Amazon announced today that it will be buying Whole Foods Market in a deal valued at $13.7 billion. The purchase is a big one for the e-commerce retailer, which has recently been trying to expand into other business models. It opened a cashier-less convenience store in Seattle in late 2016, and is testing out a grocery drive-thru pickup for AmazonFresh customers.
However, the Whole Foods deal is by far the company’s biggest venture into the lucrative world of groceries, which accounts for $700-$800 million in U.S. consumer spending. Since its 1980 founding in Austin, Texas, Whole Foods has expanded to 465 stores in North America and the United Kingdom. Last year, it made $16 billion in sales.
Despite recent changes to the supermarket’s board, John Mackey will remain Whole Foods CEO after the deal closes. Whole Foods loyalists also have nothing to worry about, the brand will continue to operate under the same name and offer the same products we’ve all come to know and love.
"This partnership presents an opportunity to maximize value for Whole Foods Market's shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers," said Mackey in a statement.
The repercussions of the purchase are already visible, perhaps nowhere more so than the stock market. Since the announcement, shares of Whole Foods market rose 28 percent, while supermarket competitors like Kroger and Costco dropped nearly 16 and 6.5 percent, respectively.
"This is an earthquake rattling through the grocery sector as well as the retail world," Mark Hamrick, senior economic analyst at Bankrate.com, told CNBC in an email. "We can only imagine the technological innovation that Amazon will bring to the purchasing experience for the consumer.”
Besides offering some needed financial security to the supermarket chain —in May, Mackey reported that “the operating environment remains challenging”— the Amazon deal also opens up a world of new retail opportunities. Whole Foods has already opened a chain of affordable concept stores, 365 by Whole Foods Market, and recently debuted a Brazilian-style restaurant in Atlanta. We’re excited to see what’s next for our favorite supplier of champagne mangoes.
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