Amazon Will Buy Whole Foods In $13.7 Billion Deal

Jun 16, 2017
Originally published on June 16, 2017 1:38 pm
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STEVE INSKEEP, HOST:

Amazon is adding to its retail empire by buying the Whole Foods grocery chain for $13.7 billion. NPR's Yuki Noguchi joins us now via Skype to discuss this deal. Hi, Yuki.

YUKI NOGUCHI, BYLINE: Good morning, Steve.

INSKEEP: Wow, trying to figure this out. Does this mean I'm going to be asked to buy Whole Foods groceries online or buy books at the grocery store? What's going on here?

NOGUCHI: Well, I think what's going on is that this is really indicative of some big changes in the grocery and food business that we've been seeing under way for some time now. You know, more and more people buy their food not from a grocery store, so they're not necessarily going to stores. You know, think of those meal delivery services or...

INSKEEP: Yeah.

NOGUCHI: ...You know, ordering your food online for curbside pickup or to have it delivered. You know, that's a more complicated digital and logistics operation. And that's exactly where Amazon is very strong, obviously.

INSKEEP: So this is really what this is about. You've got this upscale natural foods kind of grocery chain, and Amazon is going to bring it to your house. That's what their goal is here.

NOGUCHI: Well, yes. I mean, in general I think that you've seen a lot of grocers try to experiment with this grocery delivery with the digital business, the tech side of their business. And it's a lot more complicated than just, you know, stocking shelves. There are a substantial set of challenges associated with that kind of convenient grocery...

INSKEEP: Oh, because the product is perishable.

NOGUCHI: Well, the product is perishable, a lot of consumers want to check out the produce. I know I do. And, you know, there's the whole issue of how do you keep the ice cream frozen in the delivery process? So Amazon has been working on this, offering its own grocery delivery service called Amazon Fresh, which it's been testing in its home market of Seattle.

And they announced that they're going to expand that as well as, you know, launch a grocery pickup business. So buying the Whole Foods chain is going to give Amazon 450 physical grocery locations which could then serve as local warehousing operations, essentially...

INSKEEP: Oh, yeah.

NOGUCHI: ...For that delivery, making that process easier. So, you know, you're seeing this in general, that, you know, whether it's food or electronics, you know, you need - for fast delivery you really need these sort of local operations, physical operations to deliver things from.

INSKEEP: OK, let me ask about the other side of this deal. I want people to know, if they don't ever go to Whole Foods or know much about it, this is a grocery store chain that is not just a grocery store chain. It's got an ideology, really, driven by its founder of food, of what kind of food you ought to be eating. What is in it for this company to sell to Amazon?

NOGUCHI: Well, you know, grocers are, you know, generally, as I mentioned, are under a lot of financial pressure, Whole Foods included. So you saw that, you know, earlier this week with Kroger's earnings. Their sales were also down. You know, whereas before, grocery stores had a captive local audience, right? Now consumers have a lot of options to buy in bulk or online. And so stores are really contending with a lot of price competition.

And Whole Foods hasn't been immune to that. They have, you know, seen their same store sales decline for the last two years, and that's frustrated investors. And some have been trying to push the company to adjust to these changing consumer habits and, more recently, have been pushing to - for the chain to sell itself.

INSKEEP: OK. Yuki, thanks very much for the update, appreciate it.

NOGUCHI: Thank you.

INSKEEP: That's NPR's Yuki Noguchi on news that Amazon is buying Whole Foods. Transcript provided by NPR, Copyright NPR.