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Remember those rumors floating around for the past year that Kroger might buy Whole Foods?
Amazon got through the upscale grocer's checkout line first. On Friday, the online behemoth said it is buying Whole Foods for $13.7 billion. It's an earthquake of a deal.
The news sent shares of Kroger, the nation's largest grocer, down 9.2 percent on Friday after it had sunk 18.9 percent on Thursday, when the Cincinnati-based retailer lowered its financial outlook. Kroger has seen more than a quarter of its stock value evaporate in less than two days. It's as if the company got slapped with a stack of double coupons overnight.
Wall Street's reaction to the Amazon-Whole Foods marriage has been bonkers but should not shatter players such as Kroger, despite the initial reaction, said David J. Livingston, an independent grocer analyst based in Milwaukee.
"The market is overreacting and punishing companies like Kroger for no real reason," he said.
Another analyst, Phil Lempert of Supermarketguru.com, said the deal is a blow to grocers across the country, both big and small. Delivery services, a hot and growing segment, also could suffer.
"The losers? Just about every traditional grocer," Lempert said in a note, "and companies like Instacart, who built their business on Whole Foods. Clearly Amazon doesn't need someone else to deliver their groceries."
Whole Foods, a former Wall Street darling, hasn't posted double-digit-percentage sales gains since 2013, and most other chains have cribbed its halo of organic produce and customer-pleasing atmosphere in recent years.
Kroger is the dominant player in most of its markets. It won't be the big loser once Amazon swallows Whole Foods, Livingston said. Smaller, regional chains with fewer resources and less buying power might get pinched.
"There is going to be some shakeout. Fresh Market has been closing stores," Livingston said. "In Columbus, The Andersons shut down, and that isn't Giant Eagle's best market. You might see something happen there."
Giant Eagle, which has three stores in Portage County, declined to comment, and Kroger did not respond to requests for comment.
Whole Foods stores are in areas where the population is younger and more affluent than the U.S. average, which matches with Amazon's strategy, according to NPD Group, a market-research firm.
There are no Whole Foods stores in Portage County. The closest location is in Woodmere in Cuyahoga County.
Whole Foods, which had sales of $15.7 billion last year, owns 431 stores across the U.S., and Amazon will use that infrastructure of locations, the grocer's knowledge and data, along with its elevated brand status, as a foundation for expanding its fresh-food delivery business. Amazon had sales of $136 billion last year, and its sales have grown by more than 20 percent a year since 2012, although its retail, or e-commerce, sales have grown much more slowly.
"In order for Amazon to get the volume growth they are looking for, fresh foods has to be part of the equation," said David Portalatin, vice president and food industry analyst at NPD. "This deal gives them credibility with consumers and a major foothold in that space."
These additional services from Amazon also require its Prime membership, yet another source of revenue.
For those who might have been reluctant to buy Amazon's selection of produce and other grocery items online, Whole Foods' name alone might win them over.
"It will give the online grocery at Amazon name recognition," Livingston said. "It is like you have a Ford dealership and now you are selling Jaguars."