When did Amazon buy Whole Foods? Five years ago, Amazon closed its $13.7 billion purchase of Whole Foods, by far the biggest acquisition ever for the e-commerce and cloud computing giant. Since then, Amazon has made a lot of changes to the specialty grocer, from lowering prices to embedding checkout technology in its 500-plus U.S. stores.
Amazon has opened 60 new locations, including one “dark store” entirely devoted to filling online orders. Yet Whole Foods still controls just over 1% of the grocery market, according to research firm Numerator, compared with Walmart’s
19% and Kroger’s
9%.
Next week, Whole Foods gets a new CEO for the first time since its founding in 1980. Operating chief Jason Buechel steps into the lead role on Sept. 1, succeeding colorful, polarizing co-founder John Mackey, who was once described as a “right-wing hippie.”
When did Amazon buy Whole Foods?
The following article is a written adaptation of an episode of Thrilling Tales of Modern Capitalism, Slate’s podcast about companies in the news and how they got there.
In 2017, Amazon entered the grocery business by tossing Whole Foods in its shopping cart. Amazon spent more than $13 billion to buy this 40-year-old supermarket chain known for its organic merchandise and, at times, its sky-high prices.
In the grocery world, the purchase was a cataclysmic event. “The acquisition of Whole Foods was the alarm bell that started all these multibillion-dollar investments in digital grocery capabilities,” says Jon Springer, executive editor of the trade publication Winsight Grocery Business. “It was like, Oh, my God, we’ve got to do something about this.”
The COVID pandemic shifted the industry’s focus toward food delivery, which only played further into Amazon’s strengths. And now, people in the world of groceries, people on Wall Street, just people in general, are extremely curious about Amazon’s supermarket ambitions, given the company’s habit of taking a wrecking ball to any market it gets involved with. “Everything is done differently today because of Amazon, and the grocery industry is one of the last industries to come under that influence,” Springer says.
Whole Foods itself revolutionized that industry. From one health food store in Austin, Texas, that opened in 1980, it became a household name and changed the entire conversation around groceries. Gary Fine, a former Whole Foods employee, says, “Whole Foods was a mission-driven company, and the mission was to change the world, have good stuff, and to change the way people eat. Well, you know what? They won. They won. You can get organic food, you can get natural foods everywhere, you can go to your little corner grocery store, you go to Safeway.”
Cautionary Statement Regarding Amazon Forward-Looking Statements
Amazon’s statements related to the proposed merger with Whole Foods Market contain forward-looking statements, including statements regarding expected benefits of the merger, the timing of the transaction, and financing of the transaction. Actual results could differ materially from those projected or forecast in the forward-looking statements.
Factors that could cause actual results to differ materially include the following: Whole Foods Market shareholders may not approve the transaction; the conditions to the completion of the transaction may not be satisfied, or the regulatory approvals required for the transaction may not be obtained on the terms expected, on the anticipated schedule, or at all; long-term financing may not be available on favorable terms, or at all; closing of the transaction may not occur or may be delayed, either as a result of litigation related to the transaction or otherwise; the parties may be unable to achieve the anticipated benefits of the transaction; revenues following the transaction may be lower than expected; operating costs, customer loss, and business disruption,…
Amazon to Acquire Whole Foods Market
June 16, 2017—Seattle, Wash. & Austin, Texas—Amazon (NASDAQ:AMZN) and Whole Foods Market, Inc. (NASDAQ:WFM) today announced that they have entered into a definitive merger agreement under which Amazon will acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately $13.7 billion, including Whole Foods Market’s net debt.
“Millions of people love Whole Foods Market because they offer the best natural and organic foods, and they make it fun to eat healthy,” said Jeff Bezos, Amazon founder and CEO. “Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades – they’re doing an amazing job and we want that to continue.”
“This partnership presents an opportunity to maximize value for Whole Foods Market’s shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers,” said John Mackey, Whole Foods Market co-founder and CEO.
Whole Foods Market will continue to operate stores under the Whole Foods Market brand and source from trusted vendors and partners around the world. John Mackey will remain as CEO of Whole Foods Market and Whole Foods Market’s headquarters will stay in Austin, Texas.
Completion of the transaction is subject to approval by Whole Foods Market’s shareholders, regulatory approvals and other customary closing conditions. The parties expect to close the transaction during the second half of 2017.
In 2017, Whole Foods ran into trouble
In his book “Conscious Leadership,” Mackey wrote that around 2017, activist investors initiated a takeover bid. The founder said that he felt a takeover would ruin Whole Foods’ unique brand.
But Whole Foods couldn’t find a buyer
Mackey responded by approaching billionaire Warren Buffett and grocery giant Albertsons, but neither was interested in purchasing the company.
Then, Mackey called on Amazon
Bezos was interested in Whole Foods. On August 24, 2017, the companies announced that the deal had gone through. Amazon bought Whole Foods for $13.7 billion.
Lowering prices with more private-label goods
Amazon’s commitment to low prices didn’t align with Whole Foods’ image at the time of the acquisition, when the grocer was often called “whole paycheck” and mocked for selling $6 asparagus-infused water.
An Amazon spokesperson told CNBC in a statement that its goal was to “make high quality, organic foods more affordable and accessible for everyone,” and that it’s since “lowered prices across aisles at Whole Foods Market, offered Prime Membership Discounts and Prime Member Deals in-stores.”
Amazon also started focusing on selling products with bigger profit margins, an especially difficult task in the grocery business.
“You sell a lot of dollar bananas that you pay 99 cents,” said Goldberg. “So you have to be really efficient to make money. And the vast majority or a good chunk of the things you sell are perishable.”
One way to boost margins is to sell private-label goods, or in-house products. At Whole Foods, the 365 private label got a brand refresh in 2020. Whole Foods says it added 295 new products to the 365 line last year, bringing the total number to 2,200 today.
“What Amazon has been slowly starting to do is replace a lot of the purchases in Whole Foods with this private-label brand, and that has allowed them to bring prices down,” Hariharan said.
Amazon has at least 111 private-label brands, according to Coresight Research. They include Amazon Basics and Solimo for household goods and Amazon Essentials for clothes. Amazon has also been accused of using its data prowess to give its in-house products an unfair advantage.
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