Published: Mon, June 19, 2017
Hi-Tech | By Ellis Neal

Amazon buys supermarket chain Whole Foods Market

Amazon buys supermarket chain Whole Foods Market

It also is expected to hasten existing efforts by grocers to make shopping more smartphone-ready, sell more private label and specialty foods and overcome the hurdles of home-delivery of groceries. On Friday, June 16, one of the world's biggest retailers, Amazon, purchased America's largest organic grocery store chain, Whole Foods, leading to equal parts anxiety, celebration and cajoling. It is a market that remains stable even in times of economic stress as consumers will always need to buy food, making it a steady market to invest in.

The tech giant's $13.7 billion acquisition of the upscale, niche grocery chain was described as a seismic event by industry analysts, despite Whole Foods' relatively small size.

The acquisition threatens traditional grocers such as Kroger, which were already reeling from food deflation and encroachment from new competitors like German discounters Aldi and Lidl.

"This is a game-changer", Zachary Fadem, an analyst at Wells Fargo, said. The company has already disrupted offline retail in various categories. Wedbush Securities analyst Michael Pachter said Amazon might get customers over those fears if they know the delivered items are the same as those they would find at the local store. None other than John Mackey, Whole Foods chief executive officer, once predicted that Amazon's quest for grocery deliveries would be "Amazon's Waterloo".

The $US42-a-share takeover, a 27 per cent premium to the Whole Food Market's closing price on Thursday, catapults the e-commerce giant into hundreds of physical stores and fulfils a long-held goal of selling more groceries.

Lidl has about 10,000 stores in 28 markets worldwide and produced roughly $95 billion in revenue past year, according to consulting firm Kantar Retail.

"I think this acquisition is a concern", he said. Whole Foods, for example, generated a net margin of 3.2% a year ago.

A survey conducted by research firm InfoScout also indicated that consumers in Lidl's debut states are now shopping for groceries at Wal-Mart, and 90 percent of those customers are likely to give the new stores a try. But WFM has virtually no online presence and is only the 11th largest grocery store chain in the us and United Kingdom, with 460 stores and 18 million square feet of retail space.

Initial public offering (IPO) registrations in the U.S. The power of a physical presence on the high street to grow a brand's reputation and credibility is particularly important in grocery, where consumers want to be able to see the quality of the items they're buying first hand. More than 57 percent of Target's regular customers use Amazon's Prime membership program, according to consultancy Magid Associates, compared with 42 percent of all consumers.

"There's a couple companies experimenting with driverless cars, so it would make sense for them to be in that space", Eisenberg said.

The one Amazon Go location opened past year in Seattle was a sort of alpha test, open only to Amazon employees, but the company said when they announced the idea that they would be opening more stores of the same type to the general public "in early 2017". Sprouts didn't respond to a request for comment.

Shares in Ocado leapt this morning as investors began to speculate following Amazon's $13.7bn (£10.7bn) takeover of upmarket USA grocer Whole Foods on Friday. "There could be some money left on the table", he said in a note to clients.

Amazon's strong record of keeping prices low adds pressure on supermarket chains that may be forced to consolidate to cut costs in a bid to keep up.

Like this: