When Amazon.com Inc. completes its acquisition of Whole Foods Market Inc. And Whole Foods shares climbed 29 percent to $42.68 Friday - more than the $42 deal price - indicating investors expect another bidder may emerge. And shoppers may be skittish about having Amazon take over one more element of their shopping experience.
The deal represents a dramatic turn in strategy for Amazon, which has offered food delivery through its Fresh service for a decade but has not made a major dent in the US$700 billion grocery market.
Bloomberg News and others report that Amazon will buy Whole Foods for $US13.7 billion ($18 billion) in cash.
Whole Foods Market is a supermarket company founded: September 20, 1980. It also had announced a board shake-up and cost-cutting plan amid pressure from activist investor Jana Partners.
The grocery chain, known for its organic options, had been facing increased pressure from rivals, including European grocery chain Lidl, which is planning to enter the East Coast market, along with Aldi and Trader Joe's. Whole Foods itself had launched an offshoot chain named after its "365" private label brand in a nod to the popularity of no-frills chains. The parties expect to close the transaction during the second half of 2017. "That's what shoppers are looking for", he said.
"Amazon has an opportunity to give Prime members automatic entry in a new Whole Foods benefits program", added Franson. To its credit, Amazon has been trying out grocery store concepts and pickup services in its hometown of Seattle, but the scalability of those projects has remained in question. Shoppers skip the checkout line, and their Amazon accounts get automatically charged. "Most of us like to see what we're buying, and it's a good store, but we just wouldn't buy online", he said. Check out what they had to say in the video above.
The deal, which began when Amazon CEO Jeff Bezos approached Whole Foods CEO John Mackey about the aquisition, was brokered and advised by Goldman Sachs Group Inc.
What's more, Whole Foods' roughly 30 million (typically affluent) customers are also likely to be Amazon Prime customers already, which further strengthens the connective tissue between the two brands.
"This might be an opportunity for consumers who have felt that Whole Foods is inaccessible", said Lauren Beitelspacher, a marketing professor at Babson College in MA. The electronic commerce company dominates the tech industry while Whole Foods Market is the star among the groceries.
Adrienne Anderson, at a Whole Foods in Savannah, Georgia, says she shops at Whole Foods nearly exclusively for meat and fresh produce "because of the quality and selection" and because fruits and vegetables are locally sourced. Or someone who buys granola bars monthly from Whole Foods and paper towels every other week from Amazon might be offered the items in a single shipment, delivered to the door. "If shoppers are going to allow a company, a retailer, to pick their meat, their produce and their seafood, Whole Foods is probably at the top of the list of retailers with the best reputation across the country".
Ginny Byrne of Plainville said she uses Amazon, finding the shopping to be easy.
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. "And now Amazon has access to customers who may be open to home delivery".
Hetu said Amazon isn't likely to bring that to Whole Foods right away but could deploy pieces of it to further cut costs.
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