Takeaways From Amazon's Acquisition Of Whole Foods

Posted June 22, 2017

Whole Foods has made some overtures to lower prices over the years, such as launching a handful of smaller stores stocked with mostly store brands under the "365 by Whole Foods Market" banner.

The deal was set in motion when Mackey and fellow executives Jason Buechel, Ken Meyer and David Lannon flew up to Amazon's Seattle headquarters, according to a transcript of a town-hall meeting held Friday with employees.

Amazon, which is now focused on food delivery following the Whole Foods deal, could leverage GrubHub's delivery infrastructure in its grocery-delivery efforts, the analyst noted. He said at the town hall that the company had hired Boston Consulting Group to help Whole Foods trim $300 million in costs.

Cowen senior internet analyst John Blackledge, also on "Squawk Alley", didn't say whether he thought Grubhub could be on Amazon's takeover list.

For years now, the name Whole Foods has been synonymous with high-margin health food.

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Amazon has shed little light on its plans for the chain of stores since it announced the deal. Amazon ultimately wants to sell consumers virtually everything they ever want to buy, and to do so it needs to offer convenience, value, and compelling products and services at every turn-including Whole Foods stores. I think we coulda talked for 10 hours. "I dreamed that we merged with Amazon", he said.

"I think the most important aspect of the purchase is that it gives Amazon 440 refrigerated distribution centers in the US and probably puts their distribution presence within 10 miles of 80% of the population and within 90% of the wealthy population", he wrote in an email to CNBC. President Di Di Chan adds, "What makes our solution different is that it works across different formats and is so user-friendly that even my grandmother loves it". There has been plenty of speculation that if Amazon really wanted to make a presence in the grocery space, it would need to do something major in the brick-and-mortar space.

Cantor Fitzgerald views Amazon's acquisition of Whole Foods as a potentially transformative transaction for Amazon and for the industry overall, as it firmly establishes Omnichannel commerce as a the new standard in retail. This is not- this is not a Tinder relationship.

"Highly likely", said Lloyd Greif, whose investment firm Greif & Co. specializes in mergers and acquisitions but isn't involved with Whole Foods. In his note, Turner also suggested more far-fetched integrations are possible, such as Dash reordering buttons for users' favorite restaurants.

Amazon would also look to change Whole Foods' inventory, introducing its own private-label products to replace items deemed too expensive to have mass appeal, the person with knowledge of the matter said.