Amazon Buys Whole Foods

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Whole Foods Store Front/Wikimedia Commons

Retail giant Amazon will further expand its economic empire with the $ 13.7 billion buyback of US supermarket brand Whole Foods, which faces consumer disaffection.
This surprise transaction symbolizes Amazon’s desire to redesign the landscape of the American food industry, dominated by Wal-Mart, Costco, Target and Kroger.

“Millions of people like Whole Foods Market because they offer the best natural and organic food and they make healthy eating something entertaining,” commented Amazon boss Jeff Bezos.

Created in 1980 on fair trade and healthy eating, Whole Foods is present in three countries (United States, Canada, United Kingdom) with more than 430 stores, but has been suffering for two years from a consumer disinterest.

The company was facing with pressure from some of its shareholders who were asking it to accelerate its restructuring or even to consider a divestiture in the face of increased competition from other less expensive supermarkets.

“We want to confirm our commitment to the quality of food and service,” the company said in an e-mail to customers, but the transaction caused a few jokes on social networks. On Twitter, some imagined a shop where Alexa, the voice assistant of Amazon, had replaced the cashiers, while drones were delivering cabbages.

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After the deal, scheduled for completion in the second half of the year, Whole Foods will retain its name and headquarters in Austin, Texas, and John Mackey, co-founder, will remain CEO.

With this acquisition, Amazon is going to upset the food distribution landscape and further expands its empire. Now the company is proactivley involved in entertainment production, food delivery, cloud computing and drones.

“Whole Foods gives Amazon the opportunity to be a major player in the food industry without having to build a physical network out of nothing,” said Neil Saunders, an expert at Global Data

Whole Foods is the biggest acquisition ever by Jeff Bezos, which had spent $ 1.2 billion in 2009 to get and $ 1 billion in 2014 for Twitch, a gaming platform.

Even though physical store management differs from the model set up by Amazon since its inception due to complicated logistics and enormous costs, Amazon has recently begun to build its expansion into the traditional supermarket segment by unveiling different concepts.
The company launched Amazonfresh, a fresh food delivery service, recently opened a cashless store in Seattle (northwest) and is testing a store concept where consumers could themselves pick their orders after making the purchases online.

The takeover of Whole Foods “will change everything” for traditional supermarkets, says Gregori Volokhine, expert at Meeschaert Financial Services.

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The latter is a widely shared sentiment on Wall Street, where most of the shares of the sector have plunged. The world’s number one in the sector, Wal-Mart, fell 4.63%.

Conversely, Amazon shares have gained more than 2%, a jump of nearly $13 billion for its valuation in one session, which corresponds almost to the price paid for Whole Foods.

Carl Frantz

Polyglot, humanitarian, Carl was born in Germany but raised in the USA. He writes mostly on tech, science and culture.