Amazon deal for Whole Foods could bring retail experiments

Amazon.com, Inc., the world's largest Internet-based retailer, said Friday it will acquire Whole Foods Market Inc., a grocery store chain featuring foods without artificial preservatives, colors, flavors, sweeteners and hydrogenated fats, at a total cost estimated to be 13.7 billion us dollars.

The deal would give Amazon control of 430-plus U.S. Whole Foods stores, almost all of which are in neighborhoods more affluent and younger than America as a whole, noted David Portalatin, the NPD Group's vice president of food industry analysis.

The deal comes a month after Whole Foods announced a board shake-up and cost-cutting plan amid falling sales and pressure from activist investor Jana Partners.

"The entry of the king of web retail into the food space has to rattle the other companies", said Brad McMillan, chief investment officer at Commonwealth Financial Network. Amazon is buying Whole Foods in a deal valued at about $13.7 billion. Just two years ago, Whole Foods CEO John Mackey told Bloomberg BusinessWeek that Amazon's foray into grocery delivery would be "Amazon's Waterloo".

He said he expects the marketing to begin shortly after the combined company closes the deal in the second half of the year. In the first quarter this year, food-and-drink sales at American brick-and-mortar stores were down by nearly $3 billion even as grocery trips rose, according to market research firm Nielsen.

Whole Foods sent a letter to customers after the merger announcement, calling the agreement a new chapter in Whole Foods' history and an incredible opportunity. Shares of several supermarkets, food producers and shopping malls plummeted on Friday after the acquisition news emerged on the surface.

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Whole Foods has been lagging in the move to online commerce - its stores are in urban markets.

Courtney Hiddeman and her family live right down the street from the Whole Foods "world headquarters" on Bowie Street in Austin. The deal is expected to close later this year.

The S&P 500 consumer staples tumbled 1.7 percent - its biggest drop since November previous year.

The post Amazon-Whole Foods Marriage Could Disrupt Grocery Business (NASDAQ:AMZN) appeared first on Market Exclusive. While the online retailer wants to spend struggling U.S. retail space, RBC Capital analyst William Kirk believes that such a deal does not warrant industry re-rating that it caused on Friday, June 16. Amazon is also experimenting with a "click and collect" model that lets customers buy groceries online and pick them up at new AmazonFresh locations.

Ryne Misso of the research firm Market Track said a customer who buys fresh fruit regularly at Whole Foods might be offered a deal on blenders and serving bowls. Whole Foods gives Amazon a tremendous amount of credibility around the quality of the food and the reputation they have with their customer base.

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