Amazon - Whole Foods Merger?

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OptsyEagle
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Amazon - Whole Foods Merger?

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I don't own either stock. On the business news shows today they are all talking about how Amazon is going to displace all the food retailers with their takeover of Whole Foods. It seems like the market agrees with them. My problem is I guess I don't understand Amazon's model correctly because I cannot see myself ordering a bag of oranges for mail order delivery. They must have another plan, but I can't find anyone that is explaining it. They are just buying Amazon and selling everything else.

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Re: Amazon - Whole Foods Merger?

Post by westcoastfella »

You can already buy a bag of oranges on Amazon today.

Its an interesting move. I'm sure more will come out over the next few days.

EDIT: From other articles I've read, this may be the driver behind my CVS being inexplicably down 5% this morning, along with much of the staples sector. A comment in an article on seeking alpha suggested expansion into companies that can a) provide them a steady and predicable supply, and b) can be converted to the AMZN model of order online for home delivery. AMZN already allows you to purchase groceries online, perhaps Whole Foods simply provides them a stable and respected grocer to offer supply?
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Re: Amazon - Whole Foods Merger?

Post by adrian2 »

Walmart is also down $5, or 6%, as a consequence of this announcement. :roll:
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Re: Amazon - Whole Foods Merger?

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It still sounds a lot like the AOL / Time Warner merger, where everyone was very excited but know one could really explain why it makes sense.

The fact that I can order oranges on Amazon does not mean I will. Also, I would think anyone with a full wallet could probably procure a steady supply of food. You don't need to buy a bunch of buildings for $13 Billion dollars to get someone to sell you food. I suppose the logistics of obtaining the various types of food, from various suppliers, from various places in the world, before the food spoils, is a little more complicated then I give it credit, but even if the $13 Billion buys that, how are they going to distribute this food. I like to see the food I am about the buy and I prefer to get it as fresh as possible.

Anyway, I will concede that Jeff Bezos is a little brighter then I am so I will assume he knows what he is doing. I don't have a horse in the game, nor do I own any of the competitors, so let's hope I at least get a deal on my oranges. There has to be something in it for me...doesn't there?
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Re: Amazon - Whole Foods Merger?

Post by deaddog »

Costco also hit.
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Re: Amazon - Whole Foods Merger?

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Ordering groceries online is not exactly a new concept. Our local Loblaws has provided this for some time. There are four designated parking places in their lot where you can pick up your order. Saves you the trouble of pushing a shopping cart around and then lining up at the cash.

I suspect that one attraction of Amazon getting into the business is that a lot of people (including me) already shop there for a whole bunch of things. Why not get some groceries while you're at it? And if you don't think of it yourself, I'm sure Amazon will present you with some pop-up ads once you're on their site.

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Re: Amazon - Whole Foods Merger?

Post by slim »

I try to eat very healthy.
Therefore I eat fresh unpackaged grocery poducts.
I'm very fussy with quality and only buy what looks good (in Canada we pay a fortune for this food)
I just can't see having a box show up on my door step with good produce, but I guess you can always give them the benefit of the doubt and try it.
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Re: Amazon - Whole Foods Merger?

Post by AltaRed »

It depends on where it comes from.

What difference does it make whether it comes off a truck from Mexico via a Superstore distribution centre (and then via to the store and then your shopping cart), or from the same truck via a Whole Foods distribution centre directly? If anything, the bricks and mortar retail store is bypassed in the Amazon / Whole Foods model and could result in it coming to your house even quicker.

That said, I am very fussy about what my perishables look like and thus wouldn't buy them sight unseen. But for dry/canned/frozen goods, why not buy online?
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Re: Amazon - Whole Foods Merger?

Post by nisser »

This looks like a terrible purchase. It's still a struggling grocer that charges 10$ for asparagus water.
I think everyone's getting excited (and worried) about nothing.
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Re: Amazon - Whole Foods Merger?

Post by SkaSka »

Some points highlighted in what I've read today:

- Amazon will get its hands on hundreds of prime, attractive retail locations near people with money.
- Amazon intends to let Whole Foods operate as its own stand alone company for the first while.
- Grocery is a low margin business, Whole Foods has some of the highest margins in the grocery sector, assumption is that Amazon is going to bring those margins down to sell cheaper, which threatens other retail players. Amazon has plenty of experience operating successfully as the low margin/low cost retailer.
- Assumptions of synergy for Amazon Prime: makes Prime membership even more compelling as you may get discounts on the groceries you shop for and/or get free, quick delivery of your groceries.

I think the best take I read was that Amazon will succeed based on human sloth: the inherent laziness of modern people wanting things delivered quickly and free to them from the convenience of their home in a few clicks.
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Re: Amazon - Whole Foods Merger?

Post by kcowan »

Didn't Grocery Gateway lose a ton of money in Ontario before it went under? Maybe it was ahead of its time. But I would not count on it!

We buy online from Home Depot, Costco and amazon.ca when they offer better selection than their stores. But delivery is troublesome. One company delivered to the curb. I met him in the lobby and showed that there was no curb. In less than 5 minutes, we had the delivery inside our penthouse. But he said the company instructed him to leave it at the curb! He needed the waybill signed and I refused until it was safely inside.

Another company left our delivery in the hallway. What do working people do? And then there are the thieves who steal from front porches. They even have a bait package program to attempt to catch them.
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Re: Amazon - Whole Foods Merger?

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kcowan wrote: 16 Jun 2017 19:41 Didn't Grocery Gateway lose a ton of money in Ontario before it went under? Maybe it was ahead of its time. But I would not count on it!

