Log in
Forgot password ?
Become a member for free
Sign up
Sign up
Dynamic quotes 

4-Traders Homepage  >  Equities  >  Nasdaq  >  Whole Foods Market, Inc.    WFM

News SummaryMost relevantAll newsSector newsTweets 
The feature you requested does not exist. However, we suggest the following feature:

Amazon's Grocery Ambitions Spell Trouble for Big Food Brands

share with twitter share with LinkedIn share with facebook
share via e-mail
06/26/2017 | 11:45am CEST
By Annie Gasparro and Laura Stevens 

Amazon.com Inc.'s deeper push into the grocery business threatens to further pinch packaged-food companies already coping with slowing sales.

An enduring shift by consumers toward fresh and natural options is eating into the business of big food brands, like Kraft Heinz Co., Kellogg Co., and Mondelez International Inc. They also face growing competition from store brands and upstarts.

Now, Amazon is preparing to expand into the sector with its proven history of aggressively driving down prices.

Amazon's deal to buy Whole Foods Market Inc. for $13.7 billion, including debt, was disclosed about six weeks after its first meeting with executives. Because the deal came together so quickly, Amazon hasn't yet had the time to develop a complete strategy, according to people familiar with Amazon's thinking. But the company is likely to leverage its negotiating expertise and the combined scale of the business to push for lower prices from suppliers, they said.

Amazon "will keep squeezing national brands on pricing," said James Thomson, a former senior manager in business development at Amazon and now partner at brand consultancy Buy Box Experts.

Amazon's initial priority will likely be to lower Whole Foods' operating costs so that it can charge less for groceries, in hopes of winning more customers, according to the people familiar with the company's thinking.

Amazon and Whole Foods declined to comment for this article.

Whole Foods Chief Executive John Mackey told employees earlier this month that one of Amazon's core values was "frugality," hinting at a greater focus on cutting costs and lowering prices for shoppers.

Whole Foods' sales have suffered over the past two years, partly because of a perception among shoppers that its offerings are too expensive.

"If Amazon steers Whole Foods away from its 'whole-paycheck' image, and successfully sells Whole Foods' products online, then 'Big Food' faces the threat of losing even more market share," said Rabobank food analyst Nicholas Fereday.

Mondelez's comparable sales in North America declined by 1.9% in its most recent quarter. Kraft Heinz's U.S. comparable sales fell 3.5%, and Kellogg recently lowered its 2017 comparable sales growth forecast to negative 3%, excluding currency rate fluctuations. Most packaged-food companies have turned to cost-cutting to boost their profit margins .

Amazon has worked on developing its own private-label, and last year made a big push into perishable food. Analysts and former employees expect the company to use Whole Foods to build out its own labels and capitalize on the grocer's success with its 365 brand, which accounted for 15% of its most recent fiscal year's sales.

Amazon's Whole Foods deal could also widen the reach of natural and organic brands by putting them online, making them more competitive with traditional, ubiquitous brands.

Alexander Pease, chief financial officer of pretzel maker Snyder's-Lance Inc., said at a conference last week that the deal would generate another "level of discussion with [retailers] around price."

But Susquehanna Financial Group analyst Pablo Zuanic says Amazon and Whole Foods' combined share of about 4% of U.S. grocery sales hasn't enough "clout" to hurt big food companies in the way of bargaining power.

It could also take time before food makers start feeling pressure, because the deal hasn't been completed, and Amazon's strategy for Whole Foods could shift, the people familiar with the company's thinking said. The deal is expected to be completed later this year.

Companies such as PepsiCo Inc. and Mondelez, which have top-selling brands and a global presence, are best positioned to withstand the impact of a combined Amazon and Whole Foods, some analysts said.

But mainstream brands with less market share are likely to get squeezed by niche organic options on the high end and private-label copycats on the low end, they said.

UBS analysts see Campbell Soup Co. and Conagra Brands Inc., two less diversified players which are already facing big problems as consumers move away from packaged-foods, as some of the companies that could suffer most from the combination of Amazon and Whole Foods. Campbell's comparable sales fell 1% in the latest quarter. Conagra's comparable sales fell 4.8% in its last reported quarter.

