In episode 39 of "Acquired," hosts Ben Gilbert and David Rosenthal unpack the monumental Amazon acquisition of Whole Foods for $13.7 billion, a move that came as a surprise even to them. They discuss the implications of the deal, the history of Whole Foods, and the potential impact on competitors and related companies like Instacart. Additionally, they touch on the evolution of grocery delivery from the Webvan failure to the current landscape, and how Amazon's mastery of logistics through initiatives like Kiva Systems has positioned them to potentially dominate the $800 billion grocery market. The episode also briefly mentions the importance of podcast reviews for the show's growth and upcoming guests.
"Today we are coming in hot with the just announced Amazon acquisition of Whole Foods for $13.7 billion, all in cash." "We are not planning on doing an episode today, but David and I woke up, saw the news, and absolutely could not resist."
The quotes emphasize the spontaneity of the episode due to the surprise announcement of Amazon's acquisition of Whole Foods. The hosts express their excitement and intention to delve into speculative discussions about the deal.
"Before we dive in, though, important, important announcement. So Ben's birthday is coming up this week, and if you want to get him a present like me, you should leave acquired a review on Apple Podcasts."
This quote highlights the hosts' attempt to engage with their audience by intertwining a personal event (Ben's birthday) with a call-to-action for listener support through podcast reviews.
"Our next sponsor for this episode is one of our favorite companies and longtime acquired partner pilot for startups and growth companies of all kinds."
This quote introduces Pilot, the episode's sponsor, and sets the stage for discussing its services and relevance to startup companies, drawing a parallel to Jeff Bezos's business approach.
"Whole Foods was started in 1978 in Austin, Texas, by a young man named John Mackey and his then girlfriend, Renee Lawson Hardy." "So they do the merger, and then they had to rename the business and they renamed it Whole Foods Market, and thus Whole Foods is born."
These quotes outline the origins of Whole Foods and its evolution into a major grocery retailer. They provide context for understanding Whole Foods' position in the market at the time of the Amazon acquisition.
"So as you mentioned, back in April, it was rumored that Albertsons was looking at buying the company. And then today, the big announcement that Amazon finally would acquire the company for 13.7 billion in cash." "Yep. So the stock's been under a lot of pressure for the last couple years. And actually there's an activist hedge fund, Jana Partners, that I believe ended up getting board seats and has been kind of really pushing the company to take a corporate action, meaning sell itself."
These quotes discuss the circumstances leading up to Amazon's acquisition, including market pressures and the role of Jana Partners. They highlight the competitive nature of the deal and suggest Amazon's unique position to leverage the acquisition.
"So the first is the infamous web van. So the brunt of all.com jokes back in the day, this company was founded in 96 by Lewis Borders, who is the same Lewis borders who was co founder and CEO of the Borders bookstore."
This quote introduces Webvan as an example of the excesses of the dot-com era and sets up a historical context for understanding Amazon's current foray into the grocery delivery market.
"Look what they did." This quote refers to the general perception that Webvan's failure was a significant setback for the idea of online grocery delivery.
"Yeah, but what's super interesting about it is how much of that dna from Webvan kind of has still, to this day, held onto the dream of grocery delivery." David Rosenthal highlights that despite Webvan's failure, the concept of online grocery delivery persisted and evolved.
"So Kiva Systems, which Amazon ends up acquiring in 2012, was founded by a guy named Mick Mounts." David Rosenthal explains the origins of Kiva Systems and its connection to the defunct Webvan.
"This is basically the entirety of Amazon's retail operations today is just solving that problem." The quote by David Rosenthal connects the technological solutions developed by Kiva Systems to the core of Amazon's retail operations.
"So for six years, Amazon Fresh was just in Seattle." David Rosenthal discusses Amazon Fresh's initial focus on establishing a strong presence in Seattle before expanding to other markets.
"And the sort of key lesson that they took from Webvan, after spending many years analyzing it both on the Amazon side and folks having lived through it, is that the problem with Webvan wasn't that the business didn't work, it was that they grew way too quickly." David Rosenthal elucidates the key takeaway from Webvan's failure that informed Amazon Fresh's growth strategy.
"And so what Instacart, as most listeners know, has done is know, screw this whole logistics." Ben Gilbert emphasizes Instacart's strategy of bypassing the complex logistics of grocery delivery by partnering with existing stores.
"His argument has always been that by just being the thin delivery layer and being able to partner with any grocery store or other retailer for delivery, and all of those other folks are scared of Amazon too, and sort of need Instacart as a partner, that they'll be able to provide a better experience because Amazon itself will have a limited selection." David Rosenthal explains Apoorva Mehta's argument that Instacart's partnership model can offer a competitive advantage over Amazon's approach.
"Amazon acquired the domain name for webband. So if you go to webband.com today, it won't resolve, but Amazon actually owns it." Ben Gilbert notes Amazon's acquisition of the Webvan domain as evidence of their continued interest in the grocery delivery space.
"Everybody woke up this morning and the whole world changed in this space." David Rosenthal's quote reflects the industry's surprise at Amazon's acquisition of Whole Foods and its potential implications for Instacart and the grocery delivery market.
"Amazon didn't just wake up yesterday or today and decide to do this. They've been thinking about this category for over ten years at this point." David Rosenthal stresses that Amazon's acquisition of Whole Foods was not a sudden decision but part of a long-term strategy in the grocery delivery market.
