Amazon will acquire upscale USA grocer Whole Foods Market, known for its pricey organic options, for $13.7bn, the companies announced yesterday, in a deal that underscores the online retailer's growing influence.
Headquartered in Austin, Texas, Whole Foods was founded in 1978 and now has more than 460 stores with about 87,000 employees in the United States, Canada and Britain. Amazon now has six fulfillment centres across Canada, two in Vancouver and four in and around Toronto.
"In 2001, Apple chose to get into music, an industry that it wasn't in, and now they dominate sales in that industry brilliantly", he said. Spokesperson Mike Berman said Amazon's deep pockets might create more opportunities to invest throughout the region. Amazon is making a statement today.
Will this change how I buy my groceries?
Shares of Amazon have risen 34.4% in the past year, while Whole Foods shares were up 7.3% for the year (about 10% below the performance of the S&P 500) before skyrocketing when the deal was announced on Friday. Amazon officials have stated in the past they want to expand into groceries. Blue Apron's S-1 filing noted that online sales composed just $9.7 billion, or 1.2%, of the $781.5 billion US grocery market in 2016, according to a Euromonitor report. The Russell 2000 index fell 9 points, or 0.7 percent, to 1,400.
Energy shares rose 1.7 per cent, propping up the SP 500.
"You might still have people who like to physically go to a Whole Foods and pick out their produce, but if Amazon can figure out a way to deliver fresh organic produce at a price that is better than Kroger's it will hard for others to compete". "And it is 16 times more expensive to run a fleet of trucks, between labour, energy and time, than it is to use drones". The upscale grocery chain will operate as always.
Amazon. Investors like the deal and think it will be good for the online retail giant, which has been expanding its grocery offerings. Rival Metro has introduced a similar program in and around Montreal.
"Everybody orders from Amazon right?" said David Tawil, president of Maglan Capital in NY.
Walmart: The discount retailer offers a limited online grocery shopping service with an in-store pickup option in Calgary, Edmonton, Ottawa and the Greater Toronto Area. Because we also can't help spending what seems like billions at the Whole Foods, but without all the perks Amazon got for it. "This puts a tremendous amount of pressure on grocery retailers to figure out their online and delivery strategies".
Shares of Kellogg and General Mills, for example, were falling 2 percent and 3 percent, respectively, Friday.
"Dominant players like Wal-Mart, Kroger, Costco, and Target now have to look over their shoulders at the Amazon train coming down the tracks", said Charlie O'Shea, lead retail analyst at Moody's Investors Service.