We buy online from Home Depot, Costco and amazon.ca when they offer better selection than their stores. But delivery is troublesome. One company delivered to the curb. I met him in the lobby and showed that there was no curb. In less than 5 minutes, we had the delivery inside our penthouse. But he said the company instructed him to leave it at the curb! He needed the waybill signed and I refused until it was safely inside.

Another company left our delivery in the hallway. What do working people do? And then there are the thieves who steal from front porches. They even have a bait package program to attempt to catch them.
Having lived in Japan where delivery of anything is excellent, North America still seems lame.

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Re: Amazon - Whole Foods Merger?

Post by pmj »

Online grocery delivery seems to be common in the UK, too. Son and family use it.
Operated by brick & mortar stores. Most orders are made up at night-time.
Delivery at non-busy times is free. Customer can reject any veg/fruit/meat, etc product.
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Re: Amazon - Whole Foods Merger?

Post by Thegipper »

pmj wrote: 16 Jun 2017 20:37 Online grocery delivery seems to be common in the UK, too. Son and family use it.
Operated by brick & mortar stores. Most orders are made up at night-time.
Delivery at non-busy times is free. Customer can reject any veg/fruit/meat, etc product.
I have an overweight position in Amazon it is the great disrupter. I will be taking a sizeable position in Alibaba. It will the second great disrupter. In the age of disruption make sure you invest in the the disrupters. When Walmart starts waging the tail and Sears is ready for bankruptcy go with the disrupters.
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Re: Amazon - Whole Foods Merger?

Post by Taggart »

Eat the way Whole Foods CEO John Mackey mentions in this two minute video and you won't need to shop using either Whole Foods or Amazon. Your own local grocer will do just fine.



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Aside from that, I thought the way the online newspapers were reporting about the drops in Canadian grocers that at the end of the day I might eye some bargains in either L, EMP.a, or MRU. Nope. Not yet.

A few years ago, it was Walmart according to the so called experts that was going to have the Canadian grocers for breakfast. Now it's Amazon. :roll:
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Re: Amazon - Whole Foods Merger?

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Taggart wrote: 17 Jun 2017 04:03 Eat the way Whole Foods CEO John Mackey mentions in this two minute video and you won't need to shop using either Whole Foods or Amazon. Your own local grocer will do just fine.



-------------------------------------------------------------------------------

Aside from that, I thought the way the online newspapers were reporting about the drops in Canadian grocers that at the end of the day I might eye some bargains in either L, EMP.a, or MRU. Nope. Not yet.

A few years ago, it was Walmart according to the so called experts that was going to have the Canadian grocers for breakfast. Now it's Amazon. :roll:
Whole foods is expensive - although lately the wine has shown a very nice range of prices. When traveling on a long road trip, it is fun to stock up with a ready made meal and then go to one's hotel. The quality of prepared meals is very high. On the east coast, people are worried that Sobey's (Empire) purchase of Pete's Fine Foods (somewhat similar to Whole Foods) will eventually destroy it as Sobey's starts to cost cut at Pete's. Wouldn't surprise me if Whole Foods ends up more like very small boutique shops with perhaps 1/4 of the current product offerings. I think this has been talked about as part of the Whole Foods restructuring. I think the grocer that finally figures out low cost, timely delivery will be a big winner.

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Re: Amazon - Whole Foods Merger?

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Thegipper wrote: 16 Jun 2017 22:28 I have an overweight position in Amazon it is the great disrupter. I will be taking a sizeable position in Alibaba. It will the second great disrupter. In the age of disruption make sure you invest in the the disrupters. When Walmart starts waging the tail and Sears is ready for bankruptcy go with the disrupters.
But how should one value Amazon? Based on free cash flow? Revenue growth? I'd always kind of assumed its appeal to other investors was based on the latter, and the assumption that it would become seriously profitable eventually, but never really considered it as a candidate for my portfolio. I'm a numbers guy and never really understood its attraction. Maybe I'm looking at the wrong numbers. Between 2012 and 2014 it basically had net income of $0 on revenue of about $225 billion. What is that worth?

Is it going to consistently make money going forward? Does it's earnings potential merit a P/E of 180 (or 200, or 300 for that matter)?
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Re: Amazon - Whole Foods Merger?

Post by Thegipper »

Lazy Ninja wrote: 17 Jun 2017 09:18
Thegipper wrote: 16 Jun 2017 22:28 I have an overweight position in Amazon it is the great disrupter. I will be taking a sizeable position in Alibaba. It will the second great disrupter. In the age of disruption make sure you invest in the the disrupters. When Walmart starts waging the tail and Sears is ready for bankruptcy go with the disrupters.
But how should one value Amazon? Based on free cash flow? Revenue growth? I'd always kind of assumed its appeal to other investors was based on the latter, and the assumption that it would become seriously profitable eventually, but never really considered it as a candidate for my portfolio. I'm a numbers guy and never really understood its attraction. Maybe I'm looking at the wrong numbers. Between 2012 and 2014 it basically had net income of $0 on revenue of about $225 billion. What is that worth?

Is it going to consistently make money going forward? Does it's earnings potential merit a P/E of 180 (or 200, or 300 for that matter)?
I understand. From a fundamental analysis it is hard to buy this stock. ;Last year I just ignored the numbers and bought the stock. It has invested in a powerful infrastructure including the strongest cloud capacity and it will continue to growth and investors will continue to support it. Alibaba is much the same and has numbers and metrics that are appealing to a numbers investor.
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