Amazon has acquired Whole Foods, a move that marks the eCommerce giant’s official entry into the world of brick-and-mortar stores as well as groceries.
It’s Amazon’s biggest acquisition ever and it’s not even close. The company is paying $13.7 billion in cash for the grocery chain, which now operates some 465 stores across the U.S.
Starting out as a online book seller, Amazon has grown into a retail behemoth, drastically altering the market for almost every company in the U.S. that sells consumer goods.
Not content to just dominate eCommerce, Amazon has been tip-toeing into the real world with some bookstores and experimental convenience stores.
Those efforts led to speculation that Amazon eventually would make a major acquisition of a chain, rather than slowly build out its own stores.
That acquisition ended up being Whole Foods.
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 (@dkberman) June 16, 2017
The Texas-based grocery chain has grown quickly in the past couple decades, building its brand around healthy and organic offerings that are locally sourced.
Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy, said Jeff Bezos, Amazon founder and CEO, in a press release. Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades theyre doing an amazing job and we want that to continue.
It’s unclear exactly how much Amazon will change Whole Foods or integrate it into its existing business, though the companies noted in a press release that the brand would continue to operate and use its existing vendors.
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.
How big of a deal is this for the grocery industry? Well, just about anybody who owned stock in Whole Foods competitors decided now would be a good time to find a new place for their money.
The stocks below are: Amazon, Supervalu, Kroger, Target, Walmart and Costco.
Whether Whole Foods will continue to just do Whole Foods things is a whole other question. The company has faced challenges in recent years similar to those of other chains, with a raft of competitors and thinning profit eating into its business. Whole Foods leadership had also been fighting off activist investors that had pushed for major changes.
Now, paired with Amazon, Whole Foods could become a major cog in Amazon’s larger operation. Amazon could use Whole Foods locations for a variety of offeringsparticularly the expansion of its super-fast delivery program.
Whole Foods is generally targeted at high-income people, with its stores strategically located in affluent areas. Now, Amazon has bought its way into that market with one fell swoop.
I, too, spend $13.7 billion at Whole Foods.
Slade Sohmer (@Slade) June 16, 2017
It’s the largest ever acquisition by Amazon, which doesn’t tend to buy up companies very often. Its other notable purchases include Zappos (for $1.2 billion) and streaming platform Twitch (for about $1 billion).
Not that Amazon can just throw around $14 billion, but it’s not that much of a stretch for Amazon, which is now worth more than $460 billion. It is notable, however, that the deal is all cash. Companies often use stock to acquire companies in lieu of just dropping a mountain of money all at once.
But shopping at Whole Foods ain’t cheap. Shopping for Whole Foods shouldn’t be either.
This story is developing.