Few challenges have been more hard for packaged foods companies to overcome in recent years than sustaining profit margins.
Sagers argues, however, that it would be legal for Amazon to independently develop its grocery sales rather than leapfrog ahead through acquisition.
Amazon announced on June 16 that it will acquire upscale supermarket chain Whole Foods for $13.7 billion. (NYSE: KR), have a large part of the market.
SpartanNash has begun remodeling its stores with an added focus on pre-prepared foods and a wider selection of items a consumer might find at Whole Foods, exemplified by remodels of D&Ws at Breton Village Mall and in Grand Haven.
Amazon is a retail juggernaut hunting for ways to dominate groceries. Its multiple store locations could help Amazon save money and time, Vyas said.
"At what point do they own the entire food chain, whether in equity or buying power?" he said. Yes, Amazon Pantry is a price breaker and Amazon Fresh is a decent proposition, but its market shares are very limited.
Likewise, JD.com uses data from a partnership with China's hugely popular messaging app WeChat, which has over 930 million users, to build data profiles for a range of brands including baby products, cosmetics and soft drinks. This distinction separates Whole Foods from most other grocery stocks.
Todd Maute, a partner at CBX, said Amazon always can be counted on to disrupt. Amazon needs to fix these issues before it can start working on a long term strategy.
As for Whole Foods, the buy out is not a done deal.
In essence, Amazon shareholders picked up Whole Foods for free.
The list of companies that could potentially challenge Amazon is short, said Jennifer Bartashus, an analyst at Bloomberg Intelligence. Gokki says the effort will force grocery stores to make the shopping process more pleasant and efficient.
"The deal has the potential to significantly alter the retail food landscape and, by extension, the packaged food space", he said.
On the other hand, as she reflected on her experience shopping at Whole Foods Friday, McCarthy admitted there may be some benefit to Amazon's takeover, particularly for elderly people who may not be able to get out to the grocery store on a regular basis. At $480 billion, Amazon's market value equals 90 percent of all the stocks in the S&P 1500 food and staples index, which includes Walmart. In fact, it's the key to sustainability in this volatile retail marketplace. And the pricing pressure may intensify.
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now. and Wal-Mart wasn't one of them! Amazon has been trying to get into the grocery and food market for some time, particularly with Amazon Fresh.
"Competition across the supply chain continues to increase as Amazon inches closer to entering drug retail on the heels of the Whole Foods acquisition", the analysts said, highlighting CVS and Express Scripts as companies with strong merger opportunities.
One thing, though, should be made clear: Amazon is positioning itself to be the most powerful retailer in the world, and it can not achieve this goal without food.
A number of chains, including Sprouts and Kroger, noted deflationary pressures when they lowered their guidance last year, and lower prices were largely responsible for the end of Kroger's 52-quarter streak of same-store sales growth earlier this year.
"I think retailers are going to have to bring a lot of excitement to the store", said Stew Leonard Jr., CEO of Stew Leonard's, a grocery chain with five locations in CT and NY.
Doing so with Whole Foods brands as well would help lower costs and possibly diminish Amazon's reliance on packaged food makers like Kraft Heinz and PepsiCo. Mackey expressed a similar expectation. "They're not stupid enough to go change that".
Here's a look at the changes that are expected to accelerate. "But first, we have to see if the sale actually goes through; it's not a done deal yet". There is likely to be some unease among Whole Foods employees, too. "We're one large tribe, one large family".
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