Buying Whole Foods will also ramp up Amazon’s private-label grocery business, an industry that is growing steadily in the the USA and other developed markets, Bernstein noted. “Whole Foods Market has been satisfying, delighting and nourishing customers for almost four decades – they’re doing an awesome job and we want that to continue”.
Advertisement
News of the deal sent shares of traditional retailers like Walmart, Target, Costco and Kroger tumbling as much as 13 percent as investors tried to digest the implications of an Amazon-backed grocery chain. Until now, Amazon has largely focused its grocery efforts around its Amazon Fresh subscription service, which promises quick food delivery for online orders.
Supermarket shares slumped on the merger news, with Target dropping by 12 percent, Kroger by 14 percent, and Walmart by nearly 6 percent.
Whole Foods had fiscal 2016 sales of about $16 billion.
With the Whole Foods deal, the company acquired a top-notch brand name with more than 400 stores, most of which are in upscale neighborhoods, for a reasonable price.
That said, there is some speculation that Amazon could end up changing its plans and ultimately use advanced technology inside Whole Foods stores. Amazon would be able to sell Whole Foods prepackaged meals, which make up about 20 percent of Whole Food’s sales now, Stone says. We spoke to food analyst David Portalatin of the NPD Group, a market research company.
Whole Foods has more than 460 stores in the United States, Canada, and the United Kingdom.
At least one customer was concerned that an Amazon purchase would further distance Whole Foods from its roots as a purveyor of premium, organic and specialty foods.
“This is an quake rattling through the grocery sector as well as the retail world”, said Mark Hamrick, senior economic analyst for Bankrate.com.
“This store has become a money-making machine”, said Tony Castro, a 40-year-old private chef, who shops daily in Whole Foods’ sprawling downtown Los Angeles store.
The deal values Whole Foods at US$42 per share. Firstly, don’t forget that Whole Foods is a pretty trendy and high-end outlet with an organic focus.
“It’s amusing. I was just ordering something on Amazon”, said Nick Yezierski, a hotel manager who was eating breakfast outside the Whole Foods flagship store in Austin, Texas. But those involved expect the deal to close in the second half of the year. The Whole Foods purchase would let it expand to many more.
Mahaney said the move to “heavy” brick-and-mortar assets in the grocery market was a “big acceleration” for Amazon, which had dipped into ventures such as bookstores in recent years. Amazon could integrate it with technological advancements to improve the shopping experience, and, in turn, help Whole Foods rein in revenue.
Advertisement
Amazon was already in the news in India where it’s subsidiary Amazon India was believed to be in talks to buy Big Basket, a news which was neither confirmed nor denied by both the parties.
