Amazon shakes up grocery aisles

WOOLWORTHS suffered its biggest single-day market rout in nine months amid fears Amazon has designs on a far bigger share of the global grocery market.

Shares in the supermarket heavyweight fell 3.5 per cent yesterday after the US online retail titan struck a deal overnight on Friday to buy a major grocery chain.

Amazon agreed to pay $US13.7 billion ($A18 billion) for Whole Foods Market — a grocery chain with more than 460 stores in the US, Canada and Britain.

The slide in Woolworths’ share price yesterday was the biggest since May last year and wiped $1.2 billion from its market value.

Shares in Coles parent Wesfarmers, which also owns retailers including Bunnings and Officeworks, fell far more modestly, down 0.2 per cent to $40.61.

Industry analysts have played down Amazon’s likely impact on the Australian supermarket sector.

Citi analyst Bryan Ray- mond said Amazon’s influence in Australia’s grocery industry was likely to be small.

The online retailer was unlikely to follow up by buying a major grocery retailer here, he said.

An acquisition of a major supermarket chain such as Woolworths or Coles was doubtful given the cost of any such deal, he said

He said Amazon’s penetration was likely to be small and its pricing at a level above the big supermarkets as it had previously taken a “premium” approach to grocery selling.

IGA supplier Metcash was also not an expected takeover target, Mr Raymond said.

Australian Stock Report chief market strategist Chris Conway said Amazon’s US deal highlighted its desire for a big presence in groceries, but a similar deal in Australia was “a long way off, if viable at all”.

“I think a lot of people will realise the fear surrounding the competition Amazon will bring — and a subsequent selloff in some stocks — is perhaps overdone,” Mr Conway said.

Woolworths shares closed down 92c at $25.33.