What Amazon’s surprising acquisition of Whole Foods means for Triangle shoppers

Amazon’s bold and startling decision to acquire natural and organic grocer Whole Foods Market for $13.7 billion injects a new level of uncertainty into a Triangle grocery market that already is in a great deal of flux.

Amazon’s largest acquisition ever immediately sparked speculation that the online giant will use Whole Foods as a springboard to expand its AmazonFresh same-day grocery delivery service.

“Amazon clearly wants to be in grocery, clearly believes a physical presence gives them an advantage,” Michael Pachter, an analyst at Wedbush Securities, told Bloomberg News. “I assume the physical presence gives them the ability to distribute other products more locally. So theoretically you could get five-minute delivery.”

Amazon launched one- and two-hour delivery service for its Amazon Prime members in Raleigh early last year.

The acquisition announcement Friday made no mention of Amazon incorporating Whole Foods into its grocery delivery business. But if Amazon chooses to go that route, the pending deal gives it a brick-and-mortar presence throughout the Triangle. The Texas-based chain has five Triangle stores: two in Raleigh and one each in Cary, Chapel Hill and Durham. The chain also has eight other stores across North Carolina, according to its website.

Whole Foods had a 2.5 percent share of the Raleigh grocery market last year, according to Chain Store Guide.

The deal could also bring lower prices to a grocery store that many call “Whole Paycheck.”

“Amazon can be expected to work to deliver better value to grocery customers, both online and within the brick-and-mortar space,” Mark Hamrick, senior economic analyst for Bankrate.com, said in an email.

Hamrick likens the acquisition to “an earthquake rattling through the grocery sector.”

“We can only imagine the technological innovation that Amazon will bring to the purchasing experience for the consumer,” Hamrick said.

Investors saw the deal for the chain of more than 460 stores as bad news for other food retailers. Wal-Mart Stores shares fell 5 percent while Kroger shares dropped 9 percent Friday.

Whole Food’s same-store sales, a key performance indicator in the retail sector, have slipped for seven consecutive quarters and the company has been in a tense faceoff with activist hedge fund Jana Partners, which has been pushing the business to revamp its operations and seek a buyer.

Entrenched Triangle supermarkets such as Kroger, Harris Teeter and Food Lion already were bracing for an onslaught of new competition.

Lidl, a European discount grocery store chain, opened its first North Carolina stores this week in Sanford, Rocky Mount, Wilson, Kinston and Greenville. It plans to open a total of 20 U.S. stores in North Carolina, South Carolina and Virginia this summer – including one in Wake Forest.

In addition, Wegmans, which has inspired a cult-like following among some shoppers, has unveiled definite plans for four area stores and is on the prowl for others. And Sprouts Farmers Market, which touts its selection of affordable natural and organic foods, opened a store along Falls of Neuse Road in North Raleigh in March.

There’s more. Publix, which first invaded the Triangle in 2014, today has four stores and has plans for others.

Analysts say that the intensified competition is good news for consumers because it should mean better prices. The downside is that some existing neighborhood supermarkets are likely to die.

A recent survey found that consumers are eager to try out new stores.

The survey of 508 consumers in North and South Carolina and Virginia conducted by management consulting firm Oliver Wyman reported that over two-third of shoppers are likely or very likely to sample Lidl’s wares.

Which raises the question – could Amazon’s acquisition of Whole Foods spur additional consumers to give grocery delivery a try?

This story was originally published June 16, 2017 at 10:39 AM with the headline "What Amazon’s surprising acquisition of Whole Foods means for Triangle shoppers."