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Amazon’s Whole Foods deal rocks Woolworths’ share value

 

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Amazon’s plan to disrupt global retailers hit another peak this week with the announcement it will acquire US grocery retailer Whole Foods in a deal valued at approximately US$13.7 billion.

The acquisition of Whole Foods will set the online retailer up in over 400 bricks-and-mortar retail locations across the US.

In a statement, Amazon CEO Jeff Bezos said Whole Food Market is known for offering the best natural and organic foods.

“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.”

The grocery chain will continue to operate stores under the Whole Foods Market brand and co-founder John Mackey will remain as CEO.

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“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,” said Mackey.

The Australian impact

Closer to home, Woolworths’ share prices took a hit following the announcement, dropping by 4 per cent from $26.25 down to $25.33, its biggest decline since November.

A spokesperson for Woolworths told Retailbiz sister publication C&I Week it welcomes competition and is focused on putting its best foot forward regardless of what its competitors do.

“At Woolworths, we’re committed to providing our customers with great quality products at a great price both online and in-store,” the spokesperson said.

“We’re proud of our fresh food credentials, with 96 per cent of all our fruit and vegetables sourced from Australia.”

Amazon’s latest acquisition has analysts suggesting that the online retailer is preparing to roll out its products and services in Australia sooner than expected, with new plans to include a fresh food offering.

JP Morgan analyst Shaun Cousins said Amazon’s entry into the Australian market is now more likely, the AFR reported.

“The more likely prospect of an Amazon Fresh offer is in our view a negative for all food retailers in Australia,” he said.

Bankrate.com analyst Mark Hamrick said: “This is an earthquake rattling through the grocery sector as well as the retail world.”

Australian Retailers Association executive director Russell Zimmerman said it’s probably too early to be talking about the issue.

“Amazon is coming and we don’t know when, obviously buying Whole Foods could mean that they are looking very closely at a competitive market here in Australia on the grocery and retail food areas,” he said.

“We do not know where Amazon are going to set up; we need to understand when and where Amazon will actually open and no one other than Amazon can tell us.

“The main thing is for retailers to get prepared and understand so that retailers will be able to support themselves in a competitive environment.”

Amazon’s former global logistics senior manager Brittain Ladd said earlier this year that Amazon is expanding into Australia, in a statement made to Gizmodo.

Ladd also reflected on the Amazon Fresh grocery delivery service, saying Amazon would also be launching the service in Australia.

An original version of this story appeared on C&I Week.

 

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