for $13.7B (all cash). Didn't see this one coming.
So many big mergers and acquisitions lately.
Walgreens and Rite Aid (pending FTC), Cabelas and Bass Pro, Staples and Office Depot (DOJ rejected) but those all made sense to me even if I thought they were bad ideas or good ideas. Plus more...
Amazon and Whole Foods? I don't initially see how they complement each other unless Amazon plans on an Amazon drone delivery in every city where Whole Foods exists or they're trying to horn in on the meal delivery market which seems slim.
What am I missing?
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This sale gets Amazon even closer to those consumers.
Im not a trader and don't invest in retail but this looks like an huge over reaction Walmart, Kroger, target etc.
if you work in the markets would like to hear your view.
Krogers was already getting slammed this week with a bad report. Unlikely that they will be the #2 for long. Not just Amazon, but Aldi is going to eat their lunch as it expands.
Krogers was already getting slammed this week with a bad report. Unlikely that they will be the #2 for long. Not just Amazon, but Aldi is going to eat their lunch as it expands.
I made my first and Last visit to an Aldi yesterday. Thoroughly unimpressed. What am I missing?
But it's a cash deal, so in reality it's not paying for itself.
this AND it's just super easy to shop.. follow the road as you're going, nobody is going towards you, it's laid out nicely. Less stress.
Aldi owns Trader Joes, so there's a lot of the same food under different brand labels.
and I know this will come out the wrong way, but the first two years it was open I never went in it. I thought it was a middle eastern grocery (no clue why, maybe their design or name seemed middle eastern to me). I have zero against anyone from the middle east or middle eastern groceries, and I love some middle eastern food, but I felt like I do about any of the other ethnic groceries near me (we have brazilian and asian groceries to name a couple) and unless I need a brazilian or asian ingredient I have no need to shop in them.
So come to find out it's German and organic (once they marketed it) I tried it a couple times and was also thoroughly unimpressed.
I doubt I ever shop at Aldi again - not that I'm a huge shopper anyway, but Aldi doesn't do themselves any favors with me.
and I know this will come out the wrong way, but the first two years it was open I never went in it. I thought it was a middle eastern grocery (no clue why, maybe their design or name seemed middle eastern to me). I have zero against anyone from the middle east or middle eastern groceries, and I love some middle eastern food, but I felt like I do about any of the other ethnic groceries near me (we have brazilian and asian groceries to name a couple) and unless I need a brazilian or asian ingredient I have no need to shop in them.
So come to find out it's German and organic (once they marketed it) I tried it a couple times and was also thoroughly unimpressed.
I doubt I ever shop at Aldi again - not that I'm a huge shopper anyway, but Aldi doesn't do themselves any favors with me.
I agree with the produce. It's delicious and fresh, but needs to be eaten within a few days of purchase.
Our Aldi sells local fresh produce, I'm not sure if that's a chain wide thing.
I saw him speak -- literally one week ago -- and he was complaining about the activist shareholders. Looks like he forgot who really owns the company.
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So, they drive over to Costco, buy from Restaurant Depot, etc. Amazon will be targeting that market but will be delivering with their own trucks/vans vs over night type of mail like they do now with non-foods.
I own a small pizza shop and we save a lot of money with our regular trips to Costco and Sams club. We're big enough that Sysco would love our business and we use them occasionally, but in the small restaurant game it's about keeping costs down.
If Amazon can find a way to bring delivery at or very near to the prices paid in the wholesale clubs I think they will have a market. If they price it at the same level as Sysco or others they aren't going to get many small restaurants to switch, imo.
Wait, your run a restaraunt but buy FROM costco?
Aside from getting supplies, that would concern me, I want restaraunts making their own food, not buying & re-selling Costco.
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In comment 13501718 EricJ said:
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So, they drive over to Costco, buy from Restaurant Depot, etc. Amazon will be targeting that market but will be delivering with their own trucks/vans vs over night type of mail like they do now with non-foods.
