On August 28, Amazon completed its $13.7 billion acquisition of natural/organic retailer Whole Foods Market (WFM) months before many analysts predicted that the deal would be given government approval. A few days prior to the actual acquisition the Federal Trade Commission (FTC) said that it would not undertake any further investigation of the takeover.
Bruce Hoffman, an acting director at the FTC, said in a statement that the agency looked at the “proposed acquisition to determine whether it substantially lessened competition.” And, he said, the FTC “decided not to pursue this matter further.”
The all-cash deal gives Amazon approximately 470 stores in the U.S., Canada and the U.K. which produced annual revenue of nearly $16 billion. And aside from purchasing WFM’s physical units, the acquisition will likely give the Seattle-based company valuable data on how people shop in stores while also allowing the
large primarily internet merchant to utilize its own data to enhance its relationship with current and future Whole Foods’ customers.
As for the changes within the stores themselves, that process has already begun with Amazon reducing prices on dozens of popular products including meat, seafood and produce items. Orange signs that display both the Whole Foods and Amazon logos indicated reduced priced items with the additional message of “more to come.” The average price reduction of the more than 20 items that we measured was about 35 percent.
“We’re determined to make healthy and organic food affordable for everyone. Everybody should be able to eat Whole Foods Market quality – we will lower prices without compromising Whole Foods Market’s long-held commitment to the highest standards. And this is just the beginning – we will make Amazon Prime the customer rewards program at Whole Foods Market and continuously lower prices as we
invent together,” Jeff Wilke, CEO of Amazon Worldwide Consumer, said in a statement.
Looking further ahead, as it may impact the WFM store base, analysts questioned the viability of utilizing Instacart of Whole Foods’ home delivery system and also wondered if primary grocery supplier UNFI (which has partnered with Whole Foods for nearly 20 years) would continue in that role in the long-term.
Whole Foods reportedly represents approximately 35 percent of UNFI’s $8.5 billion annual revenue.
“Contractual obligations aside (the UNFI pact reportedly is valid for another eight years), why would the new Whole Foods need to utilize the services of an outside distribution organization when distribution is essentially the foundation of Amazon’s business?” queried a supermarket executive who already competes with Whole Foods and Amazon. “As for Instacart, Amazon will no longer need a third party – they already have the delivery skills to use their existing stores as mobile hubs, which will prove very effective for Amazon in urban areas, where Whole Foods has multiple concentrated locations and the use of home delivery is bigger.”