Markets

Can Amazon persuade enough people to buy fresh food online?

Can Amazon persuade enough people to buy fresh food online?

NEW YORK-Online juggernaut Amazon is buying Whole Foods in a deal valued at about $13.7 billion, a strong move to expand its growing reach into groceries.

Last Friday, when Amazon announced the acquisition, shares of Walmart as well as Target, Kroger, and Costco all tumbled.

More hubs means quicker and fresher delivery, which will bolster Amazon's existing grocery delivery service, AmazonFresh.

"Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy", said Jeff Bezos, Amazon founder and CEO, in a statement.

These early forays into groceries provide clues for what consumers could expect from a combined Amazon and Whole Foods, a deal expected to close later this year. It comes out to roughly $42 a share - a 27% premium on its closing price on Thursday.

The coming years are likely to see a lot of disruption, not only from Amazon but from traditional grocers shifting more sales online.

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.




It's also been testing automation technology at a Seattle convenience store that's now open only to Amazon employees. "Amazon has moved squarely onto the turf of traditional supermarkets and poses a much more significant threat".

Amazon's acquisition of Whole Foods Market sent the stocks of grocery store operators and other companies that compete with Whole Foods plunging Friday.

Analysts viewed the deal with Whole Foods as a seismic event for the sector.

Whole Foods recently overhauled its board and redoubled cost-cutting efforts, seeking to change a high-price image that has tagged it with the nickname "Whole Paycheck". Anderson advised Whole Foods alongside senior Evercore bankers Eduardo Mestre and William Hiltz. Whole Foods, whose fleet of stores now numbers more than 430 locations, has found it hard to attract more mainstream consumers as Walmart and other large chains have stepped up their sales of natural and organic products.

This acquisition makes the online retailer a major player in the brick-and-mortar grocery store arena. Shares of Whole Foods rose 29 percent, to $42.68, above Amazon's offered price. Whole Foods was, however, costlier in 1992 as compared to today (keep the times in check) and it has been reducing the prices to keep the sales in check.

Apparently longtime CEO John Mackey will stay the CEO and the headquarters will stay in Austin.

"This deal should leave no doubt that Amazon is deadly serious about dominating all aspects of retail", said Mr Paul Cuatrecasas, chief executive of Aquaa Partners, a London-based investment banking firm, in an e-mail.


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