Inc. said yesterday it plans to buy struggling natural and organic food pioneer Whole Foods Market Inc.in a $13.7 billion deal that would give the e-commerce giant 430-plus brick-and-mortar stores to distribute fresh food and other groceries.
Following the announcement of Amazon's plan to purchase Whole Foods Market, Inc. The top 10 grocery retailers plus Amazon control less than half of the market, Blackledge says, and a patchwork of several hundred grocery chains, convenience stores, dollars stores as well as mom and pop stores make up the remainder.
Amazon has already made inroads into tackling the grocery market in the United States and UK. It announced Friday that it's buying online men's clothing retailer Bonobos for $310 million, following a string of online acquisitions such as ModCloth and Moosejaw. "It is a tsunami that will shake up and change grocery retailing".
In October, reports surfaced that Amazon was planning to build its own grocery stores. The company is known for its organic produce and other health products.
Whole Foods last month shook up its board of directors under pressure from activist investor hedge fund Jana Partners.
Groceries are already a fiercely competitive business, with low-priced rivals like Aldi putting pressure on traditional supermarket chains and another discounter, Lidl, opening its first US stores just this week. Whole Foods' headquarters will still be in Austin.More news: Amazon buys supermarket chain Whole Foods Market
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The $42-per-share, all-cash deal, expected to close later this year, includes Whole Foods' net debt and represents about a 27 percent premium to its closing stock price on Thursday. Shoppers skip the checkout line, and their Amazon accounts get automatically charged. According to the source, Whole Foods reaffirmed its partnership with Instacart on Friday.
"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.
Charlie O'Shea, a Moody's lead retail analyst, told the Associated Press news agency that the deal could be "transformative, not just for food retail, but for retail in general".
Both Amazon and Whole Foods cater to younger consumers including millennials as well as the affluent.
A Whole Food Market is shown in Indianapolis, Friday, June 16, 2017. "Whole Foods was losing market share to Kroger", said Brittain Ladd, who until earlier this year was a senior manager working to roll out AmazonFresh globally.
Whole Foods Market was founded in 1978 and as organic food became all the rage, so did Whole Foods. In order for Amazon to get the volume growth they are looking for, fresh foods has to be part of the equation. But if customers know that what they are getting is the same as what they'd get at the local store, they are more likely to try it out.