Amazon’s Whole Foods Market has been accused by the US Food and Drug Administration (FDA) of allegedly offering and selling “misbranded” food products, by failing to properly label for the presence of major food allergens.
The FDA has sent a warning letter dated Dec. 16 to Whole Foods, which was bought by Amazon (AMZN) back in 2017, noting that between October 2019 to November 2020, the supermarket chain has recalled 32 food products due to undeclared allergens such as milk and eggs. One of the recalls included Whole Foods Market Minestrone Soup as milk wasn’t included in the ingredient list labeled on the product. Similarly, Whole Foods Market White Parkerhouse Rolls were recalled for undeclared milk and eggs.
“We noticed similar patterns of numerous recalls for undeclared allergens in previous years as well,” the FDA stated in the letter, which demanded from Whole Foods to take action to correct all violations.
Whole Foods now has 15 days to respond to the letter and provide details on how the supermarket chain is going to address the violations, as well as its plans on how to prevent recurrences going forward.
“We are working closely with the FDA to ensure all practices and procedures in our stores meet if not exceed food safety requirements,” Whole Foods said in a statement.
Amazon has been one of the top companies benefiting from the online shift in consumer preferences and spending habits as a result of the COVID-19 crisis. To capitalize on the trend, the e-commerce giant has been looking to expand and broaden its grocery and delivery services to gain more market share and enter into new markets.
Shares have been on a steady gaining streak, jumping a stellar 73% so far this year, with the average analyst price target of $3,825.60 implying an additional 19% upside potential is lying ahead in the coming 12 months.
Last week, Mizuho analyst James Lee reiterated a Buy rating on the stock with a $4,000 price target (25% upside potential) as he is expecting Amazon to have a strong growth opportunity in FY21 driven by continued penetration into grocery markets and a rebound in discretionary products.
“We view Amazon’s aggressive buildout plan for fulfillment centers and logistics as a leading indicator for demand of new product lines,” Lee wrote in a note to investors. “That said, consensus FY21 revenue growth of 18% YoY appears conservative. Also, COVID-related expenses of nearly $11bn in FY20 should not be recurring as vaccines become widely available, and long-term online pharmacy margins are likely accretive.”
Overall, AMZN scores a Strong Buy analyst consensus with 36 Buy ratings vs. only 1 Hold rating. (See Amazon stock analysis on TipRanks).
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