On Friday, Amazon announced it will purchase US based organic and natural foods chain Whole Foods Market for US $42 per share valued at approximately US $13.7 billion in an all-cash transaction.
The food retail sector underwent an earthquake-sized shock on 16th June, when Amazon announced it was buying Whole Foods Market, which makes it its biggest acquisition yet on the grocery market, and the largest in its retail history.
Whole Foods Market will continue to operate stores under the Whole Foods Market banner once the transaction closes, which is expected to go through in the second half of this year.
Whole Foods is renowned in the for its high-quality premium organic and natural grocery products.
“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.
“Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades – they’re doing an amazing job and we want that to continue.”
The deal will give Amazon a stronger presence in the bricks and mortar grocery space, by offering its customers a more extensive range of fresh produce. In order for Amazon to make some serious headway in the grocery space, it’s vital for it to increase its footprint in traditional retail, and can’t just depend on its online presence only.
Grocery has been a somewhat challenging market to navigate online-only, given the high cost of delivery and then there’s the issue of customers wanting to be home when grocery items are delivered, so that perishables aren’t destroyed.
Amazon has been able to successfully overcome delivery costs, given its strong infrastructure and being able to deliver at a lower price than any of its competitors, however it still needs to tackle what I refer to as the “touch problem” in grocery. This is when many customers want to pick out the best bananas, watermelon and what they think looks like the best piece of fish.
This is where Whole Foods Market comes in. So, if customer can buy their dry goods, including canned foods and household products online, but then have the option to venture in-store at a local Whole Foods and pick out their fresh produce, all the things they’d want to pick out themselves, then Amazon could have the best of both worlds in the grocery sector of retail.
Once one of the only organic grocers around, Whole Foods has in recent years seen the US market flooded with more competition, often at lower prices, including Walmart, Wegmans and Kroger, who have expanded its offerings. John Mackey will remain as CEO of Whole Foods Market and Whole Foods Market’s headquarters will stay in Austin, Texas.
About Whole Foods Market
Founded in 1978 in Austin, Texas, Whole Foods Market is the leading natural and organic foods supermarket, the first national “Certified Organic” grocer, and uniquely positioned as America’s Healthiest Grocery Store™.
In fiscal year 2016, the Company had sales of approximately $16 billion and has more than 460 stores in the United States, Canada, and the United Kingdom. Whole Foods Market employs approximately 87,000 team members and has been ranked for 20 consecutive years as one of the “100 Best Companies to Work For” in America by Fortune magazine.