Sometimes you look at companies like Amazon (NASDAQ: AMZN) and wonder just how it got to where it is today. What makes it such a big name worldwide? For a company that started out of somebody’s basement, it seems like too good a catch. Over the years, investors and other interested parties have seen the e-commerce magnate move strategically from one country into another, from one market to the next. You have seen the company take up space in the tech sector, the entertainment bracket, the cloud services market. And now, with a proposed $13.7 billion deal, Amazon might just be moving into the food zone as well.
Amazon CEO Jeff Bezos announced on Friday that Amazon could be expanding into the grocery store business sooner than expected with a potential acquisition of Whole Foods Market (NASDAQ: WFM). According to Bezos, the deal could be closed as soon as the end of this year, marking the entry of the global e-commerce giant into the food market. Bezos said that he was “happy” about the deal because it would help him keep Whole Foods alive and thriving in the food industry.
The purchase of Whole Foods will mark the second major venture that Amazon has made towards dominating the grocery market. A few months back, the online giant got its foot into the market’s door when it opened its Amazon Fresh Pick Up stores to the public. Unfortunately, the idea did not pick up as much as the company hoped it would. The pickup centers were centered on the idea of AI-operated stores. All you would have to do was walk into a store and pick up items that a computer would automatically pick up, and then you would pay at a machine stop. Amazon’s newest acquisition has raised concerns that this is what the company intends to do with Whole Foods. The CEOs of the two companies, however, affirmed that the operations of Whole Foods.
The newest addition to the Amazon Empire is expected to increase the company’s 2016 $136 billion sales revenue into never-before-seen sales. Whole Foods on its own was an organic food grocery store chain that was outperforming its peers. With the infusion of cash from Amazon, Whole Food’s growth potential is substantial. If the performance of Whole Food’s stock after the announcement is anything to go by, Amazon will be dominating the world food arena in no time. Whole Foods stock rose by 27% after the press release was issued, while Amazon’s gained 3% to trade at $989.27 apiece.
Whole Foods and Amazon are not the only ones feeling good about this deal. According to analyses by CNBC, an M&A between the two firms will not only lead to faster entry into the food industry but also lower inflation rates. More affordable food prices are good for everyone- well, unless you are one of the Amazon-Whole Foods competitors. Already stocks of firms like Kroger, Costo, and Walmart are falling because of the M&A announcement. What will happen when Amazon and Whole Foods actually start running stores together?