Some Whole Foods fans are anxious over what the Amazon deal will mean.
Say “Whole Foods” and some envision a gastronomic nirvana, overflowing with a healthy bounty worth a premium price. Others shun the store as an overpriced monument to yuppie indulgence.
For those in the love-it camp, like Shea Stevens, these are anxious times. A $13.7 billion proposed takeover by Amazon.com has Stevens, a 25-year-old resident of the Dallas area, wondering how the chain’s foodie credentials will survive. After beginning as a small specialty store in Austin, Whole Foods is now poised to play a central role in Amazon’s headto-head competition with discount giant Wal-Mart.
“I just don’t want Whole Foods to change how it is fundamentally,” Stevens said.
Stevens shared a sentiment expressed by other aficionados: excitement about the convenience of getting groceries from the store delivered to her mixed with concern about changes to a company that helped pioneer the organic-food market in the U.S.
Nan Griffith, a retired teacher, shops at a Whole Foods outside Detroit because of its selection of vegan products, including niche brands that aren’t widely available elsewhere. Incubating smaller local brands has been part of the Whole Foods cachet for years, and she wonders if that culture can survive inside the embrace of a retail powerhouse.
“It’s like Amazon is taking over the world,” she said.
Amazon, like Walmart, is known for using massive scale to offer low prices on everything from shoes and shirts to electronics and books. U.S. shoppers have been slow to take to online grocery shopping: Only 1 percent are purchased online. Amazon, which has tried for roughly a decade to crack the code on delivering fresh food, wants to change that. And buying Whole Foods would give CEO Jeff Bezos a readymade cadre of customers.
Amazon expects to reduce headcount and change inventory to lower prices and make Whole Foods competitive with Wal-Mart and other bigbox retailers, according to a person with knowledge of the company’s grocery plans. The goal is to shed the upscale grocer’s reputation for being too expensive. At the same time, premium products are a big part of what draws shoppers to Whole Foods.
Whole Foods, battered in recent years as conventional retailers muscled into its turf with lowerpriced organic products, has actually already begun to change. Facing its worst crisis since going public in 1992, CEO John Mackey has been trying to reduce expenses and lower prices while preserving the chain’s high-end reputation. Mackey has faced mounting pressure from shareholders. The Amazon deal was announced last week amid the potential for a proxy fight for board control.
The transaction isn’t expected to close until the second half of the year, and Whole Foods shares soared 29 percent to $42.68 Friday — more than the $42 deal price, indicating investors anticipate another bidder could emerge. Even still, analysts were skeptical of the idea that Bezos plans sweeping changes that would damage the Whole Foods ambiance. On Monday, the stock closed at $43.22.
“He’s buying it for all the intangibles that go with the brand; it has high emotional appeal,” said Thomas Ordahl, strategy officer at the branding firm Landor Associates. “He’ll be very careful tinkering with anything that could hurt the value of the brand.”