I own a small pizza shop and we save a lot of money with our regular trips to Costco and Sams club. We're big enough that Sysco would love our business and we use them occasionally, but in the small restaurant game it's about keeping costs down.
If Amazon can find a way to bring delivery at or very near to the prices paid in the wholesale clubs I think they will have a market. If they price it at the same level as Sysco or others they aren't going to get many small restaurants to switch, imo.
Wait, your run a restaraunt but buy FROM costco?
Aside from getting supplies, that would concern me, I want restaraunts making their own food, not buying & re-selling Costco.
You can buy 'raw materials' at Costco. For a pizza shop, I imagine that consists of giant bags of flour, enormous cans of tomato sauce, and gigantic blocks of whatever cheeses he uses. Why would that be an issue?
Aldi's thing is pricing. If you're going to ignore pricing, it's nothing to rave about. The pricing vs. NYC supermarkets is insane.
Wait, your run a restaraunt but buy FROM costco?
Aside from getting supplies, that would concern me, I want restaraunts making their own food, not buying & re-selling Costco.
You have high expectations. What - you expect your restaurants to grow their own food, raise and butcher animals?
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In comment 13501723 Dan in the Springs said:
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In comment 13501718 EricJ said:
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So, they drive over to Costco, buy from Restaurant Depot, etc. Amazon will be targeting that market but will be delivering with their own trucks/vans vs over night type of mail like they do now with non-foods.
I own a small pizza shop and we save a lot of money with our regular trips to Costco and Sams club. We're big enough that Sysco would love our business and we use them occasionally, but in the small restaurant game it's about keeping costs down.
If Amazon can find a way to bring delivery at or very near to the prices paid in the wholesale clubs I think they will have a market. If they price it at the same level as Sysco or others they aren't going to get many small restaurants to switch, imo.
Wait, your run a restaraunt but buy FROM costco?
Aside from getting supplies, that would concern me, I want restaraunts making their own food, not buying & re-selling Costco.
You can buy 'raw materials' at Costco. For a pizza shop, I imagine that consists of giant bags of flour, enormous cans of tomato sauce, and gigantic blocks of whatever cheeses he uses. Why would that be an issue?
if my local Mexican restaurant WASN'T buying their avocados from Costco, I'd be shocked. The price for those huge bags are ridiculous.
And there was nothing about that store that even hints at Trader Joes which I do shop at occasionally.
No one else found this funny?!
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No one else found this funny?!
there were a couple of comments about it, including my coffee spitting one.
And there was nothing about that store that even hints at Trader Joes which I do shop at occasionally.
The one in NYC is a lot smaller than the suburban one I've been too. At the one I use I dont do all my shopping there. I mix my shopping up. I do a Costco/Aldo/Target big run (all in the same place in NY). I use Fairway and Keyfood near my house in between the big runs. Arthur Avenue shops for Italian foods. Zabars for coffee and specialty/Jewish foods.
I think a big suburban Aldi should cover most needs. But the selection is that they tend to have 1 brand (house) and 1 size for most things.
Aldi's thing is pricing. If you're going to ignore pricing, it's nothing to rave about. The pricing vs. NYC supermarkets is insane.
read this, they're selling themselves as a cheaper replacement for Whole Foods and Trader Joes.
and google, Aldi whole foods and there are tons of links about this being their goal.
Link - ( New Window )
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Wait, your run a restaraunt but buy FROM costco?
Aside from getting supplies, that would concern me, I want restaraunts making their own food, not buying & re-selling Costco.
You have high expectations. What - you expect your restaurants to grow their own food, raise and butcher animals?
Produce (tomatoes) is one thing.
Tomatoe sauce?
If I'm eating out I'd rather they make their own sauce.
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It's a great place to fill your pantry with good, non-organic stuff cheap. Although more of their stuff is going organic now. I like their cheeses and salami. Produce is hit or miss.
