The retail food sector has seen major changes recently
The retail food sector has witnessed major changes in the last few years, with food deflation and swift changes in technology. Traditional grocers have had to grapple with consumers’ growing enthusiasm for healthy food and online shopping. Meal-kit delivery companies such as Blue Apron (APRN), which deliver high-quality ingredients along with recipes, have also created ripples in the industry.
However, Amazon’s (AMZN) takeover of Whole Foods (WFM) could change a lot. The acquisition will probably prompt a shift in traditional grocers’ business models to focus on e-commerce. Amazon, which completed the takeover last week, aims to slash grocery prices by up to 43%.
Kroger has been struggling to keep up
Kroger (KR), which has experienced dwindling same-store sales growth, is taking steps to withstand Amazon’s move. The grocer has been slashing grocery prices as well, along with offering online options to customers. The company has also been investing in technology.
Kroger’s stock has fallen 32% year-to-date, while other retail food stocks have fallen 20%. Kroger stock, along with Walmart (WMT) and Costco (COST) stocks, is considered by some analysts as a gauge of US consumer sentiment. Analysts predict that Amazon’s acquisition could bring down retail food profits by 20%–30%. This decrease could prompt companies to consider mergers as a survival strategy.