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Amazon buying Whole Foods in bold move into brick and mortar

17 June, 2017, 08:42 | Author: Paula Vaughn

Amazon.com Inc. will pay $42 per share of Whole Foods Market Inc.

Although Amazon is best recognized for its online purchasing platform, it has dabbled in brick-and-mortar stores in recent years. Walmart, by comparison, sold 17.3 percent of the country's groceries, while Kroger sold 8.9 percent, according to Bloomberg data.

Whole Foods' stock soared 27 percent.

With Whole Foods, Amazon gets an established business that it can transform through its technology and supply network expertise.

Small-company stocks fell more than the rest of the market. While it's true that many companies Amazon has acquired have continued to operate independently, it's hard not to wonder whether we'll start seeing Kindles and Amazon Echos popping up at Whole Foods. So Atlanta grocery chains, like department stores, could find themselves closing some that are too close to the line.

"Amazon doesn't buy fixer-uppers, they buy assets that they think are high quality that can stand on their own, and then they maybe look for incremental synergies", Mahaney said. It could have built up its groceries business without acquisitions, said Neil Saunders, managing director of GlobalData Retail, but that would have been costly and time-consuming. Meanwhile, the more than 460 Whole Foods stores in the U.S., Canada and the United Kingdom could be turned into distribution hubs - not just for delivering groceries but as pickup centers for online orders.

The deal is expected to close later this year, with Amazon taking on Whole Foods' debt and paying $42 per share.

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JPMorgan analyst Doug Anmuth believes that the buyout would allow Amazon to be more innovative in delivering the customer buying experience in Whole Foods stores. The company's decade-old AmazonFresh delivery service has been slow to take off, accounting for 0.8 percent of all grocery purchases a year ago.

Whole Foods Market's share price rose more than 29% on Friday.

Shoppers will continue to have access to Whole Foods through Instacart while the Amazon deal is going through the approval process, a source familiar with the partnerships told CNN Tech. Whole Foods Market had been the target of sale rumors for two months, boosting its stock. It has more than 400 stores in south of the border.

In Whole Foods, Amazon is acquiring a company that has recently come under pressure from investors for its lagging performance.

So if Amazon guides Whole Foods into lower prices, it stands to combine the chain's demographic strengths with the muscle of its online business, said Darren Seifer, analyst for the NPD Group. Whole Foods co-founder John Mackey will remain Whole Foods' chief executive.

[RELATED: Join us at Microsoft, and learn tactics and strategies to conquer all your biggest communications challenges.]Whole Foods Market has been satisfying, delighting and nourishing customers for almost four decades-they're doing an incredible job and we want that to continue. However, Whole Foods does not have access to Instacart's financial numbers and analytics.

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