Whole Food shares keep rising, leading to bidding war speculation

Founder and CEO of Amazon Jeff Bezos

Online retailer Amazon.com has announced it will acquire the Whole Foods supermarket chain for $13.7 billion, the New York Times reports.

Explaining the rationale, Deutsche Bank said Amazon's move would notably increase touch points with customers, as food & beverage accounted for the biggest share of consumer spending in 2016. Its $230 billion market value dwarfs listed US grocers, including Target, Kroger and Sprouts Farmers Market, as well as private Albertsons.

If shares remain above the acquisition price on the open market, it is very likely that shareholders at Whole Foods will reject the deal. Even saying Amazon is a retailer goes against the grain for a bricks and mortar zealot like me.

And 28% of Whole Foods shoppers already shop at Amazon for groceries, the most of any other grocer.

"Although industry revenue is only set to rise at an annualized rate of 0.8% over the five years to 2022, the transaction will allow the online retail giant to boost not only its grocery sales, but expand its brick-and-mortar presence", IBISWorld Industry Analyst Madeline Hurley said in a statement emailed to press. As for experience, consumers are looking for an engaging experience within the grocery format-be it a cheese tasting, wine pairing or cooking class. Amazon has now bought into more than 400 locations where it can start to bring this experience to life. While Amazon has been experimenting with "grab and go" tech-enabled grocery stores for a while now, the huge acquisition of Whole Foods shows just how fast this concept could be a reality. Jana Partners now owns 9 percent of Whole Foods Market.

Andrew Gwynn, Exane equity analyst, said Amazon's 13.7 billion United States dollars (£10.7 billion) deal for Whole Foods would only increase the chances of Ocado and Amazon working together in the future.

Ladd, who left Amazon in March, said Amazon will seek to eliminate checkout lines by using technology that automatically scans goods as customers add them to their shopping carts.

Last Friday, Amazon acquired Whole Foods for $13.7B.

Thus Whole Foods stores could give Amazon a new delivery outlet to cut these costs. So a few more acquisitions like this can change the retail landscape overnight and catch competitors off guard.

It's a great way for Amazon to integrate into the $800B grocery business, and people's daily shopping habits.

"Taking a step back in the sector at large, we continue to believe investors will have more defense vs. AMZN's domination if they follow our Super Stock theory - we think deep value companies or luxury goods companies are more Un-Amazon-Able and less vulnerable to share losses vs. Amazon".

Fresh foods are the final frontier for Amazon. That means that in the short term at least, the company would be worth more to a more traditional retailer than it would be to Amazon.

Which is why it's curious, notes the Washington Post, that Amazon has patented something called the "Physical Store Online Shopping Control" [PDF], a system that's created to make it harder for shoppers in physical stores to compare prices online.

The web was awash with "Whole Foods sure is expensive!" jokes, and many speculated that Bezos had, in fact, purchased it accidentally on Alexa. In some locales, it even served as the post office too - it's nearly like a template for the virtual general store Amazon has become.

Whatever happens this much is sure: Buckle your seat belts because it's going to be a wild ride in retail at the grocery store!



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