Amazon Buys Whole Foods As Retail Consolidates

Mergers and acquisitions in US retail are picking up, with 53 deals worth $23.4 billion so far this year, up 432% in value from the same period last year, Mergermarket Group reported after Amazon’s bid for Whole Foods. The record is held by the sale of Albertsons for $17.4 billion in 2006.

“Structural changes in retail have put a lot of pressure on bricks-and-mortar supermarket chains in recent years,” Mergermarket tells Global Finance in an email. With changing consumer habits, food retailers are ceding market share to e-commerce companies in the grocery and meal-kit delivery space.

“Amazon and Walmart’s increased competition following the latter’s purchase of [e-commerce company] Jet.com last year was just the beginning of the fight for market share,” Mergermarket says. “An uptick in consolidation is not surprising, with further M&A opportunities expected as assets become available amid increasing competition, store closures and bankruptcies.”

M&A activity in the retail sector worldwide will pick up this year, according to A.T. Kearney. In 2016, consolidation in the retail industry reached a post-recession record, driven by an abundance of capital, strong balance sheets and slow economic growth. North America and Europe accounted for 75% of the total.

Did Amazon buy Whole Foods for the groceries or the data? “Clearly this is an amazing twofer,” says Ramon Chen, chief product officer of Reltio, which develops data-driven applications. “Amazon gets a physical presence that can help its delivery and Amazon Fresh [grocery delivery] efforts, but it also gets the significant dataset of customers who buy groceries from Whole Foods.” That will help the company get a complete view of the customer, from brick-and-mortar shopping to online purchases, Chen says.