Amazon Buys Whole Foods

Ronn Torossian, CEO, 5WPR

It appears Jeff Bezos is about to expand his empire, as Amazon will soon have a much bigger footprint in the grocery business. Amazon will purchase Whole Foods for a reported $13.7 billion in cash. Yes, cash. Early reports say current CEO John Mackey will continue to helm Whole Foods, at least through the transition.

This is not Amazon’s first foray into the grocery space, a massive $800 billion marketplace dominated by major national and strong regional brands. One of the biggest in the space is Amazon’s chief antagonist, Walmart. The world’s preeminent brick and mortar brand has been in a blood sport, take no prisoners competition with the online juggernaut for some years now. In a head to head competition for retail sales, Amazon is pulling ahead, even as Walmart is expanding its business into other markets, including groceries.

Not long ago, Amazon debuted its eponymous grocery concept, an innovative store idea that drew interest but would need to go a long way toward gaining enough market share to realistically compete with major brands like Walmart and Kroger or even expanding regional brands like Publix.

The current agreement between Amazon and Whole Foods seems to indicate that Whole Foods will continue to operate largely as they currently do. Mackey will stay CEO, and the headquarters will remain in Austin, Texas, where it’s been since the company was founded in 1980. So, what’s going to change? Mackey had this to say, in a statement:

“This partnership presents an opportunity to maximize 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…”

For Whole Foods, this also means quieting increasingly antsy investors, who have been agitated over the slowing rise of the stock price. Even a recent shakeup on the company board did little to quell investor discontent, so Whole Foods needed something major to inspire their shareholders to back off the pressure and keep the faith. An alliance with one of the world’s most successful innovators may be just the thing.

Bezos and his team have big ideas that merge innovative technology with tried and true business models, creating entirely new industries or finding new ways to make struggling business models profitable again. And Amazon has a reputation for the kind of aggression that Whole Foods will need to go toe to toe against entrenched and well-moneyed brands already very established in the marketplace.