Amazon-Whole Foods Marriage Could Disrupt Grocery Business (NASDAQ:AMZN)

Marco Green
June 26, 2017

At least one local shopper at the Andover Whole Foods store had a much different perspective on the deal.

Excluding debt, the deal is valued at US$13.39 billion, based on 318.9 million diluted shares outstanding as of April 9.

Pressure from activist investors got so high that Mackey told Texas Monthly magazine recently that "they're greedy bastards, and they're putting a bunch of propaganda out there, trying to destroy my reputation and the reputation of Whole Foods, because it's in their self-interest to do so".

While the deal is still to be executed, Whole Foods has pointed out that the brand name would remain the same in the stores, headquarters will remain in Austin and John Mackey will stay on as CEO. Although Amazon's plans for Whole Foods is not clear, the acquisition has some wondering what will happen to the chain's existing stores.

Walmart and Amazon have had their sights on each other for years, each aiming to be the dominant seller of goods - however consumers of the future want to buy them.

Armed with giant warehouses, shopper data, the latest technology and almost endless funds - and now with Whole Foods' hundreds of physical stores - Amazon is set to reshape a US$800 billion grocery market that is already changing rapidly. Amazon's various forays into selling groceries - Amazon Fresh, Amazon Pantry, Prime Now - will get a boost from Whole Foods and its affluent customer base. "The checkout-free experience in Go is not yet ready for prime-time as it is still only being beta-tested by AMZN employees, but we believe the Go technology could be rolled out to physical retail, including Whole Foods, over time".

Meanwhile, Whole Foods stock soared on the news, jumping almost 30 percent by mid-morning.

That development challenges big-box retailers Wal-Mart Stores Inc. - the nation's biggest grocer - and Target Corp., whose food business has floundered of late. It announced last Friday that it had agreed to buy online clothing company Bonobos for US$310 million. Below, members of the Food & Dining team share their ideal merger scenarios - some humorous, others honest, and many touching on the role Amazon could play in serving food deserts. The turbulence highlights the fear Amazon may disrupt the brick-and-mortar retail world in massive ways.

The deal, expected to close in the second half of this year, gives Amazon -- which has been experimenting with various physical store concepts to make establish itself as a food purveyor - an instant expanse of 460 high-end stores across the USA, in Canada and in the United Kingdom.

Some investors may be wondering if Amazon will disrupt grocery stores the way it upended the bookstore business. "A lot of people will love that", said Whole Foods customer Brad Anderson.

Amazon's stock was up 2.9% in midday trading to $991.90. And the key measure that retailers look at to gauge their health, revenue at stores open more than a year, has fallen for seven quarters in a row. Year-to-date, the stock is up almost 39%.

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