Amazon issued a warrant to purchase up to 5.4 million shares in SpartanNash, according to a filing with SEC, reported The Motley Fool (Oct. 9).
The warrant has been issued specifically to Amazon.com NV Investment Holdings LLC, a subsidiary of Amazon. Through its subsidiary, Amazon will be able to purchase warrant shares for a price of $17.7257 per share until Oct. 7, 2027. If fully realized, Amazon will be the second largest shareholder of the company behind BlackRock Capital.
SpartanNash—which distributes to grocers, including 155 of its own retail stores—has seen growth during the pandemic as consumers stocked up on groceries and began cooking more at home.
Investors are betting that there may be more to the agreement than just a stake in SpartanNash due to the recent steps the company has taken towards new grocery initiatives. There is speculation that the deal means SpartanNash will become the primary distributor to the new Amazon Fresh mainstream grocery concept, reported RetailWire (Oct. 12).
BMO Capital’s Kelly Bania, in a note attained by MarketWatch, estimated the deal will more than double SpartanNash’s volume with Amazon and has the potential to significantly expand if distribution includes both PrimeNow and Fresh.
She wrote, “We estimate that like most contracts with [Amazon], margins may be lower than for independent customers. We believe that this is also a positive in adding additional diversification from [Dollar General]…although it may cause some stress in the short term.”
The partnership comes after Amazon expanded its grocery delivery capacity by more than 160% in the second quarter and grocery pickup sites by three-fold as grocery sales tripled in the period.
Amazon also recently launched a new feature that should make it easier for customers to get a grocery delivery slot this winter, reported Recode (Oct. 8). If there’s no delivery availability when a shopper tries to place an order, they can now sign up to be notified when a spot opens up.
The new feature prompts customers trying to place grocery orders from Amazon Fresh or Whole Foods to reserve a virtual place in line when there is no immediate availability. Once shoppers signs up, they are given an estimate for when availability will open up and, when it does, the company notifies them and gives them two hours to place an order.
This new feature follows reports that Whole Foods hasn’t been as successful as other grocers during the pandemic with signs that the grocer isn’t a primary focus for Amazon, reported The Washington Post (Oct. 9).
After making initial price cuts at the chain and intertwining it with its Prime loyalty program, Amazon hasn’t made any transformational changes at the retailer. Instead, it has several other grocery experiments underway, such as its cashierless Amazon Go convenience stores, its Go Grocery stores, and an Amazon Fresh brick-and-mortar store.
Early price cuts at Whole Foods initially suggested that Amazon was trying to erase its “Whole Paycheck” reputation and make the chain appeal to a wider range of consumers. However, the debut of the Fresh store seems like a concession that Amazon may not be able to make Whole Foods accessible to the everyday grocer.