Amazon's bid to become world's biggest grocer gets a big boost

Alicia Cross
June 20, 2017

"Amazon is the master at keeping as much margin as possible".

The shift started within minutes of the announcement online retailer Amazon would taking over the grocery chain Whole Foods.

"The ramifications for all of retail are seismic - not just retailers that sell grocery, but for everyone", Gordon Haskett analyst Chuck Grom said.

The almost $14 billion deal is the largest purchase in Amazon's history.

"We want to assure you that Amazon shares Whole Foods Market's deep commitment to quality and customer service".

Amazon's shares were up 3 percent at $993.40, adding more than $14 billion to its market capitalization.

The acquisition is seen as a move by Amazon to more aggressively target the grocery section of retail has proven more stubbornly resistant to digital channels. It comes out to roughly $42 a share - a 27% premium on its closing price on Thursday.

- Sysco. The food distributor sank $1.15, or 1.2 percent, to $54.38.

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As Recode smartly pointed out, the deal won't just give Amazon control of a major grocery chain, it will also give the ecommerce giant access to "more than 400 stores to use as delivery hubs". "A lot of people will love that", said Whole Foods customer Brad Anderson. You point out that 24 percent of millennials bought something from Whole Foods previous year.

Amazon has been looking at shop layouts that could allow traditional in-store purchase, online ordering with on-site pickup, and home delivery, using store warehouse space as a distribution point, Ladd said.

Amazon is considering extending the cost-cutting effort with the no-checkout technology it's developing at its Seattle convenience store, "AmazonGo", according to the person familiar with the matter, who asked not to be named because the plans are private. In addition to other natural and organic grocers, it has cited pressure from restaurant chains, meal-delivery companies and traditional supermarkets such as Kroger.

Another analyst, Phil Lempert of Supermarketguru.com, said the deal is a blow to grocers across the country, both big and small.

Jeff Bezos-led Amazon is all set to acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately $13.7 billion, including Whole Foods Market's net debt. Whole Foods will keep operating stores under its name and John Mackey will stay as CEO, with headquarters in Austin, Texas.

Hartmann said he expects the online retailer to introduce some efficiencies to Whole Foods' operation.

Such changes may be a long way off, and Amazon has plenty of time to change its strategy, with the $13.7 billion deal not expected to close until the second half of the year. In the course of a day, Amazon's attempts to become the world's biggest retailer (online and off) took a pivotal leap forward. It has expanded from a book seller into a merchant of almost all consumer products, as well as producing videos. Amazon is all about technology, and it's very likely that technology will be applied to the Whole Foods shopping experience. However, Whole Foods does not have access to Instacart's financial numbers and analytics. "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.

Goldman Sachs Group Inc advised Amazon on the deal and provided bridge financing.

Other reports by Free-Prsite

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