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04/04/2017

Beware: Amazon Will Meet With Big CPG Cos on Direct Sales; Amazon and Walmart in Price War

Beer biz should be thankful that Amazon isn’t big as beer retailer.  At least not yet.   Amazon has invited some of world’s biggest brands to its Seattle hq “in an audacious bid to persuade them that it’s time to start shipping products directly to online shoppers and bypass chains like Wal-Mart, Target and Costco,” reported Bloomberg.   Yikes.  This will be a 3-day meeting in May.  Attendees already include big CPG cos like General Mills and Mondelez.  “Amazon is looking to upend relationships between brands and brick-and-mortar stores that for decades have determined how popular products are designed, packaged and shipped.”  Here’s Amazon’s language in invite: “Times are changing.  Amazon strongly believes that supply chains designed to serve the direct-to-consumer business have the power to bring improved customer experiences and global efficiency.  To achieve this requires a major shift in thinking.”  And in alc bevs, would require a shift in law in most states.  Scary stuff.

What’s more, Amazon and Walmart now “in an all out price war that is terrifying America’s biggest brands” in other consumer packaged goods, headlined Recode mag last Thursday.  “Grocery suppliers are feeling the squeeze—big time,” it added.  Walmart has “renewed focus” on “Everyday Low Price” at same time as “Amazon’s increased aggressiveness in its own pricing” and “obsession with customer value dominates its strategy.”  Result: “a high stakes race to the bottom….  The pricing pressure has ignited intense wargaming inside the largest CPG companies,” sources told Recode.  Amazon even “willing to lose money for some period of time on a product it feels it has to have.”  Sometimes Amazon will price per unit at same price as Costco (which sells in bulk) even if it doesn’t get same wholesale price. “When Walmart sees this it freaks out on the supplier,” execs say.  Unprofitable items are known inside Amazon as “CRaP,” i.e. “can’t realize a profit.”  But it will play hardball with suppliers “and is not afraid to kick off big and small brands alike.”  One Friday last mo, Pampers diapers were suddenly “unavailable on the site.”   One of Amazon’s demands from suppliers: “to lower wholesale prices.”

Publishing Info

  • Year: 2017
  • Volume: 19
  • Issue #: 61
Read 343 times Last modified on 07/28/2017