Amazon buys Whole Foods for 13.4 billion

[Clone]

https://www.google.com/amp/s/mobile....foods.amp.html

Haven't seen a thread for this yet. I wonder what will we expect to see out of this deal.

Amazon agreed to buy the upscale grocery chain Whole Foods for $13.4 billion, in a deal that will instantly transform the company that pioneered online shopping into a merchant with physical outposts in hundreds of neighborhoods across the country.

The acquisition, announced Friday, is a reflection of both the sheer magnitude of the grocery business — about $800 billion in annual spending in the United States — and a desire to turn Amazon into a more frequent shopping habit by becoming a bigger player in food and beverages. After almost a decade selling groceries online, Amazon has failed to make a major dent on its own as consumers have shown a stubborn urge to buy items like fruits, vegetables and meat in person.

Buying Whole Foods also represents a major escalation in the company’s long-running battle with Walmart, the largest grocery retailer in the United States, which has been struggling to play catch-up in internet shopping. On Friday, Walmart announced a $310 million deal to acquire the internet apparel retailer Bonobos, and last year it agreed to pay $3.3 billion for Jet.com and put Jet’s chief executive, Marc Lore, in charge of Walmart’s overall e-commerce business.

“Make no mistake, Walmart under no circumstances can lose the grocery wars to Amazon,” said Brittain Ladd, a strategy and supply chain consultant who formerly worked with Amazon on its grocery business. “If Walmart loses the grocery battle to Amazon, they have no chance of ever dethroning Amazon as the largest e-commerce player in the world.”

The idea of Amazon, a company founded 23 years ago on the premise of shopping from the comfort of a computer screen, moving forcefully into the crowded field of brick-and-mortar retail, with its limitations on selection and lack of customer reviews, once seemed ludicrous. But in the past several years, the company has dabbled with stores, opening or planning more than a dozen bookstores around the country.

In Seattle, it recently opened two grocery drive-through stores where customers can pick up online orders, along with a convenience store called Amazon Go that uses sensors and software to let shoppers sail through the exits without visiting a cashier.

The addition of Whole Foods takes Amazon’s physical presence to a new level. The grocery chain includes more than 460 stores in the United States, Canada and Britain with sales of $16 billion in the last fiscal year. Mikey Vu, a partner at the consultancy Bain & Company who is focused on retail, said, “They’re going to be within an hour or 30 minutes of as many people as possible.”

Founded in 1978 in Austin, Tex., Whole Foods is best known for its organic foods, building its brand on healthy eating and fresh, local produce and meats. It has also long been caricatured as “Whole Paycheck” for the high prices it charges for groceries. That conflicts with a core tenet of Amazon, which has made low prices part of its mission as a retailer.

Analysts speculated that Amazon could use its $99-a-year Prime membership service, which gives customers free, two-day shipping and other benefits, to offer Whole Foods customers a better price on groceries, as it does for books in its bookstores. The stores could also serve as an advertisement to get more customers to sign up for Prime; in September the financial firm Cowen & Company estimated that Prime had 49 million subscribers in the United States, representing about 44 percent of households.

Amazon has been on a multiyear offensive to open warehouses closer to customers so it can deliver orders in as little as two hours, and Whole Foods stores will further narrow Amazon’s physical proximity to its shoppers. The stores could become locations for returning online orders of all kinds. Amazon could also use them to cut delivery times for online orders.

The $13.4 billion deal, which does not include net debt, immediately raised questions about whether Amazon’s experiments with automation, like the cashier-less checkout technology it is testing in its Amazon Go store, could eventually lead to job losses at Whole Foods stores.

“Amazon’s brutal vision for retail is one where automation replaces good jobs,” Marc Perrone, president of the United Food and Commercial Workers International Union, said in a statement. “That is the reality today at Amazon, and it will no doubt become the reality at Whole Foods.”

Drew Herdener, a spokesman for Amazon, said it has no plans to use the Amazon Go technology to automate the jobs of cashiers at Whole Foods and no job reductions are planned as a result of the deal. Whole Foods workers are not unionized.

The move to buy Whole Foods is a further sign of the outsize ambitions of Jeff Bezos, Amazon’s chief executive and founder, who came under fire from Donald J. Trump during the presidential campaign last year, when Mr. Trump said Mr. Bezos had a “huge antitrust problem because he’s controlling so much.”

Nicole Navas Oxman, a spokeswoman for the Justice Department, declined to comment about whether its antitrust division saw any issues with the proposed acquisition. Law professors who specialize in antitrust said it was unlikely regulators would block the deal.

“One question would be, does an online seller of groceries compete with a brick-and-mortar grocery store, and I think the answer is ‘yes, at some level, but that overlap is probably not terribly great,’” said John E. Lopatka, a professor of antitrust law at Penn State University.

