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Whole Food shares keep rising, leading to bidding war speculation

20 June 2017

Moody's lead retail analyst Charlie O'Shea said the deal could be "transformative, not just for food retail, but for retail in general".

Notably, shares of dozens of supermarkets, food producers, shopping malls and payment processors collectively lost about $35 billion in the US market on Friday in response to the news.

Walmart, which gets more than half its revenue from groceries, has been expanding with its acquisition of past year and last week said it was buying online men's clothing seller Bonobos.

Retail shares were sold off following the announcement amid fears Amazon would disrupt the wider industry as it has done to bookstores and music sellers.

Whatever the firm says about the Amazon deal, and it has been publicly silent so far, could have a huge effect on the way other shareholders approach the offer.

"We also expect Amazon to install its technology at Whole Foods locations", Kantar Retail Senior Analyst Robin Sherk told FierceRetail. Whole Foods' shares traded in the mid-$30 range for May and early June. If Amazon decides to deploy this kind of tech, it's likely that it would use it in Whole Foods stores as well as its own physical stores.

Groceries are already a fiercely competitive business, with low-priced rivals like Aldi putting pressure on traditional supermarket chains and another discounter, Lidl, opening its first USA stores just this week.

Whole Foods now has 460 stores across the US, Canada and the United Kingdom, with nine of them in Britain. "Amazon's acquisition of Whole Foods is one of those". The deal also puts pressure on Amazon to keep developing a smart shopping cart that can charge you automatically for whatever you drop in.

"If anything", she said, "the acquisition will make shopping at Whole Foods more convenient".

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Will my neighborhood Whole Foods disappear? "It is really fascinating to think how the landscape could change if this deal goes through", Giammona says. But Whole Foods stock closed above $42 on Friday, and it rose again Monday to top $43.

"This might be an opportunity for consumers who have felt that Whole Foods is inaccessible", said Lauren Beitelspacher, a marketing professor at Babson College in MA.

Culpepper, who owns Kroger Co shares, said Kroger is the company that would be most likely improve Whole Foods' efficiency, but that it would have difficulty matching Amazon's cash offer.

Which is why it's curious, notes the Washington Post, that Amazon has patented something called the "Physical Store Online Shopping Control" [PDF], a system that's created to make it harder for shoppers in physical stores to compare prices online. However, with the acquisition of Whole Foods, Amazon has confirmed that it plans to be a serious player in this segment.

Kantor noted that Amazon's market cap gain roughly equaled the amount the company is paying for Whole Foods.

The Whole Foods deal could also get more people to try grocery delivery, something many shoppers have been hesitant about because of concerns about meat and produce quality. "Now Amazon can give its Prime Customers a lot of new options", he said.

"Instead of deliver to my home, why not just come down here?" Amazon may open up Whole Foods proposition to a much larger audience, as only 11% of Amazon shoppers shop Whole Foods today. Still, it's the kind of technology that could help cut costs down the road, and that others may look to as well. The stores can also showcase other AMZN products such as Kindles, Echos, and private label consumer goods.

Ocado was set for its best day on the stock market in nearly a year, with its shares 19.1p higher at 294.82p.

Whole Food shares keep rising, leading to bidding war speculation