Amazon buys supermarket chain for $US14b

Amazon founder, CEO and major shareholder Jeff Bezos: share surge with Whole Foods deal made him the world's second-richest made, with a wealth of $US85b

RELATED AUDIO: NZRise's Don Christie savages the government's new Amazon deal (June 2)

0
0:00 0:10

Amazon has announced plans to buy upmarket US grocery chain Whole Foods for $US13.7 billion.

Chief executive Jeff Bezos says he hopes the deal will close later this year.

Whole Foods, which specialises in organic and natural products, has just under 100,000 staff and 450 supermarkets in the US, Canada, and the UK.

Analysts will be looking for Amazon to apply some of its recent initiatives to its new acquisition: its AmazonFresh quick delivery service, and its Amazon Go patented concept of cashier-less checkouts, and indeed checkout-free checkouts as people simply walk out of a store after an app on their smartphone has automatically tracked all the items they've chucked in their trolley (so far the technology is only in one concept store in Seattle). 

Although the scale of the move caught analysts on the hop, Amazon has already been making moves into bricks-and-mortar shopping, including opening a series of real-life bookstores.

In April, the company confirmed a retail launch in Australia. So far, there have been no plans announced for an e-tail or retail push across the Tasman — although other services in the Amazon empire, including cloud computing and its Prime video service, are actively marketed to Kiwis.

Trump: Bezos a monopolist
Beyond the usual regulatory scrutiny, the deal could face flak from the White House.

Last year, Donald Trump, referring to Mr Bezos personally, said "He has a huge anti-trust problem, because he's controlling so much, Amazon is controlling so much of what they are doing."

The president also claims that the Amazon founder, who bought the Washington Post in 2013 is "using that for political purposes to save Amazon in terms of taxes and in terms of antitrust." 

Mr Trump has also repeatedly accused the Post of fake news and bias.

There could be some Forbes' list envy in play. The US publication says Amazon's share surge today as the deal was announced has seen Mr Bezos gain $US2.5 billion in two hours to jump a place to become the world's second-richest person with a wealth of $US84.7 billion ($US4.3 billion behind the No 1, Bill Gates, on $89.1 billion, and some distance ahead of Mr Trump at 544; Forbes recently gave the president a haircut, trimming its estimate of his wealth to $3.5 billion as property prices fell).

Mr Bezos' wealth has jumped $US10 billion over the past two months amid a flurry of good news for his company's e-tail operation, Amazon.com, and its cloud computing division, Amazon Web Services (AWS), which is leading its closest rivals Microsoft, Google and IBM by some distance.

Amazon has also quietly increased its lending activity through Amazon Capital Services recently. The Financial Times says the six-year-old, low-profile division is emerging as a serious challenge to the big banks. ACS targets small businesses selling through Amazon.com, then offers them loans at anywhere from 6% to 17% (or according to a Wall Street Journal account, anywhere from below 1% to 13.9%). The FT says ACS has done about $US3 billion in loans, with $US1 billion in the past year. According to the FT, Amazon plans to ramp that up with an expansion of its lending business in the US, the UK and Japan. The UK paper sees ACS on a similar trajectory to GE Capital, which ended up with $US500 billion on its books.

Amazon is also eyeing new areas. A June 15 Bloomberg report had it eyeing a $US9 billion bid for Slack, the maker of a trendy chat app that companies use for in-house discussion.

Some projects, such as its smartphone, have been a flop, but in others such as artificial intelligence with its hit line of Echo smart speakers with the Alexa personal assistant, have put it ahead of competitors like Apple and Google.

Buying Whole Foods for free
If the deal is not approved, Amazon will have to pay Whole Foods a $US400 million breakup fee, according to an SEC filing.

But that's small potatoes for Mr Bezos' company.

Amazon shares jumped 3.3% as the Whole Foods deal was announced, pushing its market cap to $US470 billion. But the Journal pointed out that it needed just a 2.97% rise to effectively cover the cost of buying the supermarket chain (although it's not quite that simple as it's an all-cash deal).

By contrast, shares in major retailers fell by a similar amount.

Similarly, Wesfarmers' ASX-listed shares fell 3% in a session earlier this month after the chief executive of the group (which includes Coles and Bunnings in its retail portfolio) said its 4000 bricks-and-mortar stores positioned it well to compete with Amazon.

