Amazon puts pressure on supermarket rivals
British supermarkets under pressure as US giant’s sweeping cuts ramp up grocery price battle
The share prices of the UK’S supermarkets are expected to come under renewed pressure after Amazon enacted a swathe of large price cuts at Whole Foods. The web giant cut prices by up to 33 per cent at its seven British Whole Foods stores, which it bought last year in a £10.7billion deal. The price of bananas in UK stores dropped from £1.79 per kg to £1.20.
THE share prices of the UK’S supermarkets are set to come under renewed pressure after Amazon enacted a swathe of large price cuts at the Whole Foods grocer it now owns.
The American behemoth announced last week it would slash prices at the upmarket grocer it bought for £10.7bn earlier this year, a statement that knocked shares in each of its major listed UK rivals.
The internet giant came good on its threat on Monday, its first day of full ownership, cutting prices by as much as 43pc on some items in US stores, knocking the share prices of rivals Costco and Kroger in early trading.
The company has 460 shops with the vast majority in the US and Canada and seven in the UK, where prices also dropped by up to 33pc. The price of bananas in UK stores dropped from £1.79 per kg to £1.20, while organic tomatoes on the vine fell 31pc to £2.40 from £3.49. There were also discounts to be had on meat, including organic beef steak mince down from £5.89 for 380g to £3.99. A Capestone organic whole free-range chicken is now £6.50 per kg instead of £7.99 – a drop of 18pc.
In the US, big price cuts came on fruit and vegetables, including avocados, down from $2.79 (£2.16) each to $1.99, representing a 29pc fall.
The biggest drop was for organic Fuji apples, down from $3.49 per pound to $1.99 per pound – a 43pc reduction.
The move comes as UK supermarkets are battling against rising costs from business rates and the National Living Wage, as well as a steep rise in import costs on the back of the fall in sterling. This has combined with fears about constraints on disposable incomes caused by inflation rising faster than wages, something which is happening in spite of high levels of employment in the UK.
The price cuts could hasten moves by UK supermarkets to pursue deals that will give them greater scale or new revenue streams.
Sainsbury’s won a battle last year to snap up Argos owner Home Retail Group, which gave it a greater presence in consumer electricals, and is in discussions to buy Nisa, the memberowned wholesaler and convenience chain. Its rival Tesco is also trying to buy wholesaler Booker, a deal which is now being scrutinised as part of an in-depth investigation by the Competition and Markets Authority. These moves by UK grocers could be doubly important given Amazon said it would also introduce Whole Foods’ own-brands to its Amazon Fresh, Prime Pantry and Prime Now offers across 302 postcodes in London and the South East, extending the firm’s grocery offering.
Amazon already has a wholesale agreement with Morrisons to sell fresh food in the UK, but rolling out Whole Foods’ produce, which is known for its organic and artisan goods, could attract more affluent customers to the group’s £79-a-year Prime subscription service.