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Supermarket shares hit by Amazon food plans

UK supermarket shares have taken a hit after Amazon said it was planning a round of price cuts when it completes its $13.7bn takeover of upmarket grocery chain Whole Foods.

Tesco was the biggest faller on London’s FTSE 100 Index in early trading on Friday, slipping by nearly 2% – while rivals Morrisons and Sainsbury’s dropped by more than 1%.
Marks & Spencer’s which has its own high-end food division, fell by1%.
Amazon’s takeover of Whole Foods leaves supermarket chains around the world facing a new challenge from the world’s biggest online retailer.
In France, Carrefour shares fell 2%. On Thursday, shares in Kroger, the biggest US supermarket operator, had closed 8% lower while Walmart – the world’s biggest retailer – fell 2%.
Whole Foods, which has 460 stores, mainly in the US, will start offering lower prices on a range of products when its takeover by Amazon completes on Monday.
In the UK, where it has nine stores, there will be reductions on organic lines such as avocados, eggs, salmon and kale.
Jeff Wilke, chief executive of Amazon Worldwide Consumer, said: “We’re determined to make healthy and organic food affordable for everyone.”

Amazon also said it would start selling Whole Foods brand products on its website, a move that hit shares in packaged food sellers such as Kellogg.
That move will also affect the UK, where AmazonFresh delivers to 302 postcodes across London and the South East.
The S&P 500’s food retail index fell 5%, wiping more than $10bn off the value of big food sellers.
Experts said the price cuts were in line with Amazon’s broader strategy of sacrificing short-term profits for long-term market dominance.
But Roger Davidson, president of consulting firm Oakton Advisory Group, said: “It does not look like they will go kamikaze on pricing.
“They will lower prices on consequential items to drive traffic and sales but not do a whole store price reduction which could really damage gross margin.”

Source: Sky

About Business Ideas UK

My name is Joel Bissitt. I have been an entrepreneur for 24 years and have run many small businesses across various sectors. For the last 10 years I have worked mainly within online media, franchising and small business start-ups.

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