Online retailer Amazon has announced it will purchase upscale grocer Whole Foods Market for $13.7bn, the largest deal for Jeff Bezos’ ecommerce group to date. The all-cash deal will see Amazon take a major step forward in its mission to break into the world of traditional retailing, with investors hailing the deal as potentially game-changing for the industry.
As news of the deal broke, Whole Foods’ stock rose by 29 percent, while shares in rival grocers in the US and Europe fell. Shares in Walmart, the world’s biggest retailer, dropped by 4.7 percent, while discount store Target took a hit of 5.1 percent.
“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy”, Amazon founder and CEO Jeff Bezos said in a statement confirming the deal. “Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades – they’re doing an amazing job and we want that to continue.”
Founded in Texas in 1978, Whole Foods has been credited with bringing organic, health foods into the mainstream. While the firm currently has around 460 stores worldwide, it has struggled to maintain growth in recent years. However, with stocks now soaring at the upmarket grocer, the Amazon deal looks set to reverse this stagnant performance.
Upon announcement of the deal, Whole Foods’ stock rose by 29 percent, while shares in rival grocers in the US and Europe fell
Under the terms of the acquisition, John Mackey will remain CEO of Whole Foods Market, and the company’s headquarters will remain in Austin, Texas. The brand will also continue to operate under the same name.
Until now, Amazon has failed to make significant inroads in the traditional food and grocery sector. The online retailer is the fourth biggest company in the US, and accounts for 43 percent of all online sales there. However, despite launching its Amazon Fresh food delivery service over a decade ago, the company accounts for less than 0.5 percent of grocery spending in the US today.
The acquisition of Whole Foods will give Amazon an established network of brick-and-mortar stores across the country, considerably expanding its grocery delivery capabilities.
Upon announcement of the deal, Whole Foods Market co-founder and CEO John Mackey said: “This partnership presents an opportunity to maximise 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.”
While Amazon has only represented something of a distant threat to traditional supermarkets and grocers in the past, the acquisition of Whole Foods gives the online retailer a significant brick-and-mortar presence. With stocks plummeting at rival supermarket chains in both Europe and the US, Amazon could now pose a real threat to traditional retail stores.