Amazon has e-tail and cloud computing operations in Australia but no immediate plans to expand into New Zealand – although its AWS division is actively targeting Kiwi customers and recently signed a controversial all-of-government deal. The state of our dollar makes Amazon.com.au an attractive destination for some shoppers, adding to pressure on The Warehouse Group.

Amazon has also released its Prime streaming video on-demand service for New Zealand, albeit with a relative paucity of content compared to the US version.

Please respect our copyright and do not copy or share this article without permission even if you have a subscription.


17 · Got a question about this story? Leave it in Comments & Questions below.


This article is tagged with the following keywords. Find out more about MyNBR Tags

Post Comment

17 Comments & Questions

Commenter icon key: Subscriber Verified

Good story!

Reply
Share
  • 0
  • 0

Gee we are really being sucked in to that new world order so very fast. But try and tell that to the spoilt younger generation

Reply
Share
  • 0
  • 0

New World is already here.......but their grocery prices are too high.

Reply
Share
  • 1
  • 0

Oh please. The younger generation have it harder than their parents who will be the rare generation that is a net drain on society, having benefited from the high taxers their parents paid to provide various services and affordable housing, then elected not to pass those things on. There is no more entitled generation than the Boomers.

Reply
Share
  • 0
  • 1

I'm a baby boomer. My family have all worked very hard and I pay more taxes than visiting multinationals in NZ probably, as did our parents. If we are 'entitled', it is a byproduct of having worked for it in many cases. In short, your statement is nonsensical and little to do with Amazon.

Reply
Share
  • 0
  • 0

It was a response to Ruth's unrelated reference to the "spoilt younger generation". Actually, economic analyses suggest boomers may on the whole be a net drain on society - benefiting as they did from things paid for by their parents' much higher taxes, then passing on much less in benefits and services to the next generations. A best of both worlds generation. Sure, a few net positive contributors - but overall not so much.

Young Kiwis are saving at a higher rate than the boomers, yet face more difficult equations overall. Heck, the young probably won't even get the pension...

Reply
Share
  • 0
  • 0

The way Amazon is going, it's only a matter of time before US regulators step in and break the company up. Whether they do it of their own volition or at the behest of politicians remains to be seen. But the model is the break up of the robber barons, particularly J D Rockefeller's Standard Oil with the passage of the Sherman Antitrust Act at the end of the 19th century. There are strong parallels between what Rockefeller did and what Bezos is doing.

Reply
Share
  • 0
  • 0

Amazon's doing very well in e-tail, but it's far from dominating the sector.  A lot of its lead is because so many bricks-and-mortar retailers have been so slow, gormless or short-sighted with their online efforts, or smoothly integrating in-store and online shopping and delivery. It would be a shame to see any government agency intervention to undermine Amazon and prop them up at this point. 

And although it leads all-comers in offering cloud services, Microsoft, Google, HP, IBM and others have the means to fight back.

Reply
Share
  • 0
  • 0

Agree. Amazon just offer a better product in most instances. We use their RDS products because they are better than the competiton. Only dominating because of superior execution. Nothing the other players couldn't replicate. Google's AI is a generally better platform than many others too. Horses for courses.

Reply
Share
  • 0
  • 0

Having a monopoly isn't an issue. Leveraging that monopoly to gain ground in another industry/category is. While I'm certainly no anti-trust expert, this doesn't (yet) smell of anti-competitive practices.

The more recent example, with Microsoft, was because they leveraged their Operating System monopoly to unfairly compete for the Browser market. Being a monopoly itself is not the issue.

Having said that, Donald Trump already talked about Amazon needing investigation in his campaign. There are plenty of eyes watching them.

Jeff has also been very clever in focusing the internal mantra on "customer first" and how they don't look at competitors. Some of the smoking guns in the Microsoft anti-trust case was the many emails about crushing competitors and putting them out of business. While I'm not cynical enough to think Jeff had this in mind from the early days, the ethos will assist in minimising similar smoking guns at Amazon.

Reply
Share
  • 0
  • 0

If you listen to John Mackay and the grief he has had with Jana, this is probably the best outcome that could occur. While Bezos' Amazon will no doubt use its massive clout to expand upon and drive efficiency through the Whole Foods business - he will share more of the ethos and vision that Mackay has/had. Hopefully, Amazon pushes the Whole Foods concept beyond US shores.

