Amazon Buys Whole Foods For Nearly $14b In Cash
“This partnership presents an opportunity to maximize value for Whole Foods Markets shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers,” said John Mackey, Whole Foods Market co-founder and CEO in a statement.
Would love to see some of Amazon’s pricing discipline at Whole Foods. Also, drone deliveries of Kale.
Amazon has been exploring real-world brick and mortar retail stores lately, launching several physical bookstores and adding a customer pick-up option to its AmazonFresh grocery service, with varying results.
This is an earthquake rattling through the grocery sector as well as the retail world. We can only imagine the technological innovation that Amazon will bring to the purchasing experience for the consumer,” said Bankrate.com senior economic analyst Mark Hamrick.
“Now, we can see in hindsight that its recent dithering around the brick-and-mortar experience, as an experiment, was only a rumbling of the seismic event in the offing, he said.
Amazon did not just buy Whole Foods grocery stores. It bought 431 upper-income, prime-location distribution nodes for everything it does.
Dennis K. Berman
Following a decline in sales, Mackey has been under pressure from activist investors lately to either restructure or sell itself after his longstanding co-CEO who was more involved with daily operations stepped down.
List Of Mergers And Acquisitions By Amazon
|This list is incomplete you can help by adding missing items.|
, is an American electronic commerce and cloud computing company headquartered in Seattle, Washington. Founded by Jeff Bezos on July 5, 1994, as an online bookstore, Amazon went public after an initial public offering on May 15, 1997, during the midst of the dot-com bubble. The funds gained from the IPO allowed Amazon to grow quickly, making its first three acquisitions on April 27, 1998, less than a year after the company had gone public.
After the dot-com bubble burst on March 11, 2000, several companies that Amazon had invested in went bankrupt, with Amazon’s stock price itself sinking to record lows. Despite Amazon’s survival, the company made very few investments for the next several years, only acquiring two companies between 2000 and 2004. The company returned to making multiple acquisitions per year in 2005, focusing on acquiring digital retailers and media websites. Starting in 2011, Amazon began shifting its focus to buying technology startups to develop and improve and grow its division.
Amazon has diversified its acquisition portfolio into several market sectors, with its largest acquisition being the purchase of the grocery store chain Whole Foods Market for $13.7 billion on June 16, 2017.
Why Did He Do It
The million billion dollar question everyone is dying to ask Bezos, and with a year’s worth of data, we can begin to see why he pulled the trigger on such a massive acquisition.
- The grocery market is ripe for innovation, and unchanged for decades.
- Great opportunity to learn a new business with a small footprint, as Whole Foods is only 450 stores to date – which also means 450 new distribution points to expand.
- A lot of demographic overlap, fifty percent of Whole Foods shoppers were already Prime members, and eighty-one percent of Whole Foods customers also shop on Amazon.
- A great opportunity to create a deeper relationship with consumers by multiple touch points and interactions across multiple markets.
- A new avenue to lock people into the Amazon ecosystem.
Also Check: Are Amazon Flex Drivers Independent Contractors
Amazon Buying Whole Foods Is A Big Deal
Consensus is overwhelmingly that Amazons acquisition of Whole Foods is a big deal. Amazon buying Whole Foods is incredibly interesting, highly strategic, and definitely not standard said Toptal Finance Expert Josh Chapman. Recalling the video introducing Amazon Go which surfaced at the end of last year, Chapman believes Amazons vision all along and I believe it is front and center in their vision for Whole Foods. Amazon Go will now become the tech that will engulf every Whole Foods store across the country. Ill be as bold as to say that Amazon buying Whole Foods is the start of an incredible wave of innovation across the grocery/shopping landscape.
Putting aside the potential for change in the retail experience, both see implications that go far beyond. Chapman, a former investment banker at Morgan Stanley turned entrepreneur with experience across retail, real estate, energy, and SaaS industries, believes that after Whole Foods, Amazon will probably replicate this exact acquisition strategy by buying a convenience store , major clothing retailer , then perhaps a tech appliance retailer . This shift will have enormous impact on job redistribution and will also create a wave of new tech and apps that will be service providers for this new shopping experience.
