Culture / Newsy

Lower Prices at Whole Paycheck?

The Real Truths of Amazon’s $13.4 Billion Whole Foods Buy

BY // 06.19.17

It is still the biggest news in food, retail and e-commerce — a game changer that could shake up the grocery store wars for decades.

Amazon is buying Austin-based grocery chain Whole Foods for $13.4 billion. The deal values Whole Foods stock at $42 per share, a 27 percent increase to its closing price the day before the sale. The organic grocery chain will operate as a separate unit within Amazon, keeping its name, as well as its headquarters in Austin.

Texas native John Mackey, who co-founded Whole Foods in 1978, will continue to serve as CEO.

The purchase is a huge leap for Amazon as the company spreads its reach across the $800 billion grocery business. The ecommerce giant has already threatened to make competition tough for traditional supermarkets with its grocery delivery service, AmazonFresh (even if the service hasn’t quite taken off yet.)

With the acquisition of Whole Foods, Amazon hit competitors even harder, sending Kroger’s stock down 13 percent, and Walmart’s down five percent on Friday. Even Wall Street darling Costco is being downgraded in the wake of Amazon’s bold play.

The deal seems to come at a fortunate time for Whole Foods, which has struggled to please aggressive investors. Sales plummeted when the upscale grocery giant was accused of overcharging customers by regulators in New York City in 2015, and profits have yet to recover. Now that it’s owned by bargain-friendly Amazon, perhaps the prices at Whole Foods will get a reality check.

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Are the days of Whole Foods being dubbed “Whole Paycheck” on the way out?

While Amazon insists that things will largely look the same at Whole Foods in the near future, others do see the start of sea change in the grocery aisles. “This transaction is going to change the landscape of how you buy food,” Mickey Chadha, Moody’s vice president and senior credit officer, said on CNBC’s Squawk Box Monday morning. Chadha forecasts that Amazon will put pressure on grocery stores in general to lower prices.

“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,” Mackey said in a statement.

Stay tuned. There’s a whole lot of shaking still to come.

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