Reply
Share
  • 0
  • 0

Amazon's, and for that matter, all large online retailers are exploiting a short term situation, which has too many long term detrimental implications for the workforce.

Governments will have to:
1. Tax them at the point of sale, and get these businesses to pay their fair share of tax.
2. Legislate to limit their control of the market, to ensure there is work for locals.

The youth are too shortsighted to recognise the consequences of buying everything online. People need jobs, not only for income, but to provide them a purpose in life.

While some people may not agree with Trumps intensions of bringing business back to the US, the Googles, Apple & Amazons of this world are not taxing there fair share of taxes yet they are happy to feed of tax paying consumers. Something needs to be done about this.

Theres no coincidence most of the 'fake news' is coming from The Washington Post when Trumps policies are a big threat to Amazon's business and taxes.

Reply
Share
  • 1
  • 0

Richard,
The youth are not shortsighted as you indicate. If you take account for how fast life has become (vs. the dinosaur era that you come from) coupled with an increase in cost of living and average travelling time I think the youth is maximize efficiency and time by adapting to the evolution in technology.
Yes, you are right regarding jobs and purpose but lets not be one sided. If one industry dies due to another industry coming up then labor will shift (along with 'purpose') and people will adjust with time (maybe a lag i.e. 4-5 years BUT it will happen). Unless you are stating everyone is resistant to change and will be stuck in the dinosaur era, such as yourself.

Reply
Share
  • 0
  • 1

Banker Boy,
I work alongside the youth of today, and while they may be more computer savy, most dont have the work ethnic and show limited initiative. They have a limited appreciation of experience, and think they know it all.
Computers dont teach you how to communicate, or understand body language. They have their place, if you want to be a drone.
Not sure I agree that youth is maximizing efficiency and time through technology. Its not showing up in increased productivity. They seem to spend more time on coffee breaks and social media, than work itself.
While computers may be of benefit for routine tasks, the benefits are at best marginal for irregular tasks.
This might suit banksters, whos objective is to lend more bad than good debt, and have to keep moving so it doesnt catch up on them. What ever happened to objective lending to the masses, rather than exploitive lending? If you parasites exploit this so much, we'd have people investing in real jobs, rather than the ponzi scheme you have created. Spenders suit the banksters, but that hardly going to help when a rainy day comes along.

Reply
Share
  • 0
  • 0

"The children now love luxury; they have bad manners, contempt for authority; they show disrespect for elders and love chatter in place of exercise" so said Socrates (according to Plato) and that was 2500 years ago (469–399 B.C.) so even then before the internet young people were jut plain lazy.

Reply
Share
  • 1
  • 0

I work in an environment with many younger and older workers. Some of the young see those same sorts of failings in the older workers, whereas the young themselves are often to be found working longer hours, investing in ongoing learning etc.

Point being, it's probably easy to find good and bad examples in both demographic groups. I can attest to that.

(Agree with the comments re bankers and parasitic lending.)

Reply
Share
  • 0
  • 0

Imagine the possibilities. Kale chips and orgainic fair trade quinoa delivered straignt to the door.

Reply
Share
  • 0
  • 0

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.7320 0.0044 0.60%
AUD 0.9228 -0.0020 -0.22%
EUR 0.6228 0.0009 0.14%
GBP 0.5686 0.0029 0.51%
HKD 5.7283 0.0366 0.64%
JPY 79.9950 0.4640 0.58%

Commods

Commodity Price Change Time
Gold Index 1289.1 4.840 2017-08-17T00:
Oil Brent 50.8 0.700 2017-08-17T00:
Oil Nymex 47.2 0.280 2017-08-17T00:
Silver Index 17.1 0.110 2017-08-17T00:

Indices

Symbol Open High Last %
NZX 50 7870.1 7873.6 7870.1 0.04%
NASDAQ 6222.5 6254.2 6221.9 0.12%
DAX 12103.5 12178.1 12203.5 -0.31%
DJI 21724.9 21793.3 21750.7 -0.10%
FTSE 7387.9 7387.9 7387.9 -0.86%
HKSE 26999.6 27236.3 27344.2 -1.08%
NI225 19471.3 19543.1 19702.6 -1.18%
ASX 5779.2 5779.2 5779.2 -0.56%