Grocermageddon Goes Global

Well that escalated quickly...

This morning's Amazon acquisition of Whole Foods Market has collapsed share prices of many grocers (in US and around the world), pharmacies and drug distributors, and even REITs...

First things first, 11 of the top 12 biggest losers in the S&P 500 are related to AMZN's move...


It's a bloodbath in US Retailers...


But it's not just US Retailers... European Grocers are crashing too...


And away from Grocers, Supermarket-anchored REITs Kimco and Regency Centers lead S&P 500 real estate index lower, with KIM down as much as 4.6% and REG down as much as 4.2%, the largest decline for both since November...


And Pharmacies and Drug Distributors are also tumbling...CVS -4.7%, WBA -4.5%, ABC -1.9%, DPLO, CAH, MCK all down 1.7%, ESRX -1.4%

“The deal put everyone’s business models at risk,” Bloomberg Intelligence analyst Jonathon Palmer says in email, “large drugstores are trading down in sympathy but the declines are less steep than those seen in supermarkets,” as pharmacy is seen as more complicated with more regulation; would be more difficult to enter.


Amazon’s foray into the retail sector doesn’t change much for PBM pure-play Express Scripts but he sees “higher risk” for distributors from their end customers.

Finally we note that the divergence between the S&P 500 and Retailers has never been this large as correlation collapses...


Muddy1 espirit Fri, 06/16/2017 - 12:19 Permalink

It is easier to control the population when you control the food supply."We Are the World", Stevie Wonder, etal, yes the world responded with food shipments that were kept on the docks and in major cities.  People were forced to migrate from rural areas into the major cities to get food and medical attention.  The rural areas were depopulated, and the masses controlled.

In reply to by espirit

Antifaschistische eclectic syncretist Fri, 06/16/2017 - 14:50 Permalink

the constraint is not the checkout line.The constraint is that I have to drive to the grocery store, find a freaking parking space....get hearded through a stupid store where the only three things I want are at the very back of the this point, I've walked 250 yards.  Now I have to walk back out to my car.  I exercise regularly....but I don't want to combine that and grocery shopping.I want to sit at home in the evening, buy 7 items online, and have them delivered to me within the hour.  I'm okay with a requirement that I be home between 8-9.  It's more efficient for someone to deliver my groceries and the groceries for 9 other people at the same time.  One car, 10 deliveries.  Food says cool.If the retailers got hammered today it's their fault for treating customers like cattle that get hearded through their stores.  I refuse to participate in that experience.

In reply to by eclectic syncretist

waspwench blue51 Fri, 06/16/2017 - 15:26 Permalink

Didn't there used to be something called the Monopolies Commission - or something like that - and didn't it used to be responsible for maintaining a degree of competition in the business world?   Well, I thought there was.   I must have misremembered.   Silly me.   Why ever would we have needed anything like that?

In reply to by blue51

garypaul Squid Viscous Fri, 06/16/2017 - 10:56 Permalink

I don't understand any of this at all. Whole Foods is just a minor player with a controversial reputation. Amazon is never going to dominate groceries (drone-deliver my milk??), although with his money, he could throw it around and affect other companies for a little while.What is the meaning of all this? (I say it a sign of major economic problems) 

In reply to by Squid Viscous

Rabbi Chaim Cohen Squid Viscous Fri, 06/16/2017 - 11:36 Permalink

The dirty evil Jew bankers and heads of industry that you hate don't generally eat Jewish soul food. They eat out at expensive restaurants eating things like tapas, caviar, shellfish and tenderloins that look like a small birthday cakes.

The people eating the gefiltefish are more likely to be the ones very quietly tithing 20% of their income and praying 3 times a day to the God of Abraham, Isaac and Jacob.

I would suggest a bit more research to back up your generalities, otherwise people might think you're ignorant or something...

It's usually spelled "heebs", btw. Ever listen to NoFX? "White Trash, Two Heebs and a Bean"? Good album.

In reply to by Squid Viscous

MilwaukeeMark garypaul Fri, 06/16/2017 - 11:11 Permalink

Two things at play here ..1)  Bezos cannot leverage his current model of warehousing/distributing food because it is perishible. Grocery profits are slim (2-3%) so any unmanaged watse can quickly eat up your bottom line. He needs to leverage brick and motor locations for any future Amazon delivery service where rotation and variety of offerings is already factored in. That's Whole Foods (aka: Whole Paycheck) whose usual bottom line is somewhere between 5-6%. If Amazon can drive up volume those %% will fatten 2-3% because overall waste in the grocery segment can be 5-10% of sales.2) There is a huge shake-out coming to the restaiurant sector as people cannot afford to eat out as regularly. That will drive people back into the grocery stores to try to replicate their dining out experience at home but at 1/3 the cost, AND no tax and tip. So the grocery segment is where you want to be positioned in food, not the restaurant sector. People have to eat, but they also have kitchens at home. For too long the grocery stores have stood by and allowed the restaurant segment "to eat their lunch". (Bad pun sorry)

In reply to by garypaul

adr MilwaukeeMark Fri, 06/16/2017 - 11:38 Permalink

Most people eat out because they don't know how to cook.I don't want groceries delivered because I want to pick them out in person and I buy generic store brands most of the time.What is Amazon going to do about frozen items?Delivering $20 worth of groceries four times a week to the same person is a losing business proposition any way you look at it. The grocery delivery model doesn't work if scores of people start using it. Can you imagine the trucks you'd need?I guess people can start suing Amazon for food poisoning though, which would be great.

In reply to by MilwaukeeMark

MilwaukeeMark adr Fri, 06/16/2017 - 12:40 Permalink

Look .. I wasn't debating the viability of the model, I am only telling you, as someone in both sides of the food business, I understand where the synergies lie with respect to changing demographics, economics and trends. If you are clever enough to seize them, then the future is your's.Everything you said above could have more or less been said about Amazon at start up.Who would buy a book before seeing it.  How can you deliver a $5 book, include freight and make any money? Can you imagine the trucks you'd need? Do you really think someone like Bezos would knowingly deliver food which causes food poisoning? The health departments (and 3rd party auditors) will require temperature standards and documentation, just like with the food delivered today to the stores. People who excel in this world are those who see a vision no one else recognizes. The rest of the world (like you) punch holes in it and later say, "geez, I wish I'd thought of that.".

In reply to by adr

Sick Monkey MilwaukeeMark Sat, 06/17/2017 - 08:38 Permalink

I agree with you that 30 years ago those who had vision eventually became leaders in thier domain but for that to be sustainible even visionaries must cash their chips. All in the timing. You will see a lot of strange deals this summer and it's not beacause of Trump. I mean really who in their right mind would want that job given the current debt levels globally. The one thing that is predictable in this game is that in this extremely leveraged digital environment vast sums are moving to places you have never heard of and trying to predict where it's going is like hitting the moon with a .22. Many unexplainible deals coming. The private poker game room is closed to the public.

In reply to by MilwaukeeMark

Full Court Lug… garypaul Fri, 06/16/2017 - 11:09 Permalink

Exactly. Amazon barely makes any money with all their existing online retail; they have no special exerptise whatsoever in the intensely-competitive brick-and-mortar grocery space. Unless their plan is to just run a bunch of grocery stores at a loss (wouldn't surprise me) it's very hard to see how exactly they plan on disrupting this industry.

In reply to by garypaul