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Amazon-Whole Foods Marriage Could Disrupt Grocery Business (NASDAQ:AMZN)

17 Juin 2017

The fate of Instacart became a frequently asked question in the wake of the deal's announcement, as industry watchers pondered how Amazon would integrate Whole Foods into its own online commerce and delivery infrastructure.

NEW YORK, June 16 USA stocks mostly edged lower on Friday as Amazon.com's $13.7 billion deal to buy upscale grocer Whole Foods roiled the retail sector and wounded shares of an array of companies including Wal-Mart and Target.

But down the line, Amazon may decide to wrap Whole Foods into AmazonFresh, its existing grocery delivery service for Prime customers, Cohen said. Whole Foods Market's headquarters will remain in Austin, Texas, and Jon Mackey will continue as chief executive officer of the specialty supermarket chain.

Whole Foods announced a deal with Dunnhumby, a company that has created loyalty programs for grocers including Kroger, in 2017. "The only mitigation is that the more niche appeal of Whole Foods will, at least for the time being, limit the threat to other players".

Investors responded by dumping the stocks of major retailers and grocery store operators. The acquisition is unlikely to lower consumer prices but will offer more opportunities for the expanding e-commerce business for fresh food. It also had announced a board shake-up and cost-cutting plan amid pressure from activist investor Jana Partners.

"The first thing Amazon is going to do in this acquisition is to remove all those third party vendor services".

Since its founding 23 years ago, Amazon.com Inc. has upended the business of selling books, music and just about everything else we consume - except food.

For instance, Amazon has used its position as the shopper-consideration starting point to elevate its private labels on Amazon searches and shopper inquiries on Alexa. But today's development will bring it more than 430 retail locations across the country, a substantial base from which it can expand its empire into the physical realm.

Amazon has been making moves into grocery delivery for some time, but buying Whole Foods represents a bold step forward that will intensify competition in the market for delivering groceries and meals to busy consumers. Whole Foods gives Amazon "a network of stores where it can implement decades' worth of experiments in how people pick, pay for and get groceries delivered".

"No one thought about Amazon", said Phil Lempert, a food industry analyst for SupermarketGuru.

Whole Foods recently opened one of their "365" brand stores in Cedar Park at The Parke shopping center. Sprouts Farmers Market skidded $1.69, or 7.5 percent, to $20.74 and Supervalu sank 51 cents, or 13.6 percent, to $3.25.

Online delivery of groceries so far has been tough for any company to pull off because of customers' concerns about the quality of meat and produce, Wedbush Securities analyst Michael Pachter said.

Neil Saunders, managing director of the research firm Global Data Retail, said Amazon is likely to push supermarkets and grocery stores to slash prices, which will affect the companies that make and distribute those products.

"I would not like to be somebody playing in the grocery space right now", said Jan Rogers Kniffen, chief executive of retail consultancy firm J. Rogers Kniffen WWE in NY.

Whole Foods has been a staple chain in the growing organic food market.