Grocers facing a united Amazon-Whole Foods must adapt

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20 June, 2017

Any buyer of Whole Foods would likely argue that it was not in the same market, said Alden Abbott, an antitrust expert with the Heritage Foundation.

Whole Foods will eventually be part of Amazon CEO Jeff Bezos's empire. "If they bring ordering groceries online in a very efficient way, you'll have a very powerful tool to know if you're getting the best price".

"It was truly love at first sight", said Mackey. "It is really fascinating to think how the landscape could change if this deal goes through", Giammona says.

Whole Foods, often derided as "Whole Paycheck" for its high prices, could see its reputation change if Amazon, a master at undercutting its brick-and-mortar rivals, passes any savings from automation to customers.

Amazon's offer of $13.7 billion, representing a multiple of 10 times earnings before interest, tax, depreciation and amortization, could possibly be raised to 11 or 12 times, according to Kevin Dreyer, co-chief investment officer at Gabelli Funds, which holds Whole Foods shares.

She conceded it might be tough to outbid Amazon, but it could still be worth it to drive up the price and make Amazon pay more. The Whole Foods chain has 460 stores across the US. Amazon is once again shaking up the retail sector, with the announcement Friday it will acquire upscale USA grocer Whole Foods Market, known for its pricey organic options, in a deal that underscores the online giant's growing influence in the economy. But Parikh added that activist investors have a stake in Whole Foods.

Short said in the report that "in theory, all retailers that sell food and compete with Amazon" could come up with their own offer for Whole Foods because they may "have too much to lose not to bid". "I'm shopping here anyways", shopper Alina Gura said at a Whole Foods in West Hartford, Connecticut. Whole Foods will be a lab of sorts for Amazon.

"Dominant players like Walmart, Kroger, Costco and Target now have to look over their shoulders at the Amazon train coming down the tracks", said Moody's lead retail analyst Charlie O'Shea. She raised her price target on the company to $48 - almost 15 percent higher than Amazon's bid.

Since the deal also gives Amazon another way into shoppers' weekly shopping habits, success in the grocery arena would function as a de facto advertisement for its lucrative Prime subscription service.


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