Aldi's thing is pricing. If you're going to ignore pricing, it's nothing to rave about. The pricing vs. NYC supermarkets is insane.
read this, they're selling themselves as a cheaper replacement for Whole Foods and Trader Joes.
and google, Aldi whole foods and there are tons of links about this being their goal. Link - ( New Window )
Trader Joes yes. WF, I think their fresh food selection isnt there yet. Not close. At least where I shop (the Harlem NYC location).
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In comment 13502033 Rover said:
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Wait, your run a restaraunt but buy FROM costco?
Aside from getting supplies, that would concern me, I want restaraunts making their own food, not buying & re-selling Costco.
You have high expectations. What - you expect your restaurants to grow their own food, raise and butcher animals?
Produce (tomatoes) is one thing.
Tomatoe sauce?
If I'm eating out I'd rather they make their own sauce.
You think regular pizzerias make sauce with fresh tomatoes? If they dont use canned sauce, they use canned tomatoes. Which are sold at Costco. #10 cans of Ninas -- Im not sure you need to do anything to them other than buzz them to call them pizza sauce.
if my local Mexican restaurant WASN'T buying their avocados from Costco, I'd be shocked. The price for those huge bags are ridiculous.
Actually, I would bet that a mexican restaurant is buying the Avocados from a produce distributor if they are price competitive. With all of the lettuce, tomatoes and other produce that a mexican restaurant would use, that would be my guess as to where they get the avocados.
Amazon quietly bought land in my town (98% of DC had not even heard of the town then) 20+ years ago - no one paid attention or thought about data centers then. Now they are building and need 180-foot high power lines brought in and do not want to pay for protecting the community by burying them. And their lobby has some government people in line on their side. BTW - the project will deliver minimal jobs and taxes so there is little upside.
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So, they drive over to Costco, buy from Restaurant Depot, etc. Amazon will be targeting that market but will be delivering with their own trucks/vans vs over night type of mail like they do now with non-foods.
I own a small pizza shop and we save a lot of money with our regular trips to Costco and Sams club. We're big enough that Sysco would love our business and we use them occasionally, but in the small restaurant game it's about keeping costs down.
If Amazon can find a way to bring delivery at or very near to the prices paid in the wholesale clubs I think they will have a market. If they price it at the same level as Sysco or others they aren't going to get many small restaurants to switch, imo.
Hey Dan, do you have an email I can reach you at? Or can you shoot me a quick email on the one I have attached to my profile? I have a quick inquiry for you. Thanks
Produce (tomatoes) is one thing.
Tomatoe sauce?
If I'm eating out I'd rather they make their own sauce.
Tomatoe sauce? Who knew Dan Quayle was a Giant fan?!
And you're fooling yourself if you think pizzerias make their own sauce. High end restaurant pizza sure. But your typical mom and pop corner pizzeria uses canned.
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Produce (tomatoes) is one thing.
Tomatoe sauce?
If I'm eating out I'd rather they make their own sauce.
Tomatoe sauce? Who knew Dan Quayle was a Giant fan?!
And you're fooling yourself if you think pizzerias make their own sauce. High end restaurant pizza sure. But your typical mom and pop corner pizzeria uses canned.
When they crush the tomatoes with their feet, they call it tomatoe sauce.
I also buy dough for sub bread from Sam's. No way I can make it at even close to the quality and price that Sam's can give it to me at.
It's one thing to think about making pizza for yourself at home. It's entirely another to consider selling 75 or more pizzas a night plus everything else on the menu.
And the margins in the business aren't great either. My point is that you have to find the best ways to keep costs down. If you have capacity to store supplies cheap (walk-in freezers, refrigerators, and storage supplies) and are within a decent distance of a wholesale club,
We buy a lot of other supplies from Costco, including produce and consumables like paper napkins, towels, cleaning supplies, etc. We would likely buy all of it from Sam's but the Costco is a little closer to us so we make quick trips, generally, and occasionally they will deliver to us (no fees if the order is big enough).
