Amazon is buying Whole Foods Market Inc. for $13.7 billion
cash.
The deal is striking fear into the supermarket industry
because Amazon has a track record of dominating industries once it makes an
investment.
Whole Foods' stock price rose 28 percent; Amazon stock went
up three per cent when the deal was announced.
It was a different story for supermarket shares.
Kroger, the largest U.S. chain, saw its share prices fall
14.5 percent, Supervalu dropped 17 percent and Costco decreased seven percent.
Target was down 10 percent and Wal-Mart was down nearly seven percent.
"Amazon has shown time and time again that it is
willing to invest heavily in dominating the categories that it decides to
compete in, and there is little doubt that it has the financial capacity to do
so," consulting firm Oliver Wyman said in a statement about the deal.
"Grocers should be starting to look hard at their
pricing strategies yet again, and at the funding sources that can be used to
create a warchest. They have about six months."
