Amazon rings up big changes in the food business

Amazon announced late last week it would spend $13.7 billion to buy upscale grocer Whole Foods, almost 20 percent more than the company is worth right now. Two factors made Whole Foods ripe for purchase: First, it’s been suffering from falling sales. Second, an activist Whole Foods shareholder has been pressuring the board to sell. The move could create a sea-change in the way Americans buy groceries. Prodded by Amazon, a great deal of purchasing has migrated online. By and large, though, supermarket spending has not. Retail analyst Ken Perkins says he doesn’t expect the Amazon-Whole Foods deal initially to dent Walmart’s more rural business. But it and other grocers would do well to pay attention and start getting into the rapidly growing delivery business—something Amazon has had its eye on for a while. “They've been trying to get into the grocery business for some time, given the frequency of shopping that takes place in the grocery space, far more trips than your other traditional retail segments, and this gives them a large footprint of roughly 460 stores to get closer to the customer and really expand that delivery business,” Perkins said. John Mackey will remain Whole Foods’ CEO. He says in a statement that the deal will maximize shareholder value and provide higher quality and convenience to customers.

We Sift the news so you don’t have to.