Now they’re after grocery stores
$13.7B Whole Foods buy its biggest bet ever
Jeff Bezos has figured what Amazon needs — and it includes a steady supply of kale, quinoa and wild Alaskan salmon.
In a startling announcement Friday, the Seattlebased Web giant said it will buy Whole Foods for $13.7 billion — the largest acquisition by far in Amazon’s 22year history, dwarfing its $1.2 billion purchase of Zappos in 2009.
The surprise deal came as a relief for Whole Foods CEO John Mackey, who lately has been under pressure from Jana Partners to raise the fancy supermarket’s stock price. This week, Mackey griped to the media that the hedge fund was run by “greedy bastards.”
Jana, which took a 9 percent stake in Whole Foods in April, is set to clear upward of $300 million on its trade. Some analysts Friday speculated that a bidding war for Whole Foods might enlarge Jana’s bonanza further still.
But bagging Whole Foods also comes as a big relief for Amazon’s Bezos, whose high-tech efforts in food selling have met with hiccups — most recently in the glitchridden debut of its “Amazon Go” convenience-store prototype.
Despite its dominance in books, electronics, and its prowess selling streaming music and movies on its Prime service, the online behemoth’s Amazon Fresh grocery service hasn’t posed much of a threat to brickand-mortar grocers. That includes arch-rival Walmart, which is food retailing’s big- gest US player with an estimated 18 percent share of an $800 billion market.
But with the acquisition of Whole Foods and its 450 stores across the US, all of that is about to change, industry experts predict. Wall Street appeared to agree, as
the stock prices of major food retailers got hammered across the board Friday ( see article below).
“Amazon does not excel at procuring fresh foods, but Whole Foods does,” said supermarket expert Josh Goldberg, a managing director at Financo. “The two of them can do together what neither of them does well alone, and that is procure high-quality food at the right price.”
Some experts predict Amazon will be cautious with any further retail rollout, continuing to beef up the sophistication of its online operations.
But Richard Feinberg, a professor of consumer science at Purdue University, predicts that an Amazonowned Whole Foods will expand its chain “much more quickly because of the financial power of Amazon.”
Amazon “understands data mining and has the expertise to do it,” Feinberg says. “This will help Whole Foods understand its customer better and have the right products at the right price at the right time.”
Marc Wulfraat, president of MWPVL, a logistics and distribution consulting firm in Quebec, said buying Whole Foods will, in turn, beef up Amazon’s ability to deliver fresh food efficiently.
Whole Foods “has 11 distribution centers across the country,” Wulfraat notes. “Instead of Amazon buying groceries from other retailers like it does currently, a Whole Foods distribution center could send truck loads to the Amazon locations.”