Four Things We Still Don’t Know
The percentage of grocery shopping done online is small. How much larger will it get?
Whole Foods relies on United Natural Foods for its distribution. Amazon could either renew that contract or attempt distribution on its own when it expires. If it doesn’t renew the contract, UNFI would lose a significant portion of its business and scale. The broader food distribution industry is already under pressure, a reverberation from the pressures within the grocery sector.
Whole Foods used Instacart before the Amazon deal and continues to do so, what does this relationship mean now that Amazon is pushing its own delivery service? Instacart has been lining up retail partners left and right, implying it’s preparing itself should Whole Foods cut ties.
Whole Foods footprint is also far smaller than its largest grocery competitors, but is it big enough for Amazon to accomplish all it wants within the grocery space? There is often speculation about Amazon doing another large deal to augment its footprint. Observers note, though, that doing so would thrust Amazon into regulatory scrutiny, and there have already been dust-ups between President Donald Trump and the Seattle giant.
Don’t Miss: How To Make Payment Plans On Amazon
Were Still Whole Foods: Life After Amazon
The story of where Whole Foods Market is headed begins where it all started: a mission to create a healthier world by selling healthier foods.
We are a mission-based company, says Rob Twyman, EVP/Operations at Whole Foods. We are doing it because we believe in it. We are doing it because it is the right thing to do, and we want to effectively change the world and nourish people and planet. That is a lofty goal, but it is a real goal, it is a heartfelt goal, and it is something we are still very committed to.
That mission has only grown stronger since Amazon shocked the grocery industry in 2017 by buying Whole Foods for $13.6 billion.
Since then, the natural foods retailer co-founded 41 years ago by CEO John Mackey in Austin, Texas, has implemented a slew of changes, some big, some small and none of them all that shocking for an Amazon-owned company: price cuts, e-commerce enhancements and operational restructuring. Through it all, however, Whole Foods has never wavered from its core mission, according to Twyman.
Amazon still is who they are, and were still who we are, he says, and yet were learning from each other and growing from each other. With delivery, I think thats a great example of where weve leveraged the two businesses together. Theyve helped us understand through data the different aspects of our business, and we continue to bring philosophy around food in particular that I think is important as they continue to get into the food business.
Sticking To High Standards
When Amazon bought Whole Foods, there was a lot of speculation about what the Amazonification of a natural food grocer with a list of banned ingredients and animal welfare practices would look like. The result has been sort of like a marriage bringing two people together, Twyman says. While they create a new union, they still retain a sense of individuality. Amazon has done a great job of allowing us to do that.
Also Check: Where To Buy Amazon Fire Tablet
Humane Treatment Of Animals
In 2002, People for the Ethical Treatment of Animals began petitioning Whole Foods to take steps to ensure the improvement of treatment of animals sold in the stores.
Whole Foods created the Animal Compassion Foundation in January 2005, on December 5, 2014, the organization registration was canceled nonprofit organization, to help other producers evolve their practices to raise animals naturally and humanely. According to Whole Foods Natural Meat Quality Standards and Animal Compassionate Standards, pulling feathers from live ducks, bill trimming, bill heat treatment, toe punching, slitting the webs of the feet, and toe removal are all prohibited in the raising of ducks for Whole Foods Market. Any ducks treated in this manner, treated with antibiotics or antimicrobials, cloned, genetically modified, or not allowed medical treatment when necessary are to be removed from Whole Foods Market stock.
It’s Going From Regional To National
One of Whole Foods’ biggest challenges has been taking what set it apart lots of niche and often regional products and streamlining that into becoming a cost-efficient, national retailer. Many small brands point to Whole Foods as the birth ground for their new products. For Whole Foods though, devoting shelf space to small brands, especially those that aren’t driving traffic, was not always good for the bottom line. Dealing with each brand on a regional basis could prove complex.
Whole Foods has been trying to solve that challenge since before its sale to Amazon, hiring Target’s Don Clark in 2015 to help with the efforts. The grocer’s sale to Amazon though came with its own set of uncertainties, which resulted in those moves being viewed with a different level of scrutiny and tension.
