Grocery stocks getting clobbered after Amazon-Whole Foods deal

Grocery stocks getting clobbered after Amazon-Whole Foods deal

Grocery stocks getting clobbered after Amazon-Whole Foods deal

This story was last updated at 12:31 CT.

Online retail giant Amazon is buying Whole Foods in a $13.7bn (£10.7bn) deal that marks its biggest push into traditional retailing yet.

"For other grocers, the deal is potentially terrifying", Neil Saunders, managing director of consultancy GlobalData Retail, said in a statement.

Online juggernaut Amazon buying Whole Foods
As recently as May, Whole Foods replaced five board members and its chief financial officer, under pressure from Jana Partners. The takeover deal is expected to be completed in the second half of the year, pending approval by shareholders and others.

Online retailer Amazon surprised the tech world - and just about everyone - today with the announcement that it has reached an agreement to acquire the high-end grocery store chain Whole Foods Market for $13.7 billion in a cash and debt deal.

Bezos, Amazon's founder and chief executive reserved praise for the well-established supermarket chain, which will continue to trade under the same name. John Mackey, Whole Foods' outspoken co-founder, will continue to run the business - a victory after a fight with activist investor Jana Partners that threatened to drive him from power.

In the recent past, Amazon had tried its hand at physical bookstores and grocery, with limited success. With an inventory originally limited to books, Amazon's business has expanded its reach over the decades to include almost every consumer good that can be shipped. You walk into the market, the market recognizes you as a customer, and you're charged for the products electronically as you take them off the shelves.

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Additionally, Amazon has experimented with lockers for picking up orders. Gartner retail analyst Robert Hetu said Amazon could bring pieces of that to Whole Foods to further cut costs. "And this is actually brilliant". Amazon also has warehouses in Doral and near Miami International Airport.

The competition is already probably experiencing a lot of unease right now.

By joining forces with Amazon, Whole Foods gains access to an entirely new distribution channel - which should be good news for anyone hoping to shop for organic kale online.

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"[The supermarket industry] is glacially slow". Whole Foods itself had launched an offshoot chain named after its "365" private label brand in a nod to the popularity of no-frills chains. In early May, the company hired a new chairwoman, Gabrielle Sulzberger, and axed five of its board members, or almost half of the board. Amazon's purchase may change that. "Amazon is effectively saying that if retailers are going to tool themselves up with technology, then they will tool themselves up with a physical presence and high-street brand".

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