Shakeup in aisle five

In news that sent shivers down the backs of grocers across the US, and to a lesser extent Canada and the UK, Amazon announced today that it is buying Whole foods for $13.7 billion USD. When the news hit, stocks of major grocery chains like Kroger and Walmart dropped several percentage points.

The reason these food retailers – and their stockholders – are concerned is that Amazon has been trying to break into the food business for some time, and now has a jump start by acquiring Whole Foods’ hundreds of physical locations. When they made the announcement, Amazon noted that  Whole Foods stores will continue operating under that name as a separate unit of the company. John Mackey will stay on to lead Whole Foods, which will continue to be headquartered in Austin, Texas.

It will be interesting to see how Amazon’s low price model will impact the Whole Foods franchise, which is focused on high quality and organic foods. The grocer’s sales have been flagging recently, partly due to a dustup about overcharging customers in New York City and more competition by discount chains like Aldi and Walmart, which have been expanding their organic and ‘natural foods’ selections.