Amazon to buy Whole Foods for U.S. $13.7 billion

Posted June 19, 2017

The retail giant, which is due to arrive in Australia in the next 12 months, on Friday bought United States grocery store operator Whole Foods in a deal valued at about $US13.7 billion ($18.0 billion), including debt. Whole Foods has seen its sales slump and recently announced a board shake-up and cost-cutting plan amid pressure from activist investor Jana Partners.

Amazon started its experiment with brick and mortar stores when it opened a store in Seattle called Amazon Books in November 2015.

Shares of Target, Wal-Mart and Costco were all trading in red territory by late Monday morning, down around 3 percent, 0.5 percent and 2 percent, respectively.

"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".

Most concern after the acquisition announcement was for Whole Foods' cashiers. They'll have to step it up, but if they improve their service without increasing the price, that hits margins.

If you don't know anything about Bezos, take an hour to watch CNBC's Amazon Rising documentary and you'll understand why AMZN stock is a keepsake for decades to come.

In the grocery segment, Amazon could cut costs by implementing new technologies like those it is testing for its Amazon Go store format. The company has also made it increasingly easy for its users to go into just about any store, scan a barcode and compare that retailer's prices to Amazon's.

The deal raises the prospect of Amazon potentially acquiring an existing distribution network from one of the independent players in Australia's grocery market, says Gary Mortimer, a retail expert and associate professor at Queensland University of Technology.

"A few years ago, people were talking about the death of brick-and-mortar, and Amazon's up because they're buying a brick-and-mortar. So theoretically you could get 5-minute delivery".

"The thinking is it's a very complex area that everybody's been testing and trying to make something work, but they haven't been able to figure it out and that Amazon, now they're here, they can make it work", Agnese said. It has $7 billion in cash and cash equivalents on its balance sheet and could easily borrow billions more.

Founded in 1978 in Austin, Texas, Whole Foods Market is the leading natural and organic foods supermarket, the first national "Certified Organic" grocer, and uniquely positioned as America's Healthiest Grocery Store™. Whole Foods will continue to operate under its own brand, with the acquisition expected to close sometime in the second half of this year.

"Amazon could bring technology to all Whole Foods locations, or it could absorb Whole Foods into AmazonFresh". Something bigger is at play, despite what its PR would tell us.

Meanwhile, Whole Foods has a partnership with Instacart, a company that uses "shoppers" who pick up items in stores for customers who have ordered groceries online.

Not anymore. In one fell swoop, Amazon founder Jeff Bezos charged into the supermarket business with the $13.7 billion acquisition of Whole Foods.