Amazon-Whole Foods deal fallout

Posted June 20, 2017

News of Amazon.com Inc.'s (AMZN) bombshell $13.7 billion deal to buy Whole Foods Market Inc.

He said today the impact or benefit to the candies and snacks category from Amazon's Whole Foods acquisition will mainly depend "whether Amazon will look to keep the two businesses separate, or if they look to integrate the models in some way". Its $230 billion market value dwarfs listed US grocers, including Target, Kroger and Sprouts Farmers Market, as well as private Albertsons.

Those of us in the industry have known for a while that Whole Foods has been pressured to sell by its activist investor Jana Partners and mutual-fund manager Neuberger Berman, and rumors of potential deals with everyone from Kroger to Albertsons have been bandied about. Amazon might also be partial to companies whose retail footprints can easily double as Amazon order pickup locations and/or showrooms for the company's products. Amazon could provide the financial capital and tactical ability to build that into something big.

He said: "We think the deal says that entry into food retail from the outside is just too hard, but the limitations of the store pick model mean its market share progress might still be subdued short-term".

The Apple Watch app for Whole Foods included shopping list functionality (as pictured above), allowing iOS app users to create shopping lists that sync automatically to the Watch for easy viewing while walking around the store shopping.

That kind of cashier-less technology could help Amazon reduce its headcount as well, as Bloomberg cites an insider who says the company will be looking to cut staff to help save money on labor costs.

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Whole Foods, often derided as "Whole Paycheck" for its high prices, could see its reputation change if Amazon, a master at undercutting its brick-and-mortar rivals, passes any savings from automation to customers.

Whole Foods has 430 stores, but after the acquisition, it will operate 350 million stores because they will be on every desktop, Feinberg says.

Will my neighborhood Whole Foods disappear? That's business that comes right out of traditional grocery retailers. In an email to customers, the company said it planned to maintain the same standards under Amazon, including bans on artificial flavors and colors.

Whole Foods' brick-and-mortar real estate, moreover, could potentially be of use to Amazon as it seeks to grow its distribution capabilities, Maute added. Whole Foods' private-label 365 brand is well received by consumers, but it doesn't now have that much penetration. Fein said that Amazon could eventually do well by targeting consumers willing to pay cash for generic drugs through discount coupons, either because they do not have insurance or could access a cheaper price that way. "This competitive pressure is due to proposition, geography and audience overlap with Whole Foods and Amazon".

While Wally's been trying to catch up in the the digital department by acquiring hip online clothing brands, Amazon is coming in hot from the other side of the fence - growing from an online model to having a physical retail presence across the country.

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.