Amazon launches Amazon Grocery

Amazon is taking another major step in its long-running effort to crack the grocery category with the launch of Amazon Grocery.

Amazon Grocery is a new private-label food line that unifies its existing Amazon Fresh and Happy Belly brands under a single name, offering over 1,000 products - many priced under $5.  Products range from rice to meat, from bottled water to frozen pizza. Amazon Grocery will be available on amazon.com, Amazon Fresh, online and in store.

Even if you are not F&B you will find this read relevant too, as it concerns household staples and CPG broad categories in future.

A bit of history

Amazon’s venture into private-label brands is not new – the company has experimented with dozens of in-house brands over the past decade with mixed success. (Remember Pizon? Don’t worry nobody does).

By 2020, Amazon had launched 45 different house brands. But by 2023, after years of lukewarm success, Amazon dropped 27 out 30 of their brands.

The challenge has always been balancing the act: pursuing margin via own brands, without alienating or cannibalizing relationships with third-party sellers. And Amazon never mastered brand marketing.

Why Grocery

This Grocery push is not new, in fact 15 years in the making. Amazon Fresh began as an online grocery/delivery service back in 2007. Whole Foods acquisition in 2017 was a big milestone, and a statement of where Amazon wants to be: flexing its’ logistics muscle in physical space.

Amazon also had Prime Pantry (project folded in 2021), Amazon Go (scaled back in 2024), Amazon Fresh Pickup (drive-up) never scaled beyond two Seattle sites.

In 2024 Amazon introduced Amazon Saver, a budget-focused grocery line featuring very low-cost pantry staples (crackers, canned goods, condiments, etc.) with most items under $5.

That’s getting really close through trial and error to figure out right format and approach.

By the way, there is also alignment with broader market trends: as of 2023, store brands made up about 19% of U.S. grocery sales, with projections of private labels rising to 30% of grocery sales by 2033 ( metricscart.com)

Back to the story though, there are direct benefits and motivation to Amazon rolling out Amazon Grocery now:

1. We are in a value and price-conscious cycle, at least in North America

2. Customers are already used to, and trust store brands. Great Value, Aldi, and Kirkland fans are nodding here.

3. Data advantage + supply integration. Layer platform’ss data with logistics might and fulfillment network

4. Control of discovery and algorithm. Amazon will self-prefer its own products over national brands in Amazon search results

5. Most important one: getting into the household basket of repeatable purchases

Why it’s not about winning in private label, but winning in Grocery

Amazon already has a graveyard of private label attempts to know it’s hard to win at that game.

But Amazon Grocery is different. Amazon didn’t choose to go after clothing, electronics, etc. Amazon Grocery is all about making inroads into one of the largest retail sectors in the US. And via this new private label brand is secondary, i.e it is a approach Amazon chose after improving at it.

Some more stats: As of the end of 2023, Amazon’s slice of the U.S. grocery pie was still very small – about 2.9% of food and beverage spending – compared to Walmart’s dominant 18.9% share (per pymnts.com). Gaining even one percentage point means tens of billions of dollars in revenue.

No wonder that Amazon CEO Andy Jassy has explicitly called grocery a “key area of focus” going forward for Amazon, noting that they already have a “very large grocery business” that includes a rapidly growing non-perishables segment.

Because grocery drives habitual, repeatable purchases Amazon is persistently working on winning in grocery: it can fuel the flywheel of Amazon’s overall retail business by increasing customer lifetime value and engagement.

Lastly, by aggressively pursuing grocery, Amazon can directly challenge Walmart’s core business in a way that strengthens Amazon’s position. You chip away at your elephant competitor one good bite at a time.

Impact to F&B brands

If you are an F&B brand, your first thought maybe: is this a threat for my brand’s growth on amazon?

Yes, Amazon is now a direct competitor for staples - from olive oil to oatmeal. Yes, its items will likely earn prominent placement.

But impact is more nuanced.

Amazon’s move also clarifies the value ladder: commodity, mid-tier, and premium. Amazon will play in the commodity layer: basic, low price, good quality. (Side note: Amazon’s most successful PL has been AmazonBasics. The name says it all).

But most SMB brands, especially 3P selling brands, compete on combination of quality, often premium quality, competitive price, AND story.

Bigger picture is: Amazon’s investment in grocery marketing and logistics attracts new shoppers who previously ignored the category online. Once they come for $3 pasta or peanut butter, they stay to browse premium condiments, craft beverages, and health foods. Every F&B brand on Amazon gains incremental exposure from that traffic.

Amazon Grocery will pressure many brands (low-effort commodities, or non-compliant imports), but it will also expand the total addressable market for food online, accelerate infrastructure improvements, and normalize weekly grocery shopping within Amazon’s ecosystem.

And that any F&B brand selling on Amazon will benefit from.

Over the past 10 years I have directly managed or advised 100+ food and beverage brands on growth, profitability, and operational health on Amazon. When you’re ready for the “we need help” conversation, just reply to any of my CPG Digest emails.

Saludos,

Irina