Amazon.com Inc. (NASDAQ/AMZN) is preparing to broadly expand its new lineup of private-label brands to include an array of grocery items such as milk, cereal, and baby food, as well as household cleaners. Source: The Wall Street Journal, May 29, 2015.)
Amazon, which reported a $241-million loss on $89.0 billion in sales in 2014, has been pushing to expand sales of food online, including but not limited to its “AmazonFresh” grocery delivery.
The Wall Street Journal reports that Amazon is in talks with private-label companies. Those discussions include TreeHouse Foods Inc. of Oak Brook, Illinois—one of the larger private-label producers, with $3.0 billion in sales last year.
A spokesman for TreeHouse declined to comment on any talks with Amazon, but noted that the company does “business with all of the nation’s top retailers and operates in 15 grocery categories.”
Private-label goods could also bolster Amazon’s reputation as a lower-cost retailer. IRI, a market research company, estimates that private-label products are, on average, 28% less expensive than their name-brand equivalents.
Amazon already has an array of brands, like “Elements,” “Basics,” and “Pantry, so the expansion into perishable goods might seem like a natural step for the company. It even has a patio furniture brand with “Strathwood” and “Pinzon.”
Amazon would sell these food products through its AmazonFresh grocery delivery service; in a handful of U.S. cities. AmazonFresh is a subsidiary of the Amazon.com in e-commerce, which is based in Seattle, Washington. It currently offers home grocery delivery to residents of Seattle, San Francisco, Los Angeles, and New York City.
The company is already being aggressive with its “Prime” delivery service. Just last week, it announced that it would partner with local stores in Manhattan to deliver groceries, baked goods, and meals. Amazon Prime Service offers free two-day shipping and services like unlimited movies and TV shows, unlimited music streaming, unlimited photo storage—at a price of $99.00 a year.
Rivals ranging from Costco Wholesale Corporation (NASDAQ/COST), to Target Corp. (NYSE/TGT), to Walgreens Boots Alliance, Inc. (NASDAQ/WBA) offer an array of store-brand products with names including “Kirkland,” “Archer Farms,” and “Nice,” respectively. Private labels made up about a third of Target’s $73.0 billion in sales last year.