Published: Sun, August 27, 2017
Economy | By Melissa Porter

Amazon's digital disruption of the food business

Amazon's digital disruption of the food business

"But with Amazon lowering Whole Foods' prices, you could get Whole Foods in towns where you don't traditionally see them", supermarket analyst David J. Livingston said.

Less than a day after federal regulators in the U.S. approved Amazon's $13.7 billion takeover bid for Whole Foods, the Silicon Valley retail titan wasted no time in saying it would lower prices at the upscale grocery chain.

Customers shop at a Whole Foods Market in Upper Saint Clair, Pa. Amazon is moving swiftly to make big changes at Whole Foods, saying it plans to cut prices on bananas, eggs, salmon, beef and more as soon as it completes its $13.7 billion takeover. Once it does, the companies are planning sea changes, including special discounts for Prime members, and cheaper food for everyone.

Amazon also said it will start selling Whole Foods brand products on its website, a move that sent down shares of packaged food sellers including Kellogg Co (K.N).

Whole Foods has been known for high prices for years, and was even mocked by consumers, who named the store "Whole paycheck". "I think what I eat is more important than price, but they do have quality foods here", she said. We saw some of the disruption reflected in the markets yesterday - Kroger's shares fell more than 8 percent after the announcement, while Walmart's dipped 2 percent. "Obviously the low-priced approach is in Amazon's DNA, and it's something Whole Foods has been struggling with for a quite some time".

Previously you could only by them in a Whole Foods store. But analysts at SunTrust Robinson Humphrey say the near-term threat to competitors in the space is limited by the lack of customer overlap.

John Mackey will remain chief executive of Whole Foods and the company will operate as a subsidiary and continue to be headquartered in Austin, Texas, the companies said on Thursday. Customer reviews, 1-Click shopping, personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa are some of the products and services pioneered by Amazon.

As Amazon rolls out these grocery plans, some traditional sellers look better suited to absorb the shock than others: Wal-Mart has been girding itself to play defense in the food business for some time now, investing in programs such as online grocery pickup and working to improve its assortment of fresh produce and vegetables.

Amazon has said it expects the deal, which still requires regulatory approval, to close by the end of the year.

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