And there isn't a need to walk aisles. When you buy for your store you can fax what you want over to them and they will have it ready on a pallet - help you load your truck and everything. Very simple operation.
When I asked him why the boss didn't just buy a giant dough mixer instead of having him (and 2 other employees) sit and do that all day, or why he didn't just buy it pre-made, he said that was the cheapest way of cranking out dough. The eventual mixer failures made it more expensive than manual labor.
On a good night, that store would sell about 500 pizzas, though.
And the margins in the business aren't great either. My point is that you have to find the best ways to keep costs down.
yeah the margins are very slim in the pizza business. Everyone has an expectation as to what a slice of pizza should cost. Price if flour went through the roof years ago which also drove costs up for the pizza shops but many of the could not take their prices up enough to compensate for that. Not sure how that impacted you.
Nice sugar high short term
Could hurt them long term
I.e. Sears Kmart
Your welcome and congrats on owning that stock!!
piece of advice, do not ever listen to denny. About anything.
I have no idea what this means for your amazon stock, but it's a safe bet that denny doesn't either
One of the reasons I find it better to just make my own stuff.
What you are paying for is simply convenience.
One of the reasons I find it better to just make my own stuff.
What you are paying for is simply convenience.
You learned the wrong lesson.
While ingredients matter, other things matter too. Knowing how to put the ingredients together. Knowing to let something rest for a certain period. Knowing what temperature to cook something at, and what method to use. Knowing the right tools to use. Having the right tools to use.
With identical ingredients, I would bet you wouldn't make as as good a pizza as your corner pizzeria.
I'd also point people to the linked Economist piece from March. Lack of competition and shareholder overlap leading to excess profits. Profits arent a bad thing. But if industry after industry is pulling down record profit margins, you have to ask why there isnt more competition eating into that. Link - ( New Window )
So how does his M&A bonanza end? Since the economic collapse in 2008, it seems like our economy is moving further and further away from capitalism. If more and more barriers to entry create less and less competition, are we moving towards socialism by default? Will the Government eventually step in to prevent this? Would it even matter?
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but mergers of leading competitors are horrible for consumers. There has been some good reporting on how these get approved. Big school professors hired as expert witnesses to argue that each merger will be pro-consumer and pro-competition by driving prices down. It doesnt pan out. For a lot of these professors, they make many multiples of their univ salary by being experts. And merger approval is increasingly a battle of the experts.
I'd also point people to the linked Economist piece from March. Lack of competition and shareholder overlap leading to excess profits. Profits arent a bad thing. But if industry after industry is pulling down record profit margins, you have to ask why there isnt more competition eating into that. Link - ( New Window )
So how does his M&A bonanza end? Since the economic collapse in 2008, it seems like our economy is moving further and further away from capitalism. If more and more barriers to entry create less and less competition, are we moving towards socialism by default? Will the Government eventually step in to prevent this? Would it even matter?
The FTC has to start doing a better job, and judges need to use their brains a little more. I think the impetus will have to come from the media, but that's a problematic thing since institutionally media orgs like mergers -- they do them. The Washington Post is owned by Bezos. NBC is Comcast. Fox News is News Corp. etc.
I dont think it's socialism that will result. I think it's late 19th century style trusts. Sucking up all the gains.
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but mergers of leading competitors are horrible for consumers. There has been some good reporting on how these get approved. Big school professors hired as expert witnesses to argue that each merger will be pro-consumer and pro-competition by driving prices down. It doesnt pan out. For a lot of these professors, they make many multiples of their univ salary by being experts. And merger approval is increasingly a battle of the experts.
I'd also point people to the linked Economist piece from March. Lack of competition and shareholder overlap leading to excess profits. Profits arent a bad thing. But if industry after industry is pulling down record profit margins, you have to ask why there isnt more competition eating into that. Link - ( New Window )
So how does his M&A bonanza end? Since the economic collapse in 2008, it seems like our economy is moving further and further away from capitalism. If more and more barriers to entry create less and less competition, are we moving towards socialism by default? Will the Government eventually step in to prevent this? Would it even matter?
see.. not to get all Darwinistic here, but I fundamentally disagree with this.
