Last Friday, e-commerce giant Amazon.com (NASDAQ:AMZN) and natural and organic grocer Whole Foods Market (NASDAQ:WFM) took the world by surprise when the two companies announced that Amazon would acquire Whole Foods in a $13.7 billion all-cash transaction. The major deal, which will be Amazon's biggest-ever acquisition if it closes successfully, has many implications for both Amazon and Whole Foods investors -- and investors are still digesting what the deal means.
One of the more interesting facets of the deal worth further exploration is Amazon's plans for the Whole Foods brand. Will Amazon keep it at the grocery chain's stores after the acquisition? Furthermore, how much could Whole Foods change overall after the acquisition?
IMAGE SOURCE: WHOLE FOODS MARKET.
What will happen to the Whole Foods brand?
For now, the underlying Whole Foods brand, along with what the brand stands for, looks like it will remain mostly the same under Amazon.
"Whole Foods Market will continue to operate stores under the Whole Foods Market brand and source from trusted vendors and partners around the world," Amazon said in a press release about the deal. "John Mackey will remain as CEO of Whole Foods Market and Whole Foods Market's headquarters will stay in Austin, Texas."
Going further, in what seems like a nod to Whole Food's powerful brand, Amazon CEO Jeff Bezos praised the company's long history in the grocery business. He said, "Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades -- they're doing an amazing job and we want that to continue."
It's not unusual for acquired companies to maintain their current brands and leadership after an acquisition -- especially when the acquired companies are as large as Whole Foods. In its approximately 460 stores in the U.S., Canada, and the United Kingdom, Whole Foods employs about 87,000 people and has annual revenue of about $16 billion. In addition, Whole Foods is the market leader in the natural and organic foods supermarket. Keeping the Whole Foods brand will enable Amazon to tap into a loyal and validated high-end customer base. In addition, by keeping the Whole Foods brand, Amazon will mitigate any risk of losing customers as the two companies merge.
But change is on the horizon
While the Whole Foods brand and other facets of the grocer's business may remain largely unchanged under Amazon's ownership, there will definitely be some change. After all, as Mackey said in the press release about the deal, the acquisition is "an opportunity to maximize value for Whole Foods Market's shareholders, while at the same time extending our mission and bringing the highest quality experience, convenience and innovation to our customers."
PERSON GRABBING A DRINK AT AN AMAZON GO CHECKOUT-FREE STORE. IMAGE SOURCE: AMAZON.COM.
Investors may get a window into some of Amazon's plans for Whole Foods by looking at Amazon's recent launch of a small convenience-style grocery store concept with a checkout-free shopping experience. The stores use computer vision, deep learning, and sensor fusion -- technology found in self-driving cars -- to deploy technology that detects when products are removed from shelves, ultimately helping customers check out with a virtual cart that requires no interaction with a cashier. "When you're done shopping, you can just leave the store. Shortly after, we'll charge your Amazon account and send you a receipt," Amazon says about the Just Walk Out Shopping technology used at these stores.
Then, of course, there are the more speculative possibilities of Amazon using Whole Foods as a hybrid brick-and-mortar grocery store and distribution center for online orders or the possibility of Prime members receiving discounts or benefits at Whole Foods.
But until Amazon begins officially implementing changes at Whole Foods after the acquisition, investors should understand that Whole Foods won't be rebranded under Amazon. This not only gives credibility to the Whole Foods brand, but it also suggests that Amazon won't be totally overhauling the Whole Foods customers we know today -- at least not right away.
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