If the deal goes through, Amazon and Whole Foods will still only account for about 3.5 percent of grocery spending in the United States, making it the country’s fifth-largest grocery retailer, according to estimates by John Blackledge, an analyst at Cowen & Company.
Groceries are purchased five times a month on average by shoppers, compared with the four times a month Amazon Prime customers typically shop on the site and two times for people who do not have Prime memberships, Cowen estimates.

“If you open up groceries, it could increase the frequency,” Mr. Blackledge said.

For Whole Foods, the deal represents a chance to fend off pressure from activist investors frustrated by a sluggish stock price as it has faced fierce competition from Costco, Safeway and Walmart, which have begun offering organic produce and kitchen staples, forcing Whole Foods to slash prices. Money managers, unhappy with the pace of the turnaround effort, have pushed for more, taking aim at the board, its grocery offerings and its pricey real estate holdings.

In response, Whole Foods has revamped its board and replaced its chief financial officer. Gabrielle Sulzberger, a private equity executive, was named the company’s chairwoman. Ms. Sulzberger is married to Arthur O. Sulzberger Jr., the chairman and publisher of The New York Times.

Investors are betting there may be other buyers interested in Whole Foods, and by late Friday the company’s shares rose above Amazon’s $42 a share offer, nearly 30 percent higher for the day. Amazon closed at $987.71 a share, up 2.4 percent.

Even with the bigger physical presence Amazon will gain through Whole Foods, it will have far less reach than Walmart and its Sam’s Club warehouse chain, which together account for about 18 percent of the grocery market. Walmart has almost 10 times the number of stores as Whole Foods does.

“We feel great about our position, with more than 4,500 stores around the country and fast growing e-commerce and online grocery businesses,” Greg Hitt, a spokesman for Walmart, said in a statement.

Correction: June 16, 2017
An earlier version of this article misstated the annual sales in the United States in the grocery industry. The sales are $700 billion to $800 billion, not $700 million to $800 million.

[GennGreymane]

now what does this mean for stocks in both companies?

[Thoughtful Trolli]

oh my God, I totally get the meme now.

I thought it was just about the command device malfunctioning in perhaps the least comical way possible.

now what does this mean for stocks in both companies?

It falls for both for a while because no consumers will know how to buy the new company product,, but before the end of the next fiscal quarter it will rise because people love having groceries show up at their doorstep in a little robot vehicle only they have the pass code to open.

I'm bullshitting I don't really know.

[GennGreymane]

oh my God, I totally get the meme now.

I thought it was just about the command device malfunctioning in perhaps the least comical way possible.


It falls for both for a while because no consumers will know how to buy the new company product,, but before the end of the next fiscal quarter it will rise because people love having groceries show up at their doorstep in a little robot vehicle only they have the pass code to open.

I'm bullshitting I don't really know.

But I wanna know if its a good buy!!!! Where is that guy with the kel thuzad avatar with the hard to spell name who usually just spews garbage? He claims to know about this shit.

[goblingirl]

Here's a couple things I think it means:

1. The prices at Whole Foods are going to drop (good).

2. Amazon now owns Whole Foods stores, but they also own Whole Foods' warehouse distribution network. This is a pretty big deal because they've been trying to break into the fresh grocery delivery business for years and have been severely geographically restricted. So perhaps this will give them an opportunity to do delivery in many more places.

[Independent voter]

It's all about Amazon's struggle with Walmart, check out http://walmart.com to see what I mean. And Walmart has actually made a profit for decades unlike Amazon.

But the Wholefoods thing is good for Amazon as the Wholefood stores where built in neighborhoods with a lot of Amazon Prime members, your more upper class neighborhoods. You can see people doing returns at the stores or whatever.

Walmart doesn't charge a membership fee.

[downnola]

From the Atlantic:

After today’s announcement, several people on Twitter joked that between Prime and Whole Foods, Amazon may now account for a majority of some urban Millennials’ discretionary spending. What’s not a joke, however, is that Amazon’s life bundle, like TV’s cable bundle, is fundamentally about the merchandizing of convenience, which is often indistinguishable from sheer human laziness. Driving to the movies and parking is a pain, and cable offered several cineplexes worth of video offerings on the couch. Similarly, driving to the grocery store, finding parking, seeking out the produce section, and waiting several minutes in Line 6 is a pain. What’s not a pain? Lying on your couch, watching Downton Abbey on Prime Video, and shouting to your Amazon daemon, “Alexa, I need six heirloom tomatoes and a bottle of extra-virgin olive oil for tomorrow’s delivery.” Choose your narrative: Amazon is winning, because Americans are so harried today they don’t have time to shop, cook, or dine out; or deep down, the human race tends toward sloth, and the company is building a global delivery system on the scaffolding of mankind’s indolent nature.

https://www.theatlantic.com/business...-foods/530652/

[Deleted]

Now people can go through thier whole lives only buying products off Jeff Bezos.

silicon valley = surveillance valley

[Deleted]

My hope always was that the internet would make small businesses drive, but I was pretty wrong. What I'm wondering about is that almost nobody has any issues with amazon growing into an all-domineering super-zombie.

