25 June, 2017
In an announcement that has jolted the shares of other grocers, Amazon will acquire Whole Foods for $42 per share, all-cash, at a value of approximately $13.7 billion. Target has built out a major grocery business within its stores, and if Amazon upends that either through its delivery service or its brick-and-mortar locations, it could threaten foot traffic. Walmart is very much taking on Amazon and utilising its network to develop ecommerce and click & collect at its thousands of stores.
Some customers said they believe Whole Foods shoppers will quickly adapt if Amazon does widen the online grocery shopping experience. At least in the near future, Amazon probably won't want to touch that, said Mark Cohen, a professor at Columbia Business School who studies retail.
Walmart, which has the largest share of the USA food market, has already been pushing harder into e-commerce to build on strength in its stores and groceries. Amazon, on the other hand, saw an increase in its share value of around 2.4 percent with around $11 billion adding to its market capitalization.
Amazon has a deal to buy Whole Foods, the online retailer announced on Friday. It comes out to roughly $42 a share - a 27% premium on its closing price on Thursday.
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. Earlier this year, Oppenheimer valued Whole Foods in the mid $40-range in a possible buyout.
As Recode first reported past year, Whole Foods has made an investment in Instacart, though it's believed to be a small one and does not involve a board seat.
In the United Kingdom, where there are Whole Foods stores, sell-offs wiped out almost $2billion (£1.5billion) from the value of stocks at grocers Tesco, Sainsbury's and Marks & Spencer, according to This Is Money. Until now, Amazon has largely focused its grocery efforts around its Amazon Fresh subscription service, which promises quick food delivery for online orders. That is the eighth Amazon bookstore now open around the US and more are expected in the future.
It can be expected in the future to see a price war in the grocer industry, and an increase in online business as Amazon's purchase has seemed to create a greater need for other companies to infiltrate this sector. Whole Foods chief executive John Mackey would remain CEO after the purchase and the company would keep its headquarters in Austin, Texas.
Under the new arrangement, Whole Foods Market according to Amazon, will continue to operate the Whole Foods Market brand and source from trusted vendors and partners around the world. Whole Foods, a pioneer in natural and organic products, has 456 stores, which young, high-end shoppers flock to.
The Amazon and Whole Foods news even had an impact overseas. The acquisition price implies a trailing 12-month price-to-earnings multiple for Whole Foods of 31 times, versus a 14.4 average for the S&P 500 Food Retail index.
