Grocers facing a united Amazon-Whole Foods must adapt

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Jefferies' Brian Fitzgerald provides some more in-depth analysis of the strategy behind the deal: We believe the WFM (Hold) acquisition would give a boost to AMZN's efforts with Fresh which was launched 10 years ago and operates in 20 metro areas in the USA and overseas. "However now, with Amazon in the driving seat, the game has clearly changed". A US$13.7 billion proposed takeover by Amazon.com Inc. has Stevens, a 25-year-old Irving, Texas, resident, wondering how the chain's foodie credentials will survive.

Wal-Mart Stores Inc could have sufficiently deep pockets to make a counter bid and other grocery rivals such as Kroger or Albertsons Cos Inc would have the motivation, he said. "This means that sweet and snack suppliers of Whole Foods could suddenly have an opportunity for huge customer reach and sales as a result", Walker said. For example, as an alternative to home delivery, Amazon could allow customers to pick up their package at the nearest Whole Foods and earn bonus points or some other reward for helping the retailer reduce its shipping costs. Indeed, 76% of past four-week Whole Foods shoppers also shop Amazon.com. It announced Friday that it's buying online men's clothing retailer Bonobos for $310 million, following a string of online acquisitions including ModCloth and Moosejaw.

It's unclear and seems unlikely Amazon's acquisition had much to do with the decision by Whole Foods since the deal is still pending regulatory approvals, but it wouldn't be necessarily surprising either following Amazon's decision to remove its other apps from the platform.

JP Morgan analyst Ken Goldman noted that Sprouts Farmers Market, which is known for its low prices on natural and organic products, could become a more likely target for acquisition. There are already 65,000 pharmacy locations in the United States, which are all competing to lower their prices. "This would give them a very premium brand that has a lot of credibility with customers, and puts them right in the middle of the grocery industry in one fell swoop". Several hundred grocery chains, convenience stores, dollars stores as well as mom and pop stores account for the rest. It might not be hard for Wal-Mart - or Target - to match the quality and price of products offered, but Amazon has an advantage in the form of its loyal Prime customer base and its AmazonFresh and Amazon Go offerings. For Amazon, Whole Foods is a "sustainably sourced guinea pig", as Manjoo calls it.

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The deciding factor will probably be Louisiana Democrat Cedric Richmond, who may be the best to have ever played in the game. Votes were canceled in the House on Wednesday, but on Thursday they were taking place.

Tracking shopper data to offer more targeted deals is seen as a critical advantage in the competitive grocery industry. Something bigger is at play, despite what its PR would tell us.

Goldman Sachs' Fassler lowered his Costco rating from "conviction buy" to neutral on Friday, slashing his price target from $197 to $176. Deep discounter Aldi has been expanding and its German rival Lidl opened its first USA stores this month. The analyst expects the deal to accelerate USA e-commerce sales. The source claims Amazon will plan to use new technology to eliminate cashiers, but an Amazon spokesperson denied any job cuts were planned.

Citi's analyst Brian Raymond said that "Whole Foods provides Amazon with a (primarily leased) 460 retail store footprint across 42 U.S. states, serving as distribution points and pick-up locations".

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