Lunedi, 20 Agosto, 2018

Amazon buying Whole Foods in $13.7 billion deal

Sveva Terracina | 20 Giugno, 2017, 00:23

"This shows that online is going to be very dominant in the grocery business - and very quickly", said former Whole Foods executive Errol Schweizer.

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.

In the USA "this adds 440 refrigerated warehouses within 10 miles of probably 80% of the population", said Michael Pachter, an analyst for Wedbush Securities.

Expanding into the grocery market would not only bring profits to Amazon but a room for great expansion.

That said, there is some speculation that Amazon could end up changing its plans and ultimately use advanced technology inside Whole Foods stores.

Since Whole Foods is a publicly traded company it could be scuttled if another bidder decides to offer a lot more money for the grocery chain. Stone sees the possibility that Whole Foods CEO John Mackey could do what he's wanted to do, expand the chain to about 1,000 stores from its current stable of more than 460.

Interestingly, Mackey called activist Jana Partners "greedy bastards" in an interview released on Wednesday. "That is the reality today at Amazon, and it will no doubt become the reality at Whole Foods".

The Amazon-Whole Foods combination could put even more pressure on those chains and other big grocery sellers.


Amazon's deal also gives it a brick-and-mortar footprint around the U.S.

Whole Foods' conversations with banks took place before the company was approached by Amazon, so Goldman was also vying for a role with Whole Foods. "Either way, it's good for consumers like myself", said Di Wu, a NY resident in her early 30s who is a member of Amazon's Prime fast-shipping club and who shops at Whole Foods at least twice a week.

But is Amazon turning into a monopoly?

With this strategy, Amazon is planning to make the prices competitive and attract "more low- and middle-income shoppers" to its retail stores, which may still be located in posh localities.

"The losers? Just about every traditional grocer", Lempert said in a note, "and companies like Instacart, who built their business on Whole Foods".

But a person close to Instacart told Bloomberg that the startup thinks it can still hang on to its Whole Foods partnership. How? That could change if Amazon not only cuts operational costs but passes those savings onto customers. It wasn't until 2015 that the number of pure grocery stores actually started to decline, according to government numbers, and then only slightly. Bank of America Corp also provided financing to Amazon, while Evercore Partners Inc advised Whole Foods. For customers, this could mean better prices and delivery options. Kroger sank 11.48 percent, while Costco dropped 5.64 percent.

And it shakes up a US grocery industry that has been struggling to keep up with growing competition, both in stores and online.

Amazon boasts itself as No. 2 on Fortune's 2017 list of World's Most Admired Companies and Whole Foods as No. 28. The deal is expected to close later this year.

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