Published: Sun, June 18, 2017
Markets | By Noel Gibbs

Amazon Upends Grocers With Acquisition of Whole Foods


Whole Foods Market will still run physical stores under its own brand so the deal seems more about bringing Amazon's scale and expertise - especially in analytics - to bare.

Brittain Ladd, a former senior manager at Amazon who worked on its brick-and-mortar strategy, said Amazon will use Whole Foods to test concepts for the grocery store of the future.

The deal could be "transformative", Moody's lead retail analyst Charlie O'Shea said, "not just for food retail, but for retail in general".

"Fresh foods are the final frontier for Amazon", Portalatin said.

The company unveiled plans on Friday to buy upmarket USA grocer Whole Foods Market in a massive $13.7 billion (€12.24 billion) deal.

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Whole Foods, which made its name retailing organic and fresh products, had been struggling recently with stepped-up competition from Costco Wholesale, Trader Joe's and other grocers. It also had announced a board shake-up and cost-cutting plan amid pressure from activist investor Jana Partners.

Groceries are already a fiercely competitive business, with low-priced rivals like Aldi putting pressure on traditional supermarket chains and another discounter, Lidl, opening its first USA stores just this week.

Whole Foods will join AmazonFresh for groceries, Amazon Prime for TV shows and movies, Kindle for e-books, Audible for podcasts and audiobooks, Echo to rival smart assistants like Apple's Siri, and IMDb for movie reviews, among many other subsidiary companies. Other retail and food distribution-related stocks in the USA and Europe, including Wal-Mart and Target, followed suit.

Canadians have few options for grocery delivery with a small number of companies like Grocery Gateway and a few large chains offering the service in limited locations.

Stanford University Marketing professor Wesley Hartmann said quality may not slip if the takeover comes to fruition because Amazon is incredibly efficient, while industry analysts have said Whole Foods is not. While both companies aren't headquartered here - check out Austin Inno for the deal's impact on Whole Foods' home base - the deal is certainly going to have an impact here and everywhere else across the country, if only due to their collective reach.

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■Kroger: The grocery store chain declined $2.27, or 9.2 percent, to $22.29. "Amazon is effectively saying that if retailers are going to tool themselves up with technology, then they will tool themselves up with a physical presence and high-street brand". "This gets Amazon straight up the curve with a credible, albeit upmarket, range", Bernstein said in the research note.

"It's probably like the ideal match right", Whitney Winchester said. That could change if Amazon not only cuts operational costs but passes those savings onto customers. Well, not anymore. In one fell swoop, Amazon founder Jeff Bezos has charged into the supermarket business with the US$13.7 billion (S$19 billion) acquisition of Whole Foods last Friday.

Americans have been slowly moving toward online grocery shopping. It has more than 400 stores in south of the border. Target tumbled by 10 percent and Walmart was down by 6 percent.

Walmart has been trying to address some of those online threats, pushing harder into online to build on its strength in its stores and groceries.

By coming under the Amazon umbrella, Whole Foods may develop new methods for distributing food that could also allow it to reach more customers, Eggers says.

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