Amazon Deal Takes Food Delivery Startups By Storm
17 June 2017 - 8:39AM
Dow Jones News
By Cat Zakrzewski
Amazon Inc.'s acquisition of Whole Foods Market Inc. pits the
technology giant directly against a wave of venture-backed startups
that have been trying to change the way consumers buy food.
The deal is a blow to grocery delivery upstart Instacart Inc.,
which recently raised at least $300 million at a roughly $3.4
billion valuation.
The tie-up could also complicate plans for many other food and
meal delivery startup, including Blue Apron Inc., Doordash and
Postmates.
Blue Apron declined to comment, citing a quiet period as it
prepares for an initial public offering. Doordash did not
immediately respond to a request for comment. Postmates declined to
comment.
Venky Ganesan, a Menlo Ventures managing director, said the move
is "massively disruptive" for the category.
"It's like you're playing chess and someone throws the chess
board in the air," he said. "It's a completely new game now."
Instacart delivers Whole Foods groceries, and the grocer is an
investor in the company. Its stake totaled less than 1%, a person
familiar with the matter said.
The purchase of Whole Foods comes as Instacart has aggressively
been forming partnerships with retailers beyond Whole Foods,
including recent alliances with Wegmans Food Markets and Publix
Super Markets Inc. Instacart has also diversified its partnerships
into brick-and-mortar retail giants such as Target.
Mr. Ganesan said the deal calls the valuations of food and
grocery delivery companies into question.
"Today's news lowers those valuations," Mr. Ganesan said. "If
they were a public stock, they would have traded down."
The deal did drive down the stocks of publicly traded retailers
such as Wal-Mart Stores Inc., Target Corp. and Costco Wholesale
Corp.
Amazon's big buy could ignite interest in more partnerships
among existing brick-and-mortar retailers, who will have an urgency
to move into the category now that Amazon is taking a more
aggressive position.
"It validates how strategically important this category is,"
said Semil Shah, founder of Haystack and an investor in
Instacart.
Instacart signed a new partnership with an unnamed grocer on
Friday, a person familiar with the matter said.
The deal could also cause traditional retailers to be more
acquisitive, one Instacart investor said.
"It lights a fire under Wal-Mart to make a big move here," said
Canaan Partners General Partner Hrach Simonian.
Write to Cat Zakrzewski at cat.zakrzewski@wsj.com
(END) Dow Jones Newswires
June 16, 2017 18:24 ET (22:24 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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