Hi guys, in this blog we are going to talk about the Amazon Whole Food Merger. In this blog you will find what we think what the effect of Amazon Whole Food merger will have on Amazon stock price. On Friday the 16th Amazon announced that it would take over Whole Food.
Amazon Whole Food Merger: What are the advantages?
On Friday the 16th of June Amazon announced that they would take over Whole Food company for 13.7 Billion USD. It basically means that Amazon is paying 42 USD per Whole Food share. What are the possible advantages from this acquisition?
#1 Whole Food Market customers
With this take over, Amazon will gain more access to high end customers. Like Amazon Whole Food Market served high end customers who demands top quality for every dollar they spend. With this merger Amazon can gain more prime members. For those who don’t know what high end customers means. High end customers are customers who are willing to pay top dollars for premium products that is worth their money.
#2 Physical Stores
Amazon also gets 432 physique stores of Whole Food Market. With the experiments of Amazon on what a customer pick, pay and how they get their grocery delivered in the recent years. Amazon has now the opportunity to change and shake up the grocery industry. It is the reason why nearly every supermarket stocks went down when the Amazon Whole Food merger was announced. Just take a look below what kind of store Amazon Go is. ( They launched the store this year.)
#3 Reducing delivery time
By acquiring Whole Food Market, Amazon got more physical places to distribute their products. For example customers can pick their Amazon products during their grocery time at any Whole Food Market store.
# 4 Extra Profit
The final advantage is that Amazon get the revenue and profit from Whole Food Market. In 2016 the revenue of Whole Food Market was 15.7 billion USD.
Amazon Whole Food Merger: What are the disadvantages?
#1 Fierce Grocery industry
Whole Food Market has been struggling for the last few quarters. Their profits has been slinking. And their profit margin isn’t exactly super great either. If Whole Food Market continue too struggle in the grocery industry then their profit will turn negative eventually. So there is a chance that Amazon will lose more money in this deal.
Amazon Whole Food Merger: How does this effect the stock price?
I think on the short term the trend of Amazon will be bullish. Because it feeds the market the idea that Amazon can do something really amazing in the grocery industry. Some analyst are believing that Amazon will change the whole grocery industry. The grocery market was worth around 606 billion USD in 2016. So there is a lot of money to be made in the grocery industry. If Amazon can disrupt the grocery market with the help of Whole Food Market like they did with the book industry then the stocks of Amazon will sky rock a whole lot more!