How will Amazon transform Whole Foods? (The 3:59, Ep. 242)

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A $13.7 billion proposed takeover by Amazon.com Inc. has Stevens, a 25-year-old Irving, Texas, resident, wondering how the chain's foodie credentials will survive.

Whole Foods will eventually be part of Amazon CEO Jeff Bezos's empire. "That's going to make us a lot better company, a more competitive company", he said.

"Any smart board recognizes it's probably smarter to try to pay more" for Whole Foods "to keep Bezos out of this game", Schiffer said.

It has realised it needs to co-opt one or two of the various legacy rivals all the experts reckoned it would destroy - just as it has 'disrupted other sectors like books, music, clothing, cloud computing etc. About a year and a half ago, I dreamed that we merged with Amazon.

Amazon has been dipping it's toes into the fresh food market for quite some time now, with its grocery delivery and pickup service, AmazonFresh.

Whole Foods shares rose 1.3 percent on Monday to close at $43.22 - adding to Friday's 29 percent rise and reflecting hopes the company might fetch a higher price.

"Whole Foods was late in realizing private label's opportunity because they were enjoying the growth of the organic market", said the Citigroup report "There is significant opportunity there for Amazon". Some Whole Foods fans may oppose the move as they would rather buy produce from a brick and mortar location than a website.

Online grocery sales are expected to increase from $71 billion this year to $177 billion in 2022, according to John Blackledge, an analyst at Cowen & Co. It has a network of more than 50,000 restaurants, almost 9 million active diners and an annualized run rate of $3 billion in gross food sales.

The analysts pointed out that while there remains a fear of Amazon entering the United Kingdom, the food retail sector is likely to remain depressed.

"Dairy has to be delivered quickly".

"But it will put more pressure on other physical supermarket chains, particularly ones that don't have an owner with as deep of pockets as Amazon that can leverage technology, scale, and data on customer preferences", says Lim. And another analyst pointed out that "Building a cold supply chain with refrigerated trucks is not easy or cheap to do". Amazon has an obvious ability in e-commerce, but retailers such as Wal-Mart and Target have recently aggressively stepped up their digital efforts. Whole Foods' footprint is far smaller with about 440 locations, though those are mostly in urban and affluent neighborhoods where delivery might be more in demand. Amazon's grocery attempts, on the other hand, have not been very successful, which is why its purchase of Whole Foods is an interesting one.

Amazon has impacted more parts of the USA economy as it expands from books, toys and electronics into apparel, groceries and entertainment.

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