Amazon has dominated many aspects of the retail market, but the grocery industry has always been limited for obvious reasons. No speed of shipping can bring fresh food and dairy products right to people’s doors. However, the online giant has made incredible waves on Friday by announcing the purchase of organic grocery store, Whole Foods Market.
The deal is worth $13.7 billion and it boosts Whole Foods’ value to $42 per share. That’s a 27 percent increase on where the company’s stock was at the end of the day on Thursday. CNBC’s on-air stocks editor, Bob Pisani, says that Amazon essentially as their “market cap has appreciated by about $15.6 billion today.” However, the online retail giant will also be acquiring Whole Foods’ debt .
This becomes Amazon’s . Everything else doesn’t even reach the billion dollar plateau. Twitch Interactive, a website that gives people the ability to stream video games they play and has been one of the biggest platforms for the growth of esports, was Amazon’s next-biggest acquisition at $970 million back in 2014. The online retail giant has also bought other famous entities like Zappos.com, Alexa Internet, and Audible.
With the purchase of Whole Foods, Amazon is declaring two things -- they’re ready to dive into the grocery marketplace and they want to expand their presence in brick-and-mortar stores. The company has continued to build their , which gives select areas free two-hour delivery on select items. Bigger cities have the ability to deliver restaurant items and groceries from local stores within one hour with the service.
A major obstacle with improving this service is building more warehouses. In order to bring fresh produce, meats, and other items consumers would like, Amazon would need a lot of local stores. They have a few original brick-and-mortar stores and the company has that don’t have checkout lanes, but buying out Whole Foods immediately gives them over 400 stores to help their cause. There’s a chance existing grocery stores could morph into the “Amazon Go” design.
Meanwhile, Whole Foods’ buyout comes at a good time for the company. Back in February, the company and no longer put a focus on opening more stores as growth became stagnant. The grocer has also been trying to fend off Jana Partners, an investor that has pushed for a sale.
CEO John Mackey reportedly called the investors “” and suggested they were spreading “propaganda” out there to make a quick buck. However, the investment firm will get a significant payday as their stocks rise by 37.5 percent, or $300 million from the $800 million they put into the stock market.
More from Green Matters