The Fallout from Amazon Whole Foods Market Acquisition

20 Jun 2017 --- Shares in supermarkets on both sides of the Atlantic dipped as news of Amazon’s planned deal with Whole Foods Market spread late last week - and now the industry is heaving with speculation about what the move means for the traditional bricks and mortar retail space.

Viewed as a major disruption to the physical retail space in the US, Amazon has laid out its intentions to expand into retail but not just any retail space. Whole Foods Market represents the quintessential healthy store having been instrumental in bringing organic and health foods to the forefront of consumers consciousness.
 
Amazon on the other hand has previously entered into bookstores, electronics and retail industries, where it has a history of severely impacting the competition through its e-commerce platform. 
 
The expansion further into groceries signals further progression, albeit in reverse.
 
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 - a name which is trademarked. 
 
In fiscal year 2016, the company had sales of approximately US$16 billion and there are more than 460 stores in the US, Canada, and the UK.
 
When news broke last week that Amazon and Whole Foods Market have entered into a definitive merger agreement under which Amazon will acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately US$13.7 billion, including Whole Foods Market’s net debt, markets became unsettled. 
 
While Amazon’s stock increased, the fallout rippled through equities of retailers. 
Wal-Mart, Costco and Target stocks all went down initially, while grocers Kroger and Supervalu took big hits last Friday but have recovered since then. 
 
UK supermarkets Sainsbury’s and Tesco also saw their stocks fall. 
 
The surprise deal will likely have major implications for food retailing, food suppliers and the supply chain and over the coming months the finer details are likely to become clearer.