It has begun to centralize purchasing for its suppliers. That means many small brands need to go through WFM headquarters in Austin, Texas, to get placed in a store, not through their regional Whole Foods representative. That approach simplifies operations and makes it easier for a brand to scale without traveling region by region. The drawback is small brands with little plans to grow at such a scale might feel squeezed out.
Whole Foods has also begun to centralize its merchandising, which means it’s now taking care of in-store displays and setup rather than allowing brands to outsource the task to third-party services.
Don’t Miss: How To Become An Amazon Warehouse
The War With Walmart Should Heat Up
Amazon made its first break into stores with an Amazon Books bookstore in Seattle a year and a half ago. The company has since opened seven bookstores, several college pickup locations and mall kiosks. Since that first store opened in Seattle, reporters and analysts have discussed endlessly the potential for Amazon breaking into physical locations, an ironic move because the e-retailer contributed to the demise of Borders, Circuit City, RadioShack and other stores, and because traditional retailers are flagging amid competition against Amazon.
However, many retail industry watchers expected Amazon would have to end up owning stores if it hoped to keep up its huge growth. A major reason for that change: US online sales are still less than 10 percent of the total. Amazon needed stores to draw in the remaining 90 percent. With 460 additional stores, Amazon is finally going big on brick-and-mortar. But it’s doing so with an acquisition of an existing retailer, not by building out its own stores, as some predicted.
There is a chance that the Whole Foods stores could eventually become testing grounds for new Amazon store technologies, like cashier-less checkout, but that doesn’t seem likely in the short term.
“Implications ripple far beyond the food segment, where dominant players like Walmart, Kroger, Costco, and Target now have to look over their shoulders at the Amazon train coming down the tracks,” Moody’s retail analyst Charlie O’Shea said in an emailed statement.
A Bigger Physical Retail Footprint For Amazon
Amazon revolutionized online shopping with the launch of its website in 1995, but in recent years its showed increasing interest in having a similar impact on the physical retail experience. Last year, the shopping behemoth unveiled , an experimental grocery store with no checkout counter thats currently open to Amazon employees in Seattle. Amazon also opened its first brick-and-mortar book store in Seattle in 2015, and has since expanded to New York City,Chicago, and Los Angeles. The company is said to be weighing numerous physical retail experiments that range from futuristic Home- Depot-like stores that incorporate augmented reality to Apple-esque electronics boutiques, according to The New York Times. Amazons acquisition gives the company 431 physical Whole Foods locations to potentially flesh out new concepts.
Recommended Reading: Is Amazon Audible Included With Prime
Express Lane To Growth
The pact comes as Amazon looks to expand its new Fresh grocery store chain that’s part Whole Foods, part Amazon Go, and part 365, the discount grocery store it closed last year. Fresh incorporates a mix of organic, premium, and low-priced national brands cashier-free checkouts and online fulfillment through curbside pickup.
SpartanNash distributes groceries to independent supermarkets, military commissaries, and its own chain of stores, but it has also had a relationship with Amazon since 2016 when it agreed to supply the e-commerce leader’s distribution centers with groceries.
Dollar General is currently SpartanNash’s largest customer, representing 17% of the food distributor’s $8.5 billion in annual sales, while Amazon’s existing business accounts for less than 10% of the total. The new agreement, though, could see Amazon’s contribution increase significantly and taking an ownership stake in its partner is reminiscent of the stakes it took in aircraft leasing companies Air Transport Group and Atlas Air Worldwide.
Earlier this year Air Transport issued warrants for up to 33% of its stock and Atlas up to 40% based on the number of aircraft Amazon leases. If Amazon hits certain performance targets with SpartanNash, it could become the second largest shareholder in the company.
At Amazon You Can ‘just Walk Out’
Imagine walking into a neighborhood Amazon Fresh store, grabbing a cart, and sailing out when the shopping is doneall without waiting in a checkout line.
Amazon’s Just Walk Out technology makes it possible by combining “computer vision, sensor fusion, and deep learning”high-tech machine-learning terms that mean convenience for shoppers.
