Naperville Business Lawyer Discusses Whole Foods and Amazon

whole foods, Naperville business law attorneyKnown for a wide selection of health foods and organic items not found in many “regular” grocery stores, Whole Foods has not always been synonymous with “inexpensive.” In fact, the less-than-flattering moniker “Whole Paycheck” has been used by many to describe the high-end chain. Even Whole Foods CEO John Mackey has heard the nickname, calling it a “trap” that the company has been unable to escape—until recently, that is.

As a business law attorney, I recognize the value and strategy involved with successful mergers and acquisitions. Some take place rather quietly behind the scenes, leaving few clues for consumers that ownership has changed. Others occur with a great deal of fanfare leading to increased expectations from clients, shareholders, and the general public. Amazon’s acquisition of Whole Foods in late August is a good example of the latter type, as shoppers noticed a few remarkable changes almost instantly.

Lower Prices Pull Shoppers From Other Stores

About two months ago, Amazon spent $13.7 billion to acquire Whole Foods and immediately went to work in an effort to draw new customers. The upscale grocery store has never been known for low prices. Instead, the chain focused on providing niche items like kale-infused guacamole and tofu-ginger-rice muffins. Within several days of the deal, Whole Foods’ prices on many staple items began to drop dramatically, and some prices fell by more than 40 percent.

The slashed prices forced customers to sit up and take notice, and stores around the country saw an increase in traffic of an average of 25 percent. Market analysts say that about a quarter of new customers had migrated from Walmart, with large numbers coming from Kroger and Costco as well. Reports suggest, however, that the customer profile did not change much, since most of the shoppers coming from other stores were relatively wealthy with disposable income.

Back to Reality

In the weeks since the acquisition, there have been indications that the headline-making price drops may not have as dramatic of an effect as many first thought. A new report even suggests that Whole Foods has even increased prices on other items, including frozen food and snack foods. Overall, the report calculated that Whole Foods prices have dropped a total of 1.2 percent across the board, meaning that most customers are spending about the same per trip as they did before Amazon entered the picture.

More Centralized Control

There has also been concern among local food producers. They are worried that the takeover by Amazon will result in few decisions being made at the individual store level. This could mean less locally-sourced products in Whole Foods stores, as executives at the chain’s Texas headquarters will be making more decisions regarding each store’s offerings.

Seek Qualified Guidance

While Amazon’s acquisition of Whole Foods promises to change the face of the grocery industry—the high-end sector, at least—you may be considering a merger or acquisition of your own. If you would like to discuss your plans with an experienced Naperville business law attorney, contact our office today. Call 630-756-1160 and get the help you need in securing your company’s future.

 

Sources:

Washington Post

Business Insider

Yahoo Finance

WCPO – Cincinnati