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Whole Foods CEO hints at another brand under Amazon

20 Juin 2017

Given Amazon's history, it will take the model developed for grocery, and then replicate it across other retail verticals. Whole Foods did not immediately respond to a request for comment.

"Highly likely", said Lloyd Greif, whose investment firm Greif & Co. specializes in mergers and acquisitions but isn't involved with Whole Foods.

"We rely on Amazon for most of our household purchases", says Lauren Brewer, a thirtysomething from Nacogdoches, a rural community of 33,000 in East Texas. The eighty million Prime subscribers also share certain traits with the Whole Foods audience.

With the deal, Whole Foods' more than 460 stores become a test bed with which Amazon can learn how to compete with Wal-Mart's 4,700 stores with a large grocery offering that are also within 16 km of 90% of the USA population. The deal is an all cash one, but with Amazon's stock trading at a trailing price earnings multiple of 185 times, one might think funding the purchase with stock might make more sense. Yes, Amazon Pantry is a price breaker and Amazon Fresh is a decent proposition, but its market shares are very limited.

To combat Amazon's push into groceries, these two retail giants will either need to find new ways to drive foot traffic or grow more competitive online.

Any of the big grocery chains that bid on Whole Foods would likely win antitrust approval to buy the premium grocery chain, according to three antitrust experts. "ORCRP016487-topic.html" class="local_link" >Wal-Mart Stores Inc.

An Amazon spokesman declined to comment on the town hall.

Still, Hovenkamp and Fox note that Trump's nominee for assistant attorney general for antitrust, Makan Delrahim, has a track record suggesting he would not challenge the Amazon-Whole Foods deal. He's said if the combined Amazon and Whole Foods operations means home delivery of more dairy, frozen and produce items - and beat the likes of Aldi on price - he'd be won over.

Amazon will scoop up more than 400 Whole Foods stores across the country, instantly making them a major player in the grocery industry.

USA Today business reporter Zlati Meyer said the deal could combine two giant companies that could disrupt the market, but in a way that could benefit consumers: the competition could force other grocery stores to lower prices. It started its fresh food online business a decade and has gained no traction whatsoever in the US, Canada and Britain. "He could make some shocking changes that could be deadly to some of these [existing] brands".

Benchmark Research analyst Daniel Kurnos also expects a bidding war, but he said: "Amazon will ultimately be able to outbid any other party by a meaningful amount, given the valuation gap between them and WFM".

Kantor noted that Amazon's market cap gain roughly equaled the amount the company is paying for Whole Foods.

Whole Foods used to be one of the leaders in organic and natural foods, but other chains have increased the availability of those products.

"Shifts in the retail environment, particularly in North America, may pose risks broadly for center-store processed food manufacturers, including General Mills".

As for Amazon's current offer, "give Jeff [Bezos] credit, he's getting a great deal here", Greif said. When he wasn't gushing about his love affair with Amazon, Mackey reassured employees that while there will surely be changes coming, Whole Foods' quality standards will remain intact.

"I think we're going to get a lot of those innovations in our stores", he said.

Whole Foods CEO hints at another brand under Amazon