Grocery

Why Amazon Bought Whole Foods for $13.7 Billion

by:
June 16, 2017

Amazon will pay $13.7 billion in cash to acquire Whole Foods Market, the once online-only retail behemoth announced Friday, June 16. The deal is generous, valuing Whole Foods at $42 a share, a full 27 percent higher than its closing price on Thursday. Stocks for competitors, like Kroger, Costco, and Sprouts, in contrast, all fell in the wake of the news. So what does the merger mean?

On its own, Amazon has been toying with the brick-and-mortar grocery experience for several months now, rolling out concepts like Amazon Go, which eliminates the checkout process, and AmazonFresh Pickup, the Seattle-only service that treats your groceries like takeout, available within 15 minutes of your order.

In other words, Amazon really wants you to buy your groceries (and everything else) from Amazon—and since Walmart, which already has a nationwide network of stores, just launched a giant grocery vending machine that seems destined for expansion, the time to get physical is now.

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Enter Whole Foods. Amazon’s nearly $14 billion purchase will allow Bezos’ ecommerce company direct access to hundreds of communities with income levels high enough for the regular Whole Foods customer.

And that’s just the beginning. "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. "We can only imagine the technological innovation that Amazon will bring to the purchasing experience for the consumer. Now, we can see in hindsight that its recent dithering around the brick-and-mortar experience, as an experiment, was only a rumbling of the seismic event in the offing."

Not surprisingly, Whole Foods’ price tag struck a chord with customers

One observer hypothesized that perhaps even Bezos himself fell into the Whole Paycheck trap

The deal is set to close later in the year, and Whole Foods CEO John Mackey will continue to operate the brand as a separate division of the company.

Meanwhile, as shareholders rejoice, here’s hoping that the Whole Foods shopping experiences gets a little less whole paycheck, if you know what I mean.

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29 Comments

petalpusher June 23, 2017
The beginning of the final paragraph sums up much of the American experience - of rejoicing 'shareholders'. It's not 'we the people' - its all about we the shareholders. Living in a rural community and growing most of my own food, this news will not affect my life much, but my head spins when I envision 14 billion in cash.
 
Sandra L. June 23, 2017
One thing no one seems to talk about here is the increasing loss of contact with other human beings, the loss of community that comes with doing everything from an armchair in the comfort of your home. One more reason here for people to LIVE online. I find this really sad and am somewhat depressed at the thought of not being able to spend leisure time wandering the aisles looking at and touching new products or talking to other foodies or to the butcher, the wine person, etc. Not to mention, sitting and spontaneously enjoying a cup of coffee with a friend I've run into by accident...I live in France now where the personal aspect of life is still thriving with weekly markets and small businesses. I am sad for America and glad to have left.
 
Sue S. June 23, 2017
It's probably nothing like France in terms of human-to-human communication, but there do exist many areas in the US where there are thriving farmers and farmer's markets. Even in my difficult to grow, cloudy rain forest home place in coastal Oregon, we are blessed with a group of young farmers--as well as a few older ones. These artisans are doing beautiful things, get paid a pittance for it, but many seem to be holding their passion for outstanding stewardship of their animals, eggs, vegetables and (mostly) berries. These efforts need to be supported, and they appear to be, despite the best efforts of the government to suppress them..
 
Cynthia D. June 23, 2017
agreed. I feel like we are losing touch with humanity and each other. <br />
 
susantcase June 23, 2017
I agree with Sandra Lane. To a great extent, shopping and running errands is how I keep in touch with my community - chatting with shopkeepers, running into friends and neighbors. I support privately owned and family businesses whenever possible. Whole Foods has seemed a more personal place to shop and I'm apprehensive about the Amazon influence in the future.
 
Barbie M. June 22, 2017
What made whole foods special were artisans, and thoughtfully produced foods that came at a price because of the care that went into producing them. The 365 brand is bad, it just is. I can count on it. What I hope won't happen is someone being able to persuade us to buy cheaply made "safer" foods - - that the bar becomes simply something better than what a traditional grocer can offer, in terms of how much damage eating something will do to you. Local small artisan products cost money. The whining about the cost is a little silly - there are innumerable walmarts out there if what we want is something cheap, but if what we want is something really delicious, really well made, with the best ingredients by someone who knows how to do it really well - that comes at a price. That is my only fear here - I am baffled about people hoping this brings the prices down. You understand the product will come down with the prices. right?
 
Sue S. June 22, 2017
This kind of operation will very likely increase packaging, which is one thing this planet does not need any more of. Plastic crap is destroying the oceans and clogging the landfills. Too bad hardly any grocery, including the few food co-ops remaining, consider reducing throw-away garbage a worthy goal.
 
Judy F. June 22, 2017
Been doing this for years and it is delicious!
 
Judy F. June 22, 2017
Was trying to comment on Guacamole, not Amazon. (Which I love!)
 
Dianne R. June 22, 2017
Look out Blue Apron and all the other companies selling pre-packaged meals with cooking recipes. Amazon will eat you alive! They're next on Amazon's hit list. Won't be long before Amazon takes over the world and small businesses will no longer exist. I own a retail flower shop-just holding my breath waiting for the day when Amazon will mass create flower arrangements and bouquets and deliver them by drone.
 