[Theodarzna]

Thats like 4 whole jars of asparagus water.

[Deleted]

Kale right to my doorstep? sign me up.
Not really.

[Skandulous]

It's all about Amazon's struggle with Walmart, check out http://walmart.com to see what I mean. And Walmart has actually made a profit for decades unlike Amazon.

But the Wholefoods thing is good for Amazon as the Wholefood stores where built in neighborhoods with a lot of Amazon Prime members, your more upper class neighborhoods. You can see people doing returns at the stores or whatever.

Walmart doesn't charge a membership fee.

Once again your dead wrong. Mom and pop stores fear Walmart because it puts them out of business but now Walmart fears Amazon because it might put them out of business. Amazon's stock shits all over Walmarts stock and Walmart has been closing tons of stores all over the country. Amazon has now forced Walmart to include free 2 day shipping just to keep pace with Amazon where members pay 99$ a month for it. An estimated 44% of households are subscribed to Prime which makes them more likely not to shop at Walmart or any were else.

[Suporex]

Once again your dead wrong. Mom and pop stores fear Walmart because it puts them out of business but now Walmart fears Amazon because it might put them out of business. Amazon's stock shits all over Walmarts stock and Walmart has been closing tons of stores all over the country. Amazon has now forced Walmart to include free 2 day shipping just to keep pace with Amazon where members pay 99$ a month for it. An estimated 44% of households are subscribed to Prime which makes them more likely not to shop at Walmart or any were else.

If you think people don't ever shop at a retail stores because they have Amazon Prime you're kidding yourself. Yet Best Buy, Target, Staples, Kohls, etc are still around. You should probably wait before these stores go under before trying to say Amazon is going to put Walmart out of business when Amazon can't even generate the level of revenue that Walmart can.

[Evil Midnight Bomber]

now what does this mean for stocks in both companies?

http://www.cnbc.com/2017/06/16/after...-for-free.html

After its stock pop, Amazon could get Whole Foods essentially for free

After its stock pop, Amazon got Whole Foods essentially for free.

For free? Well, if you consider the increase in market capitalization that Amazon is seeing midday, the answer is yes.

Here's the math:

Amazon is paying $13.7 billion in cash for Whole Foods.

Amazon's stock was up $32 and change mid-morning. There are 478 million shares outstanding, so Amazon's market cap has appreciated by about $15.6 billion today.

So, you could argue, they are getting Whole Foods for free, and pocketing $1.9 billion as well.

By the way, here's the joke going around trading desks on Wall Street: "Jeff Bezos said to Alexa, 'Buy me something from Whole Foods,' and Alexa bought Whole Foods."

[Rasulis]

http://www.cnbc.com/2017/06/16/after...-for-free.html

You forgot to mention Whole Foods stock also went up 27% overnight. It is almost 30% now.

Not to mention, which is interesting, the stock price for grocery chains went down overnight an average of 1.5%.

- - - Updated - - -

Kale right to my doorstep? sign me up.
Not really.

Think "Amazon Locker".

[PACOX]

It's all about Amazon's struggle with Walmart, check out http://walmart.com to see what I mean. And Walmart has actually made a profit for decades unlike Amazon.

But the Wholefoods thing is good for Amazon as the Wholefood stores where built in neighborhoods with a lot of Amazon Prime members, your more upper class neighborhoods. You can see people doing returns at the stores or whatever.

Walmart doesn't charge a membership fee.

Amazon doesn't try to make a profit, it reinvest its money. Thats why Amazon is massive and has controls a good chunk of the internet and online shopping. Walmart had to adapt to Amazon or risk becoming irrelevant in a couple of years.

[Evil Midnight Bomber]

Think "Amazon Locker".

I think more "Amazon Go"

[Molis]

I stole this joke. Thought it was funny.

Amazon paid $13.7 million, also known as the average shopping trip to Whole Foods

[Hashtronaut]

Drones bringing us our groceries!

[PACOX]

My hope always was that the internet would make small businesses drive, but I was pretty wrong. What I'm wondering about is that almost nobody has any issues with amazon growing into an all-domineering super-zombie.

Whats wrong with putting your store on Amazon as a platform to reach more customers?