Whole Foods Markets to be Acquired by Amazon

Andrew Cummings
June 20, 2017

In 2016 alone, Whole Foods had sales of $16 billion across its more than 460 stores in the United States, Canada and the United Kingdom.

Amazon's deal to buy Whole Foods comes as Wal-Mart is engaged in a price war with rivals such as Aldi and Kroger in the grocery segment, which makes up about 56 percent of Wal-Mart's revenue.

The deal has the possibility to be "transformative", Moody's lead retail analyst Charlie O'Shea said in a note, "not just for food retail, but for retail in general". It also means big changes are ahead for the grocery business.

The S&P 500's retail and food categories were hit particularly hard by the news - especially retail businesses who have expanded into the grocery realm in recent years.

In response to Amazon's news, Walmart told Q13 News that the company is still in a great position, with more than 4,500 stores across the country.

"Dominant players like Walmart, Kroger, Costco, and Target now have to look over their shoulders at the Amazon train coming down the tracks", O'Shea said.

The shift to younger shoppers over time is expected to play a part in the transformation of online grocery shopping, he said. When they walk out of the store, the payment is instantaneous; no more waiting to checkout, which is the biggest complaint that consumers have of grocery stores.

The supermarket chain will continue to operate stores under the Whole Foods Market brand.

"This will definitely make the market more competitive", she added.

The announcement of Amazon's largest acquisition yet sent stock prices for major grocery chains tanking Friday morning.

Amazon already has made inroads into the supermarket business with its AmazonFresh grocery delivery service and a prototype checkout-free Amazon Go brick-and-mortar store, so far only open to employees. Whole Foods, whose fleet of stores now numbers more than 430 locations, has found it hard to attract more mainstream consumers as Walmart and other large chains have stepped up their sales of natural and organic products. It also had announced a board shake-up and cost-cutting plan amid pressure from activist investor Jana Partners.

Amazon is a beast in the world of online retailers.

Amazon could cut costs if the technology gets good enough to deploy at Whole Foods locations. With a $13.4 billion purchase, Amazon is stepping up its game and hoping to get an even stronger foothold in the retail market. It now delivers fresh food on demand and opening test stores in Seattle. It was recently granted a patent for technology that would block shoppers from comparing prices using their mobile devices while they are in stores.

"Amazon's brutal vision for retail is one where automation replaces good jobs".

"I'm a little concerned that the culture might change, the Whole Foods culture, but I'm kind of excited to see what Amazon's going to do with the brand", Hiddeman said.

Whole Foods and Amazon both have significant warehouses in Texas.

That's frustrated investors saddled with a drop of almost 43 percent from the start of 2014 through Thursday, while the rest of the stock market marched 32 percent higher to record heights. Instacart allows some retail partners to take small investments in the company, and Whole Foods owns less than 1%, the source said. 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.

John Mackey will remain CEO of the company.

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