It begins with the “green” gate that greets customers at the entrance and prompts them for their preference: using Just Walk Out or the traditional way with checkout lanes.
The Just Walk Out service is easy enough to join. As Amazon explains, customers can scan the QR code in their Amazon app, scan their palm using Amazon One , or use the debit or credit card on their Amazon account. Any of the options will open the Just Walk Out gates.
Everything a shopper takes off the shelf is automatically added to the final tally the technology also knows when a shopper puts an item back on the shelf and adjusts the final tab. Receipts are sent digitally.
You May Like: How To Cancel Dazn On Amazon
Whats Next For Whole Foods
Analysts believe Amazon has delivered on its plan for Whole Foods in the first year of the transition, by focusing on reorganization and integrating Prime membership into the shopping experience.
The streamline and standardization process is ongoing. Whole Foods has been working on consolidating its 13 regions across the country, Yahoo Finance has learned.
Customers can expect more changes on the aisles, too. Amazon is expected to introduce more consumer packaged and private label products, a move that analysts believe would open the premium store to a larger customer base.
Amazon is performing a lot of analysis to identify what products to put on their shelves to bring the most customers, not to retain current customers, said Ladd.
With all the online and offline shopping behavior data Amazon could collect, Saunders thinks it will take a more personalized approach to making promotions and discounts more relevant to shoppers.
More moves could also be expected on delivery. In February, Yahoo Finance first reported Amazons move to consolidate Amazon Fresh and Prime Now to work with Whole Foods. In the past year, both the delivery startup Instacart and Amazon have been sending Whole Foods goods to peoples doorway.
Do you work for Amazon/Whole Foods? Wed love to hear your thoughts on the deal. Drop us a line via email@example.com or follow Krystal on .
‘amazonification’ Of Whole Foods
This store represents the Amazonification of grocery stores. It gives consumers, and the industry, an idea of how the e-commerce giant wants people to shop for groceries in the future.
The store is located in the Glover Park neighborhood near Georgetown.
This 21,500-square-foot store, which offers a wide variety of local products, is fully automated, managed largely by robots.
All this is based on so-called just-walk-out technology.
A customer enters the store and identifies as a shopper in one of two ways: either by scanning a palm or by scanning an in-app QR.
Hundreds of cameras with a bird’s-eye view of customers are placed around the store, and sensors are placed under each apple, box of oatmeal and loaf of multigrain bread.
Deep-learning software analyzes purchase activity to detect patterns and increase the accuracy of charges.
“Amazons Just Walk Out Shopping technology is made possible through a combination of computer vision, sensor fusion and deep learning,” the company explains. It “automatically detects when products are taken from or returned to the shelves and keeps track of them in a virtual cart. When youre done shopping, you can skip the checkout line.”
You May Like: How Do I Add Gift Card To Amazon
Amazon Opens First Whole Foods Equipped With Cashierless Technology
Dozens of cameras suspended from the stores ceiling track customers and their purchases.
Amazon has brought its cashierless Just Walk Out technology to a Whole Foods store for the first time, allowing customers to shop and leave the store with their items without having to interact with any kind of cashier. The revamped store opened on February 23rd in Washington, DCs Glover Park neighborhood, where theres been a Whole Foods store for over 20 years.
Although Amazon has been operating cashierless grocery stores in increasinglylarge Amazon Go and Amazon Fresh-branded stores, this is the first time its bringing the technology to a Whole Foods store. Amazon bought the grocery chain for $13.7 billion in 2017, but until now the brands integration with Amazon has been more minimal, consisting of discounts and free delivery for Prime subscribers.
The store can also use a palm scan to identify you. Turnstiles at the stores entrance.
At 21,500 square feet, the Whole Foods location isnt the largest store to use Amazons cashierless technology . But it shows Amazons confidence in its technology that its willing to bring it to a preexisting store that doesnt have Amazon in its name. Amazon declined to on whether it plans to add the technology to all Whole Foods stores.
The Washington, DC store is one of two Whole Foods stores that its bringing its cashierless technology to the second will open in Los Angeles later this year.