Amazon lands on earth at Whole Foods
The traveller from deepest cyberspace must be serious, otherwise it wouldn't be offering $13.7bn for the privilege of buying the largest organic food retailer in the United States.
The thing about flying saucers, of course, is that they can go wherever they want. So how about Germany and Old Europe, dear aliens?
Wait a minute, though. Can we really believe our eyes and ears when Texan free spirit and organic visionary John Mackey starts to fraternise with Amazon boss and online billionaire Jeff Bezos?
But CEO Mackey (63), who founded Whole Foods in 1978, is an earthling under pressure. US supermarket multiples such as Kroger are selling more and more organic food; like-for-like sales have declined since 2015; and the share price has halved on Wall Street over the same period.
This has led activist investor Jana Partners to push for radical change or the sale of the company, which is doubtless why Mackey has called them "greedy bastards".
From clicks to bricks
This has left the pundits trying to second-guess what Amazon intends to do with its first ever acquisition in the very terrestrial world of bricks & mortar grocery retailing. Suggestions have ranged from using Whole Food's 465 outlets as fulfilment centres to offering its upmarket clientele Kindle eReaders and Echo smart speakers. These, of course, could be purchased via Amazon Pay in stores with no checkouts.
Probably even Amazon doesn't have a detailed game plan yet and will be on a steep learning curve. But soon they will know the tricks of the trade and bash suppliers on terms & conditions. No wonder most consumer goods shares have also taken a hit over the last few days.
Whole Foods with net sales last year of $15.7bn, would give Amazon plenty of food volume, so goodbye out-of-stocks and the years of tinkering around with Amazon Fresh in the US.
Last but not least, Whole Foods will obviously bring extensive know-how in fresh produce and organic food.
So the deal, which needs to be approved by shareholders and which could still face a counterbid, has considerable charm for Amazon. Now that they have tasted blood, they will doubtless bay for more. Further physical acquisitions in the US are highly likely as the non-food giant discovers that modern food retailing has also become a game of scale.
Old Europe in focus
But who could they buy in Germany where Amazon Fresh started in May this year? Amazon clearly believes that premium organic retailers best suit their grocery business model. This narrows the range considerably. The three largest organic food specialists are Dennree, Alnatura and Basic.
The Americans could also be interested in Tegut. This quality Hessian supermarket operator offers the highest percentage of organic food among local grocery multiples. The subsidiary of Swiss parent Migros Zurich has also been supplying Amazon with several thousand dry goods lines, including around 800 own label products, since March.
Our newspaper asked all four retailers for a statement. We heard nothing from Basic, and Dennree's answer was essentially defensive: "At this moment in time, it is still difficult to define or comment on potential repercussions. Any attempt to do so would therefore be mere speculation."
"Alnatura sells only organic products to its customers. The more we excite them with our brand, the more we are asked whether we would want to sell. But our answer hasn't changed: Alnatura is not for sale. And, by the way, we are also well-represented in e-commerce via our Alnatura online shop and other online providers."
Thomas Gutberlet, CEO of Tegut, is less emphatic, but equally clear: "Amazon's bid for Whole Foods merely confirms our strategy and that we are on the right track. We're not afraid of cooperating with Amazon, but we are happy in our partnership with Migros."
These responses would seem to imply little or no interest among German organics retailers in selling their businesses to all-devouring Amazon. They remain fiercely independent. But John Mackey was once just as proud. He is now relieved to sell his life's work when the share price is at a third of its historical high. That doesn't exactly look like faith in the future of bricks & mortar.
But a band of intrepid organic idealists seems determined to resist the alien invasion in Germany. So perhaps Amazon should really be eyeing Metro Group?
N.B. Readers are also referred to an interactive chart (paywall), compiled by Marco Kitzmann, showing the Whole Foods store base in the US, Canada and the UK.
Podcast. Click arrow to listen to an audio version of the text: