Hear from Kevin Hua, Co-founder of AtlasTrend, in this second interview by Christopher Hall of Arrow Securities Group. Kevin shares his insights around Amazon’s recently announced acquisition of Whole Foods Market. 

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Amazon put their hand up and said perishable foods one was nut they couldn’t crack. Now Amazon are trying to buy the company in the U.S. that does it best. Amazon’s acquisition of Whole Foods Market for US$13.7 billion will be its biggest deal ever. Kevin Hua Co-Founder of AtlasTrend shares insights on what this deal means for investors and consumers.

This is the second in this series of interviews. Missed the first one? Listen to the discussion on Alibaba – The Growing Goliath.

CLICK BELOW to listen to the interview (listening time is 7:14 minutes)

Key points:

Why does Amazon want to be in groceries, when we’ve seen Australia’s largest grocers losing market share and share prices tumble?

  • Grocery is a big industry worth up to US$800 billion in the U.S.
  • Amazon already has food offerings. e.g. Amazon Fresh in the U.S. and Amazon Pantry
  • Amazon’s market share in online grocery is small at 2-3% of sales
  • Whole Foods Market is a leader in fresh food and premium, organic food and will accelerate Amazon’s push into groceries
  • Strategic move tapping into a structural long-term trend that comes with higher margins and faster growth than other grocery categories
  • Perhaps an acknowledgement by Amazon that selling fresh groceries requires a physical presence to complement its online presence.

Is this just an expensive way for Amazon to learn about groceries?

  • This is more than just about groceries for Amazon
  • Amazon’s expertise in software engineering, big data analytics, digital marketing, inventory management and logistics are likely to bring efficiencies to benefit Whole Foods Market’s customers
  • Whole Foods Market’s 460+ physical stores in prime locations gives Amazon more flexibility on how it can distribute its goods more efficiently
  • Natural extension of Amazon wanting to be the retailer of choice

Will the deal go through and what’s next?

  • Unlikely to have a competing offer – Whole Foods Market will have to pay US$400 million termination fee to Amazon if it accepts another offer
  • Few competitors with financial firepower – only Walmart and Costco, but would be a significant change in strategy
  • Further corporate activity can be expected in the organice food industry with its higher margins and faster growth rates

Listen to more audios in this series:

Alibaba – The Growing Goliath

 

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About Kevin Hua

Kevin Hua is a Co-Founder of AtlasTrend, an online investment platform that makes it easy for anyone to learn and invest in trends transforming our world. Kevin has over 19 years experience in financial markets including as Senior Portfolio Manager at Atrium Investment Management and Stark Investments.