Amazon is taking a huge leap into another industry, agreeing to buy grocery store chain Whole Foods Market in a blockbuster deal for $13.7 billion in cash, or $42 per share, the companies announced Friday.
Whole Foods, a leading retailer of natural and organic foods, has more than 460 stores in the U.S., Canada and the U.K., and employs about 87,000. Under the deal, Amazon will also assume Whole Foods' net debt.
The deal is a marriage of "bricks and clicks," bringing together a big-name brick-and-mortar retailer that operates on a national scale with one of the world's leading e-commerce companies. Also, Amazon's status as a public cloud leader, with Amazon Web Services, can help Whole Foods accelerate delivery and potentially widen its customer base through its other business lines, supported by Amazon's Prime membership program that offers customers access to a variety of company-specific services and deals.
It's Amazon's zeal to jump into different businesses that helps Daniel DiSano land AWS customers for his company, Axispoint, an AWS partner based in Elmsford, N.Y., and No. 301 on CRN's Solution Provider 500.
"They know that Amazon is going to be around for a long time, so you don’t have to worry about them being a flash in the pan," DiSano, president and CEO of Axispoint, told CRN.
Amazon, with its launch of AWS in 2006 and its AmazonFresh grocery delivery service a year later, has entered businesses to be a "category killer," DiSano said. 'Now, with Whole Foods, they're going to try to win [the grocery] category. People know they're going to be a category leader."
Allen Falcon, CEO of another AWS partner, Cumulus Global of Westborough, Mass., called the deal for Whole Foods "fascinating," allowing Amazon an opportunity to "control the last mile" on delivery and distribution, especially with food. He said AmazonFresh, based predominantly on the West Coast, can now be expanded across the rest of the country with the addition of Whole Foods and regional food supplier relationships that will come with the acquisition.
Meanwhile, Jamie Begin, CEO of AWS partner RightBrain Networks, of Ann Arbor, Mich., called the acquisition a "testament to how serious [Amazon's] business is and how large their business is."
Amazon is also acquiring a company that's a customer of one its cloud rivals: Microsoft Azure. Whole Foods uses Azure Active Directory to enable its thousands of employees to sign on to cloud-based applications, which includes the Office 365 suite.
Whole Foods, founded in 1978, has been at the forefront of the organic food movement and is the first national “Certified Organic” grocer. But Falcon said Whole Foods has been facing a challenge to its business as other grocery store chains have expanded their selections and begun selling organic food, pushing Whole Foods on price. "People never wanted to pay a premium for organic and semi-organic" food, Falcon said. "But they had to, and now you don’t anymore."