Whole Foods was Amazon’s biggest acquisition ever
Since Amazon (AMZN) acquired Whole Foods Market, over a dozen executives and senior managers from Whole Foods have left, according to The Wall Street Journal. Some of the Whole Foods leaders were pushed out while others left on their own volition, perhaps because they weren’t comfortable with the leadership arrangement that followed after Amazon took control of the organic grocer.
The executive outflow at Whole Foods has hit the bakery, produce, and local-food departments, according to the report. Amazon paid $13.7 billion to acquire Whole Foods, marking its biggest merger and acquisition deal ever.
Demand for organic food on the rise
Amazon closed the Whole Foods acquisition in August 2017. In its last annual report as an independent company, Whole Foods reported over $16 billion in revenue and $245 million in net profit in fiscal 2017 (ended September 2017). It had revenue of $15.7 billion in the previous year.
Amazon’s acquisition of Whole Foods was viewed as part of its push into the grocery sector. Since most consumer food purchases are largely offline, traditional retailers such as Walmart (WMT) and Kroger (KR) have had an edge over pure e-commerce rivals such as Amazon. Whole Foods offers Amazon the offline reach it needs to drive grocery sales.
Perhaps Amazon’s move to acquire Whole Foods was also motivated by the rapid expansion of the organic food market. According to the OTA (Organic Trade Association), US organic food sales hit a record high of $43.0 billion in 2016, increasing 8.4% from 2015. Overall, US retail food sales only rose 5.3% in 2016.
Amazon revenue jumped 38% last quarter
Amazon’s revenue increased 38% YoY (year-over-year) in 4Q17, faster than the 9.0% YoY increase at eBay, but slower than the 56% YoY increase at Alibaba. Amazon stock fell 4.8% in the week ended March 23, highlighting resilience in the stock as both the S&P 500 and the NASDAQ fell more than 5% during the week.