The Jolly Green Giant, Tony the Tiger and the Keebler Elves have co-existed harmoniously in groceries, superstores and warehouse clubs for generations. But they may not survive the Amazon.
If Amazon opens a chain of grocery stores, as The Wall Street Journal reported, the most vulnerable competitors won’t be Kroger, Target and other supermarket chains. Rather, Kraft, Nabisco, Coca-Cola and similar makers of the brands that fill grocery shelves stand to lose the most. Or they stand to gain the least.
Amazon likely would carry a large number of private-label goods, a strategy it’s exploring now and is basically a must-have across all of retail. Aldi and Trader Joe’s specialize in private label, while Kroger, Target and Walmart are expanding their offerings aggressively. (Kroger Manufacturing in fact makes goods for other sellers, while its private label brands generate 26% of its own revenue).
It’s simply good business for retailers, which can better control the costs and distribution of house-made products. The profit margins on private-label items are estimated to be 25% to 30% higher than from national brands, CBInsights reports. The only real risk of introducing them is in displacing national brands shoppers come expressly to their stores to buy.
To put it simply: Crackers are fair game, but keep your hands off my Tide.