the way things were, a future that most people thought was completely nuts at the time,” she said.

Whole Foods declined to comment for this story and Amazon did not return a request for comment.