Health Care

Amazon to Acquire Whole Foods Market for $13.7 Billion

Amazon to Acquire Whole Foods Market for $13.7 Billion

Whole Foods customer Bethany Capels, 34, of Mendenhall, Miss., loads her Whole Foods Market purchases in her vehicle in Jackson, Miss., Friday, June 16, 2017.

Amazon is buying Whole Foods in a deal valued at about $13.7 billion, a stunning move into brick-and-mortar retail that sets the stage for more radical store experimentation and intensified competition with grocery rivals.

On top of the Whole Foods Market deal, Amazon has unveiled plans for a constellation of book shops around the U.S. - stepping in to replace the very bricks-and-mortar booksellers it drove out of business with its online offerings. As more and more grocery stores have begun offering organic produce, Whole Foods is no longer people's only option. The parties expect to close the transaction during the second half of 2017.

Shares of Walmart (WMT), the leading USA food retailer, and Kroger (KR), the largest traditional operator of supermarkets, tumbled 5 percent and 10 percent, respectively, in Friday trading.

Pachter said that even if Amazon gets 20 million members of its Prime loyalty program to pay $15 a month extra for AmazonFresh grocery-delivery service, that's 20 million not going to traditional supermarkets. Amazon also offers grocery shipments elsewhere, but that's tough with perishable foods.

The stock prices of large food retail chains, such as Costco, tumbled a bit. Amazon will retain the Whole Foods brand, and CEO John Mackey will stay in his job. "We'd like to see what we're buying", he said. Whole Foods itself had launched an offshoot chain named after its "365" private label brand in a nod to the popularity of no-frills chains.

"Large grocery stores like Kroger and Albertsons will be especially affected", said Madeline Hurley, senior analyst at IBISWorld.

Ginny Byrne of Plainville said she uses Amazon, finding the shopping to be easy. Walmart, which has the largest share of the US grocery market, is ramping up its grocery services as a way to fuel online sales. That is expected to change, according to Stifel Nicolaus & Co. analyst Marc Astrachan. So there's lots of room to grow.

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Amazon, meanwhile, has been expanding its reach in goods, services, and entertainment.

The message is this: The brick-and-mortar retail business that pioneered organic, fresh food and the country's dominant e-commerce company makea powerful combination. The offer price represents a hefty premium of 27 percent from WFM's stock closing price on Thursday. But it has been struggling to find a profitable model.

What do you think it will be like to walk into a Whole Foods 10 years from now? "People don't know what they're having for dinner when they leave the office at the end of the day and don't have it in the refrigerator". The stores could teach cooking skills, hold classes and educate about food.

"I like picking out my own stuff", Hall said. "Amazon gains expertise in grocery and organics in particular".

And shoppers are a picky bunch, saying they would be looking for the best prices, good quality and convenience when it comes to online food delivery.

The deal for Whole Foods, however, isn't without risks for Amazon.

"Instead of deliver to my home, why not just come down here?"


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