"So unless Apple or Google steps in, like Kroger only has $400 million. Dan Primac was raising this point on Twitter. Amazon's really the only one who could win this deal." Ben Gilbert discusses the financial aspects of the Whole Foods acquisition and the limited number of potential competitors capable of challenging Amazon's bid.
"Geekwire was reporting that a really interesting thing here is that it's really a training ground for AI retail research. Amazon has all these incredible machine learning, artificial intelligence, phds, and Whole Foods has probably zero, I mean, maybe some small amount of data science..."
The quote emphasizes the disparity in AI capabilities between Amazon and Whole Foods, suggesting that the acquisition will allow Amazon to significantly advance AI retail research and data application within Whole Foods and across its broader business.
"Imagine Amazon prime now launching everywhere where there's a whole Foods because they can keep things in Whole Foods in a non customer facing way."
This quote discusses the potential for Whole Foods stores to serve as distribution nodes for Amazon Prime Now, highlighting the strategic advantage of Whole Foods' locations for Amazon's delivery infrastructure.
"Will they need m a like whatever they're doing with foods? Like will it make sense to buy a big international chain as well?"
The quote speculates on Amazon's potential strategy for international expansion in the grocery sector, suggesting that acquiring a large international chain could be a logical step following the Whole Foods acquisition.
"Amazon has reportedly been working on some prescription and pharmacy efforts, and CNBC reported that if Amazon wants to sell prescription drugs, Whole Foods could provide the real estate..."
This quote ties the acquisition to Amazon's potential entry into the pharmacy market, pointing out the strategic value of Whole Foods' locations and customer demographics for launching a pharmacy brand.
"This is now instantly 450 plus new in last mile distribution centers in cities that are extremely proximate to the majority of Amazon's customer base..."
The quote categorizes the acquisition as an asset, highlighting the significance of Whole Foods' locations as last-mile distribution centers for Amazon, which aligns with its strategic distribution goals.
"Statsig is a feature management and experimentation platform that helps product teams ship faster, automate a b testing, and see the impact every feature is having on the core business metrics."
The quote explains Statsig's role in enabling product teams to efficiently manage feature rollouts and testing, emphasizing the platform's impact on business metrics and product development.
"The only model that makes sense that is capable of scaling quickly in anything less than a decade long time frame in this space, which is let the stores and the companies that are good at logistics do logistics and we'll do the last mile."
This quote discusses Instacart's business model and its potential to scale by focusing on last-mile delivery while allowing stores to handle logistics, suggesting a path forward despite Amazon's acquisition of Whole Foods.
"Amazon is by far the scariest of those five horsemen right now."
The quote captures the sentiment that Amazon is currently the most formidable of the major tech companies, especially in the context of its ability to disrupt markets and affect the valuation of competitors.
Costco 6%, sprouts 11%, and Kroger 13. Wow. Amazon signals they're going to enter a market. And just which is ironic, too.
The quote highlights the immediate impact on stock prices of various grocery retailers following Amazon's announcement of entering the grocery market. The percentages indicate the stock price decline for each mentioned company.
But actually, that is a good point that I think is worth a moment that as scary as Amazon is, they can't start from zero and destroy you. Really.
David Rosenthal emphasizes that despite Amazon's reputation, it cannot instantly dominate a new market and obliterate existing competition.
As they grow and everything you were just saying, and enter so many new markets, there is going to be this incredible, incredible human capital management problem there.
David Rosenthal speculates on the potential management difficulties Amazon could face as it continues to expand into new markets.
And the two pizza teams in Amazon, like a two pizza team started prime now and Amazon go and Amazon fresh and all these.
Ben Gilbert discusses Amazon's approach to project development through small, focused teams that can feed with two pizzas, highlighting their role in launching significant services.
Amazon's never done an acquisition on this order of magnitude of their m a strategy sort of changed from buying these sort of properties that they can integrate into their systems, audible and zappos and things like that, to buying technologies that were even cheaper.
Ben Gilbert reflects on Amazon's historical acquisition strategy and notes the unprecedented scale of the Whole Foods acquisition compared to past purchases.
When you're talking about a market as large as grocery, I mean, literally a trillion dollar market, 15% of us retail, you have to think about it in terms of like, what if I'm right?
David Rosenthal discusses the potential gains from entering the vast grocery market and how Amazon's approach to such markets is based on the potential for substantial growth.
And you can start to see the flywheel spinning. And that's how you can create this know, unsurmountable competitive advantage in a space.
David Rosenthal describes Amazon's strategy of building a self-reinforcing system that grows more potent as more elements are added, such as integrating grocery services with Alexa.
I'm going to give it an a minus, which is in line.
David Rosenthal provides a tentative grade for Amazon's Whole Foods acquisition, suggesting it is a strong move but not necessarily transformative.
I think at Walmart through Jet is really just trying to buy a bunch of these sort of smaller e-commerce companies that people love and figure, know, can they just own a portfolio of these things?
Ben Gilbert analyzes Walmart's strategy of acquiring smaller e-commerce brands to bolster its online portfolio, contrasting it with Amazon's more aggressive expansion tactics.
It really feels like with Apple announcing that they're going to bring a whole bunch of changes and improvements to the platform of podcasting, like now might be the time.
David Rosenthal comments on the significance of Apple's planned improvements to podcasting, suggesting that these changes could mark a turning point for the industry.