Losing half your money, Charlie Munger, Amazon and the Whole Food(s) Industry

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Charlie Munger

Standard cause of Human Misjudgement of Human Psychological Misjudgement from Charlie Munger, business partner of Warren Buffett

 

Amazon and the Whole Food(s) Industry

Credit: GlynLowe.com

This story has been in the news every day since it was announced, and why not, it could be a real game-changer. Is Amazon’s pending purchase of Whole Foods going to dramatically change the grocery industry? I guess it depends on who you ask.

In the stock market, there’s typically a buyer for every seller. You may think that by buying Apple at $145 you are getting a great deal but think about it. If you are buying, someone else must be selling. They must think that selling Apple at $145 is an acceptable price. For every person who thinks that something is a good idea, someone else thinks it might not be.

Many people believe that the Amazon / Whole Foods merger will be a game-changer for the supermarket industry. The stock market seems to agree. The stock prices of all the major grocery chains have dropped considerably since the deal was announced. Is the industry in trouble? Some suggest that a company with deep enough pockets should step in and outbid Amazon for Whole Foods… for the good of the industry as a whole.

It’s hard to overstate the importance of the Amazon / Whole Foods deal
Those who believe this is a game changer think along these lines… Amazon’s acquisition of Whole Foods, should it close, is the white flag (the kind signaling one lap to go, vs. surrender) in Amazon’s march to a trillion. This transaction will be to retail what Facebook’s acquisition of Instagram was to media — the deal everyone wishes they had done. Amazon will reach $1T in value in the next 36 months, at the expense of … everyone.

 

Walmart won’t battle Amazon for Whole Foods for a very simple reason

And then there are others who think that Amazon’s acquisition of Whole Foods is no big deal. Do you know who the largest supermarket chian is? The largest supermarket chain really isn’t a supermarket chain… it’s Walmart. According to Reuters, Walmart has indicated that it has no intention of bidding for Whole Foods.

Here’s why: Walmart doesn’t need to buy Whole Foods to dominate the grocery market. It’s already the top grocery chain in the US by a long-shot, with 21% market share, compared to its next-closest competitor, Kroger, which claims a 10% share of the grocery market in the US.

Whole Foods, meanwhile, has just 1.4% of grocery market share, and Amazon has a 0.2% share.

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