The report comes after activist investor Jana Partners took 9% stake in Whole Foods this week, urging the grocery company to continue its turnaround and even consider selling itself. Whole Foods has seen its shares fall by half since 2013, amid six straight quarters of declining same-store sales and increased competition from Walmart, Kroger, and more recently, Amazon (AMZN).
Although Amazon didn’t end up pursuing an acquisition of Whole Foods (WFM), the interest isn’t surprising. The e-commerce giant has been experimenting with a line of convenience and grocery stores, called Amazon Go. Amazon also offers an online grocery delivery and ordering service, Amazon Fresh.
Amazon has been operating grocery delivery since 2007, but has been slow to expand the service. Amazon Fresh previously cost $299 annually, but the terms of membership were changed in 2016 to include $15 monthly fee on top of the $99 Amazon charges for its marquis subscription service for shipping and content streaming, Amazon Prime. Currently, Amazon Fresh is available in California, New Jersey, New York City, Philadelphia, Boston, and Washington, among other regions.
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Groceries and grocery delivery isn’t an unnatural fit for Amazon. The service fits nicely into its Prime subscription, which also includes access to stream digital movies, TV shows, and Amazon’s original productions in addition to free two-day shipping and one-hour delivery on certain orders. And Amazon already has a delivery and logistics network set up for its e-commerce marketplace.
Whole Foods, whose market cap is just shy of $11 billion, would likely have been Amazon’s largest acquisition to date. The company paid $775 million for robotics company Kiva Systems in 2012 and shelled out $1.2 billion for e-commerce company Zappos in 2009.
But a takeover could have been an easy way to gain dominance in groceries, and potentially fend of competition from others in the grocery delivery space, including Silicon Valley startup Instacart.