Cindy June 22, 2017
I'm over the "whole paycheck" reference. Amazon does not do any better of a job providing organic/non gmo products at a competitive price. In fact no grocery store does. I've done the research because my diet (in reference to groceries) is organic /non gmo. I would rather spend money on groceries that are healthy. The real issue lies in getting the government behind better food so grocery stores can sell it at a better price. It would be a big surprise if the new Amazon /Whole Foods combo helps pricing on these items. The only reatailers that are selling them cheaper is Costco and Sams Club- online Vitacost. <br />Whole Foods is a great store and a great experience let's hope it stays that way.<br />Can't wait to see what happens.
 
Stacey June 24, 2017
You've clearly never researched Natural Grocers. They do a thousand times better job than Whole Foods. Whole Foods lobbied FOR the Dark Act! Natural Grocers is pubically against all GMOs, only sells 100% certified organic produce, only pasture based dairy and no chemicals, preservatives, artificial colors and sweeteners. (If a vendor sells a product that contains big GMO ingredients, they must provide proof it comes from a certified source.)
 
Cindy June 24, 2017
Oh I also shop at Natural Grocers often. I know their research. I was commenting on the fact that the research I have done (in reference to organic/non gmo food prices) does not show a grocery store that is cheaper than Whole Foods-except the giants Costco/Sams Club...and that is in center isle non perishable goods.
 
Cindy June 22, 2017
Love Amazon, but I love my Texas HEB much more. Order online pick or even deliver your groceries in some stores! Can't beat that for convenience not to mention very high quality food, at a not so high price. Kroger and Albertsons are trying to mimic HEB in our town, lol not even close
 
Carol E. June 22, 2017
I hope Amazon doesn't do to the grocery biz what it did to brick & mortar bookstores. Because of their predatory business practices I have been boycotting Amazon for years. Sure am gonna miss Whole Foods!
 
Susan June 22, 2017
Carol, that is interesting what you said about Amazon being a predatory business. I have never thought this way about them! They have always been fair to me over the years and once, when I had repeatedly told one of their sellers that I had never ordered what they were in the process of sending me (a costly piece of furniture), Amazon not only got them to take the item back, but doubled what the furniture cost in repayment to me. I will continue to be a loyal customer.
 
Eva S. June 22, 2017
As a former indie bookseller (don't worry, the store is doing fine!), I agree completely. Their predatory pricing also devalues the products on their site which makes it increasingly more difficult for the creators of those products - books or otherwise - to sustain themselves or charge the true cost of the products elsewhere.<br /><br />Also they were just recently granted a patent that blocks consumers from online price-checking via wifi (while in an amazon store). Hard to call that a pro-consumer move!
 
David B. June 22, 2017
They sold books below cost (subsidizing them via profits on other products) for the purpose of killing online and brick and mortar competitors. It worked.
 
Stacey June 24, 2017
Both Amazon and WFM treat their employees poorly. Another thing to think about!
 
Deb June 22, 2017
There isn't a Whole Foods within 2 hours of where we live, and we probably couldn't afford to shop there anyway. I've always wondered about it, though. Good for Amazon for moving forward and growing.
 
Carl June 22, 2017
I think the most important part of this story is something few have talked about, which is a complete disruption of the current retail grocery supply chain. This is GOOD FOR CONSUMERS and takes the dozen or so hands between the manufacturer and the consumer (this wrecks the KeHE's and UNFI's) wrecks the broker middle men who service brands between the distributor and store, puts real time data in the hands of the brands, which they now have to pay to someone like SPINS to get actual register ring data, and could even the playing field somewhat for the small manufacturers who don't have millions for brand adverts, marketing, shelf placement, etc - All of this is potentially MASSIVELY GOOD for the consumer - better choice, better prices, fresher products - the retail grocery business is still in 1950. If Amazon is successful this is a tektonic shift for the grocery biz!!!
 
Decs June 22, 2017
Just creating a monopoly. Nothing to see here.<br />/s
 
AntoniaJames June 19, 2017
Heard an interesting story on the radio yesterday (Gary Allen on Business on KNBR) who noted that Whole Foods gives Amazon not just a food retailer but also 500 access points (with enormous refrigeration capabilities) immediately, in generally prosperous, mostly urban areas. I notice, by the way, that the Oakland Whole Foods has been doing an online order / pickup at the store service for a while, which I assume is similar to what Walmart has been doing (haven't been in a Walmart lately). It will be interesting to see how things unfold there.<br />Finally, there's an interesting piece in the Times today: https://www.nytimes.com/2017/06/17/technology/whole-foods-amazon-jeff-bezos.html?_r=0 ;o)<br />
 
Nancy June 20, 2017
Thanks, AJ...saw these pieces. Also here's one that comments about both decline (and/or inconsistency in customer service) and very quick (maybe too-quick) expansion of the chain since 2010.<br />http://nypost.com/2017/06/18/whole-foods-has-been-forgetting-the-customer/
 
HalfPint June 19, 2017
Looks like Amazon got a "bargain". Whole Foods use to be worth twice that sale price.
 
Jade G. June 16, 2017
$14 million purchase?<br />Please. There's no point in rushing out an article in the effort to be first if you can't get the basic facts right.
 
Erin M. June 18, 2017
Um, it said BILLION in the title. Here it is cut and paste<br />Why Amazon Bought Whole Foods for $13.7 Billion<br />Not sure what you were reading....
 
fosterOR June 22, 2017
As nice a discourse as exists on Food52, wish it could be even more pervasive. There are so many nicer ways one can point out a possible error. Then, of course, never costs anything to apologize if you've made the mistake. Sigh...
 
petalpusher June 23, 2017
14 Billion in CASH. Please follow your rushing advice.