Business World

Wednesday 29 January 2020

Shockwaves in EU as Amazon gobbles up Whole Foods


Amazon — headed by Jeff Bezos — ‘has the ability to put the fear of God in any competitor’. Photo: AFP/Getty
Amazon — headed by Jeff Bezos — ‘has the ability to put the fear of God in any competitor’. Photo: AFP/Getty

Martinne Geller and Toby Sterling

Amazon's $14bn (€12,2bn) takeover of Whole Foods Market sent shockwaves across the Atlantic on Friday as investors weighed the implications for Europe's supermarkets from an accelerated push by the e-commerce juggernaut into traditional food retail.

Amazon has already been expanding its Fresh grocery delivery business in European cities such as London and Berlin.

But its purchase of a bricks-and-mortar supermarket chain, even one as small in Europe and high-end as Whole Foods, raises the prospect of tougher competition and more acquisitions.

"To hear that it's actually buying an existing retailer confirms its intentions in the area and that obviously leads to further competition in what is already a fiercely competitive market," said Laith Khalaf, an analyst at Hargreaves Lansdown.

Large European retailers' shares were down in afternoon trading on Friday.

Ahold Delhaize closed down 9pc in Amsterdam due in part to its large US exposure, but Tesco was down 5pc in London and Carrefour was down 3pc in Paris.

The news shook a grocery sector that is already grappling with consumer unease, currency volatility, geopolitical uncertainty and increased competition from the German hard discounters Aldi and Lidl.

Shares were already wobbly on Friday following a big profit warning from Kroger, the largest US operator.

"People are very nervous. And then they see this and they think 'if online is going to kill offline, what am I doing in the sector? Sell'," said Fernand de Boer, analyst at Petercam in Amsterdam.

The news also has implications longer term, as some saw the acquisition of Whole Foods, whose only European stores are nine in Britain, as merely a first step.

"Clearly whoever and whatever Amazon looks at, the fallout from that is who they don't take over," said Shore Capital analyst Clive Black in London.

"Amazon has the ability to put the fear of God in any of its competitors."

Black estimated it would still be a couple years before Amazon might buy another large British grocer, as it will need time to integrate Whole Foods with its existing food business.

"I would have thought it'd be somewhere down the line but who knows. Amazon's got the resource capability to buy whatever it wants."

He said the move also suggests that the future of grocery retail is not just online, where profits are gobbled up by the complex and costly need to deliver food.

Still, internet sales of food and drink exceeded $74bn last year worldwide, up from $29bn in 2011, according to Euromonitor International, which predicts it to reach $116bn by 2021.

Though large, e-commerce still only represents a small fraction of overall grocery shopping around the world.

South Koreans do the most shopping online, according to a report last year by Kantar Worldpanel, which said online accounted for 17pc of overall grocery sales there.

Japan and Britain are No 2 and 3, both clocking in at around 7pc.


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