Capitalism thrives on competition. There are plenty of opportunities for retailers to thrive. The problem is some of them aren't smart enough to evolve or diversify to survive.
Take Bass Pro and Cabela's for example. Basically the same store, with Bass Pro focused more on fishing and Cabela's on hunting. MINOR differences between both destinations.
How is it that Bass Pro is thriving and Cabela's deep into debt?? Bass Pro has made it a priority to bring customers in with great deals on National Brands and promote the hell out of their private label brands (where they make most of their margin).
Cabela's has made a business of pushing National Brands at a low margin and their Private Label at VERY high retails.
Rite Aid didn't evolve, either did Office Maxx. BJ's failed to compete with Costo and Sams because it's the same store you walked in 1989.
Mergers happen for one reason.. one half of the merger is not making money and need to get bailed out.
If you look at thriving industries, you will see healthy competition. Look at the "discount" retailers. Not counting Target/Walmart.
TJX (Marshalls/TJ Maxx), Ross Stores, Kohls, Burlington...there are a bunch.
Not only are there a lot of them, they are all thriving and making a lot of money.
Yes.. when it comes to these mergers "the rich get richer".. but only in brand and real estate. Bass Pro is taking on a crap ton of debt. Same with Walgreens on the Rite Aid merger.
So yah.. I think Capitalism is very healthy in this example..
That being said, I think there are retailers who were brilliant in evolving and diversifying when in trouble. After Circuit City, CompUSA and eventually HH Gregg went belly up, Best Buy saw the writing on the wall as well as loss of sales and margins. They changed their business plan and are now a very healthy company.
That's not remotely true. There are a lot of reasons for mergers. One of the leading reasons is lack of executive succession option/plan. I.e. the CEO is retiring and there is no great replacement perceived. Another reason is empire building -- CEOs who want to run bigger companies. Another is "economies of scale" and synergies -- costs savings that can be realized by combining two firms. Another is pipeline, exclusive products/patents, and other increased capabilities. Access to certain customers, diversification, complimentary products, vertical integration, target growth (e.g. getting a good product into the hands of someone who can really sell/grow it). I could give you other reasons that dont have to do with the target struggling.
But more important to this story, you're missing the merger motivation to reduce competition. You think Facebook bought Instagram because it was failing as a business, or because Facebook was worried about a rival social network? The answer is obvious.
Your platitude about the ferocity of competition are nice, but they're not the way the world necessarily works. If they were, we wouldnt have anti-trust review of mergers.
In a retail platform, if you look at the major mergers in the past 10 years, MOST of them are acquiring a flailing company with something of significant value.
Kmart acquired Sears because of Craftsman. Sears was bleeding money at the time.
Bass Pro is acquiring Cabela's because of the brand.
Camping World bought a chunk of Gander for the real estate and to build their brick and mortar footprint.
I agree with you in the tech industry. The Facebooks of the world throw ridiculous money around to acquire companies with tech they do NOT have. Same with Google and so on.
I see the retail landscape differently. It's not often you see a successful retailer that is making money merging with another successful company making money.
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No one else found this funny?!
I did and commented above, but I agree, this thread has lost its way.
One of the reasons I find it better to just make my own stuff.
What you are paying for is simply convenience.
It's a bit of both. Definitely more convenient when you want a slice to walk in and have it all done for you. But there's more to it than simple assembly.
I always bring school kids into the kitchen and show them how to make pizza. Then I let them try to "assemble" their own. They can't even press a dough properly, even though I'm standing right there showing them how to do it.
Baking the pie is a trick in and of itself. You have to know your oven and how it heats really well. I have places on the brick that are slightly hotter than others. When I brick the pie if I don't know my oven well I'll burn them. It happens so fast - no margin of error.
Anyway - glad you've learned some more about the pizza business!