Amazon is buying Whole Foods Market for US$13.7 billion in a giant leap of a deal that pushes the Internet retailer further into the grocery business and gives it more of a brick-and-mortar presence.
Whole Foods, which opened its first store in Austin, Texas in 1980, now has 465 stores across North America and the UK. There are now 13 stores in Canada. The grocery chain will continue to operate under its brand and source from its trusted vendors and partners.
“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 co-founder John Mackey, who also will remain as CEO.
Amazon will be paying $42 a share in cash for the organic-food chain, making it the company’s largest transaction to date.
“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 Amazon founder and CEO Jeff Bezos in a statement released earlier this morning.
Approval of the sale is expected by the second half of 2017. No big plans have been announced and it’s still early to determine what changes Amazon may consider, but industry is musing the potential benefits. Currently, Amazon offers grocery-delivery services in five markets, but the move would allow it to expand.
“If we dissect North Americans’ spending patterns, we see one third of all spending is on food and convenience merchandise, one third is on cars and car parts, and the other third is on stuff Amazon sells already,” says James Smerdon, retail consultant and strategic planner with Colliers International Consulting in Vancouver. “I see this as a way to branch out into a category Amazon doesn’t do very well in, by buying one of the best in the industry.
He imagines Amazon will use the Whole Foods acquisition to drive food and convenience spending traffic online, either through delivery or click-and-collect type services.
Canadian grocery retailers are already doing everything they can to maintain competitiveness, he adds, pointing to Loblaw, which has already implemented a click-and-collect model and earlier this year announced its considering home deliveries.