"We enjoy good working relationships with both Amazon and Whole Foods and expect that to continue," a Campbell spokeswoman said. Conagra declined to comment.

In the past, Amazon has been willing to lower price tags at the expense of margins to gain traction in a new market. Amazon's stock has risen even when profits didn't, indicating investors' patience with the company's strategy to push for long-term gains.

Mr. Thomson the former Amazon manager, said that in its bread-and-butter online retail business, Amazon has taken a tough stance to match or beat competitors, even if that meant prices dropped below a brand's minimum. The company also typically attempts to negotiate lower prices with brands each year, he said.

And when it comes to private label, "Amazon will move much faster at building new brands than any national brand can today," Mr. Thomson said.

Write to Annie Gasparro at [email protected] and Laura Stevens at [email protected]

share with twitter share with LinkedIn share with facebook
share via e-mail
11:45aDJAmazon's Grocery Ambitions Spell Trouble for Big Food Brands
08:49a GREENGATE WILL BE SITE OF FOURTH MAN : Mango Salon opening fourth location - in ..
07:15a WHOLE FOODS MARKET : A street fight among grocers to deliver milk, eggs, bananas
06/25 WHOLE FOODS MARKET : Impact of Amazon-Whole Foods Deal Unclear
06/25 WHOLE FOODS MARKET : Food ‘Disruptor’ Is Disrupted
06/25 WHOLE FOODS MARKET : Nation shouldn't shrink from the turmoil that comes with ch..
06/25 LET US PLUNGE TOWARD OUR FAST-UNFOLD : Let us plunge toward our fast-unfolding f..
06/25 Tech giants face no contest when it comes to competition law
06/24 TECHNOBABBLE : What will Amazon branch out into next?
06/24 GREENGATE WILL BE SITE OF FOURTH MAN : Mango Salon opening fourth location - in ..
More news
Sector news : Supermarkets & Convenience Stores
09:00aDJTESCO : Investec Bank plc Form 8.5 (EPT/RI) - Tesco Plc
08:48aDJWAL MART STORES : It's 5 O'Clock Somewhere -- Unless You've Been Bought by Wal-M..
06/25 CARMILA : Carrefour's property arm Carmila launches capital increase
06/25DJWAL MART STORES : It's 5 O'Clock Somewhere -- Unless You've Been Acquired by Wal..
06/23 Exclusive - Wal-Mart not considering a bid for Whole Foods
More sector news : Supermarkets & Convenience Stores
News from SeekingAlpha
06/25 Amazon + Whole Foods = $1T
06/24 How The Election And Amazon Upheld My Conviction In Active Management
06/24 The Market Recognizes That Amazon Is Different
06/23 At Home - Positioned For Years Of Solid Growth
Financials ($)
Sales 2017 15 913 M
EBIT 2017 718 M
Net income 2017 394 M
Debt 2017 192 M
Yield 2017 1,46%
P/E ratio 2017 33,18
P/E ratio 2018 30,60
EV / Sales 2017 0,87x
EV / Sales 2018 0,85x
Capitalization 13 724 M
More Financials
Duration : Period :
Whole Foods Market, Inc. Technical Analysis Chart | WFM | US9668371068 | 4-Traders
Full-screen chart
Technical analysis trends WHOLE FOODS MARKE...
Short TermMid-TermLong Term
Technical analysis
Income Statement Evolution
More Financials
Mean consensus HOLD
Number of Analysts 23
Average target price 37,9 $
Spread / Average Target -12%
Consensus details
EPS Revisions
More Estimates Revisions
John P. Mackey Chief Executive Officer & Director
A. C. Gallo President & Chief Operating Officer
Gabrielle Sulzberger Chairman
Keith Manbeck Chief Financial Officer & Executive Vice President
Jason J. Buechel Chief Information Officer & Executive VP
More about the company
Sector and Competitors
1st jan.Capitalization (M$)
WHOLE FOODS MARKET, IN..39.61%13 724
WAL-MART STORES8.28%226 882
CARREFOUR-3.84%18 614
More Results