In a note to investors released after Amazon unveiled a $13.7bn deal to acquire Whole Foods on Friday, Bernstein analysts Alexia Howard and Matt Romariz explain: "The deal clearly has profound implications for the USA branded packaged food companies that we cover". Its balance-sheet cash could in theory finance almost half the acquisition and, with total debt now at about 1.5 times EBITDA, it could borrow more.
Ocado declined to comment on the Amazon-Whole Foods takeover, but a source close to the company said it could work in its favour, igniting interest in its services from USA grocers who will want to ensure their digital operations can compete.
Back in May when Amazon quietly pulled its Apple Watch apps alongside similar moves from Google and eBay, the company offered a vague statement to The Verge claiming "there are a number of reasons we don't think this is the right solution for our customers at this time".
But now Mackey, 63, one of the most successful traditional retailers of the past generation, is going into business with Bezos, 53, the man most responsible for turning traditional retail on its head.
Retailers such as Dollar General (DG), Dollar Tree (DLTR) and Five Below (FIVE) have been pretty immune to e-commerce pressures to date, thanks largely to their ability to provide rock-bottom prices that an online retailer - even one as efficient as Amazon - is hard-pressed to match. It will not only reshape the retail landscape but also help it counter competition, if it manages to get a first mover advantage.
Amazon, Maute noted, has already dipped its toe into brick-and-mortar retailing with the likes of its Amazon Books bookstores and ongoing experiments with small-format grocery stores. It has also added online and offline features to its bookstores.
Groceries can be a lure - one that consumers can't live without - which could result in more sales of Kindle e-books and other high-margin goods that could end up on Whole Foods's shelves.
"Retail presence is very important for e-commerce websites like Amazon", Elspeth Cheung, global BrandZ valuation director at Kantar Millward Brown, told ConfectioneryNews. Mackey was assured that Whole Foods' quality standards wouldn't be compromised, he said. At time of writing shares in Whole Foods Market were due to open at $42.60.
But that may not happen anymore. The stores could teach cooking skills, hold classes and educate about food.
Sure, the sale to Amazon is a win for Jana.
Amazon's huge cash balance offers it flexibility to pursue growth in potential areas and various markets.
"This is an natural disaster rattling through the grocery sector as well as the retail world", said Mark Hamrick with Bankrate.com. German discounters Aldi and Lidl are battling Wal-Mart, which controls 22 percent of the US grocery market, with each vowing to undercut whatever price the others offer.
Massive transaction could have far-reaching effects-some with a dark side-on retailers, brands, suppliers and more, according to executives at New York-based branding consultancy.
Cheung said Amazon Go is likely to influence Whole Foods' future store design.
So Amazon's increasing transition from build to buy option is a clear indication that it wants to speed up its market penetration, expansion and competitive strategies. Walmart has about 4,700 USA locations, with plans to offer curbside grocery pickup at 1,100 by the end of this year. Trussell sees Costco's online operations as lagging its brick-and-mortar peers. Everything that Amazon touches has been transformed to gold and its brick-and-mortar venture could well add another feather in its cap. He is lowering his price target from $187 to $172. Like most of the Street he has a buy rating on AMZN stock. Today, you can download 7 Best Stocks for the Next 30 Days.
Jeff Bezos just drove a tank into the middle of the food fight going on between Wal-Mart and the packaged goods industry.