We dissected 10 private and public companies possibly threatened by Amazon's acquisition of Whole Foods.

Amazon recently agreed to buy high-end grocery chain Whole Foods for $13.7B, a 27% premium on where it was trading yesterday. The move was uncharacteristic of Amazon, which has historically been a conservative M&A buyer. And, interestingly, Whole Foods is by far Amazon’s largest M&A deal and more than 10 times the size of Amazon’s next largest buy (Zappos for $1.2B in 2009). As we detailed in our Amazon Strategy Teardown, one new frontier for Amazon has been tackling brick-and-mortar retail and pushing deeper into logistics and fulfillment. Owning Whole Foods not only gives Amazon the reach for getting into the massive grocery market, but will immediately give it a footprint in some of the most affluent urban areas and invigorate its tech-enabled efforts with Amazon Fresh (grocery pickup) and Amazon Go (cashier-less retail tech), along with Amazon Prime in general.

Getting “Amazon-ed” is now synonymous with disruption, and Amazon entering the grocery market affects both publicly-traded grocers and private food startups alike. Here are the companies most likely to be affected:

 

1. Walmart

Amazon was originally conceived borrowing from Walmart’s Everyday Low Prices playbook. Amazon began its supply chain efforts by poaching many early employees from Walmart. Since then, nobody has gone head-to-head with Amazon quite like America’s largest retailer. Walmart has been on a e-commerce M&A spree with its purchase of Jet, and on the same day as Amazon’s historic buy, it slung back an announcement that it had agreed to buy men’s clothing brand Bonobos. Walmart is a large player in the grocery segment, but counter-intuitively it is in the logistics realm where this Amazon-Whole Foods deal may hurt it the most. Whole Foods gives Amazon even more reach into the most desirable consumer segments in the country (young-trending affluent urban and suburban dwellers), leaving Wal-Mart further isolated and catering to lower-income consumers outside of large metropolitan areas.


2. Instacart

Among the biggest private names in grocery delivery (and founded by an ex-Amazon employee), Instacart may eventually face an uphill battle with Amazon’s logistics network now in the mix. In the near term, Instacart may be spared. Currently, Whole Foods only represents about 10% of its deliveries, and in 2016 the company signed a 5-year deal with Whole Foods to be its exclusive delivery service for perishable items. (Whole Foods apparently has no contractual “out.”) Down the line, however, Amazon’s enormous supply chain scale means Instacart could get sidelined when it comes to grocery delivery.


3. Blue Apron

The soon-to-be public meal kit delivery company could certainly be threatened. With Whole Foods stores potentially becoming Amazon fulfillment centers, little is in the way of stopping Amazon from devising meal delivery kits in the same vein as Blue Apron. Whole Foods’ reputation as an organic retailer put further pressure on Blue Apron, given its emphasis on a sustainable farmer network. Not to mention, Whole Foods has a formidable and complex supply chain connecting it with farmers country-wide, and has even experimented with its own proprietary farming operations. This puts it in a strong position, one coupled with Amazon’s logistics reach, to deliver fresh ingredients in meal kit form.


4. Costco

Costco’s yearly subscription model could be disrupted with the introduction of a Prime-enabled grocery store that instantly grabs a significant slice of the US grocery market. Amazon Fresh’s car-side pickup also makes Costco’s marketshare of bulk groceries even further up for grabs.


5. Kroger

Ohio-based Kroger is the world’s largest supermarket chain by revenue. The company’s immense size and a highly developed line of private label goods put it squarely in Amazon’s crosshairs. Recently, Amazon has begun a foray into private label goods with its Amazon Basics and apparel efforts. Whole Foods also has a strong private label operation with its 365 brand.


6. FreshDirect

The 15-year-old food delivery service has raised a series of private equity rounds. When last asked about Amazon’s efforts with AmazonFresh, FreshDirect CEO Jason Ackerman reportedly quipped, “we’ve been competing with Amazon for a while now…and we’ve continued our growth rates all the way through.” Whether it can continue to do so in the face of an Amazon-backed Whole Foods is another question entirely.


7. HelloFresh

The Germany-based Rocket Internet startup delivers meal kits to subscribers and was last valued at over $2B. Much like Blue Apron, HelloFresh is said to be marching towards an IPO, and Amazon-Whole Foods presents a likely competitive threat.


8. Munchery

Munchery‘s all-natural lineup of heatable meals delivered from its central kitchens, might be challenged by Whole Foods if it expands from its current niche cooking buffet-style self-serve food on location to increase revenue and drive food traffic. Additionally, the company’s chef-crafted dishes in theory could be disrupted by Amazon’s AI capacity. Down the line, Amazon-Whole Foods could employ algorithms to design meals that bring customers back. More niche meal delivery services like those focused on paleo or kosher meals might do better against Amazon than Munchery’s more general appeal approach.


9. Plated

The weekly meal kit service Plated, like those mentioned above, could be in jeopardy if Amazon were to begin a meal service in conjunction with Whole Foods. Plated has raised more than $80M in funding from names including Greycroft, Formation 8, along with Shark Tank stars Mark Cuban and Kevin O’Leary.


10. Shipt

On-demand grocery service Shipt employs local shoppers to do the buying and delivery of groceries to end users. As in the case of Instacart, given that Amazon could arrange this in a fulfillment center (which are now within 20 miles of 44% of Americans) and deliver en masse, it seems unlikely that a marketplace for shoppers could compete with Amazon’s low cost structure.


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