Amazon has tried to enter the grocery industry for a long time but hasn't had much success. However, the company has now decided to take the plunge by acquiring Whole Foods Market in a deal that dwarves all the previous deals that the company has completed. This is a particularly significant development since this Amazon's first big foray into Brick And Mortar segment.
Amazon's mega deal
In the recent past, Amazon had tried its hand at physical bookstores and grocery, with limited success. However, the acquisition of Whole Foods Market makes it the company's first big move into the brick and mortar retailing.
The deal is valued at a staggering $13.7 billion and makes it the most expensive acquisition in Amazon's chequered history. Whole Foods Market specialises in organic products, which definitely makes it a prized possession for Amazon. Amazon is going to pay $42 per share to Whole Foods Market and it accounts for a premium of 27%. Considering the present state of Whole Foods Market, it is an excellent deal.
Due to the fact that more and more consumers are now moving towards the consumption of organic foods, this acquisition by Amazon definitely looks like a shrewd one. In addition to that, Amazon's CEO Jeff Bezos is famous for having a long-term view as an entrepreneur and it would not be a surprise if the company manages to make many times over the $13.7 billion that they are paying for it.
After all, the US Grocery Market is valued at $800 billion and there is a lot of money to be made for the right companies.
A shrewd acquisition
Whole Foods has not been doing particularly well in recent years and had attracted the wrath of investors, who were unhappy about the company's lackadaisical commercial performance. At the same time, the company had fallen way behind peers like Walmart.
However, it cannot be denied that the Whole Foods Market still boasts of a total of 430 stores across the United States and in spite of its dwindling sales, it operates in a niche that has a lot of promise. Those 430 stores and the brand value, gives Amazon an excellent foothold in the grocery market that they had been trying to enter for many years.
Last but certainly not the least, Whole Foods is going to continue to operate under its present name. However, at the same time, it might be the start of Amazon's great quest for diversification and the first step towards revolutionising an industry. Maybe, they would make forays into new industries in the future.
