Amazon Australia adds pantry food, stepping up pressure on supermarkets

Sue Mitchell
Oct 17 2018
AFR
Amazon has stepped up pressure on Coles and Woolworths to invest in their online grocery offers by adding food and beverages to its Australian e-commerce site.
From Wednesday, Amazon will start selling dry groceries such as tea, coffee and tinned goods as well as specialty, health and organic foods, rounding out its existing range of non-food groceries and household cleaning products.
The new pantry food range includes more than 400 Australian and international brands such as Arnott’s and Oreo biscuits, Milo milk powder, Uncle Tobys breakfast cereals, Masterfoods seasonings, T2 tea, Carman’s and Sanitarium breakfast cereals, Lindt and M&Ms chocolates and Powerade energy drink.
The new pantry offer comes a month after Amazon added pet supplies, travel and outdoor goods, automotive supplies and jewellery to its range and takes the number of categories to 27 and the number of products to more than 80 million.
“Since the launch of amazon.com.au in December of last year, we have been focused on growing selection and services for Australian customers,” Amazon Australia country manager Rocco Braeuniger said. “Today we are delighted to add to the over 80 million products already available on the store with the launch of pantry food and drinks, bringing greater convenience to customers, underscored by everyday brilliant value and fast delivery.”
It is understood Amazon has no plans to start selling fresh foods in the short- to medium-term, as it lacks a chilled supply chain.
Amazon will sell pantry foods on a first-party and a third-party (marketplace) basis. This means orders will be eligible for Amazon’s Prime subscription-based free two-day delivery service if they are first-party products or if marketplace sellers are using Amazon’s fulfilment services.
Amazon has also established a one-day delivery service in select areas in Australia, prompting Woolworths and Coles – which dominate online food retailing in Australia – to start testing express two-hour deliveries in selected supermarkets and liquor stores.
Online penetration in the $100 billion food and grocery market is just 2 per cent, compared with 5 per cent in China and Britain, according to a recent report by Macquarie Equities. However, it is growing fast, by about 25 per cent a year.
Concern from suppliers
Macquarie Equities says while consumer demand for online food shopping is significant, “lack of attractive online offers keeps that in check”. Faster and cheaper deliveries will be crucial to encouraging more consumers to shop for groceries online.
Some food and grocery suppliers have been reluctant to sell their wares on Amazon, fearful of damaging their relationships with Woolworths and Coles and worried the major chains will retaliate by delisting their brands or demanding cheaper prices.
However, encouraged by global brands such as Kimberly Clark, Reckitt Benckiser and Unilever, a growing number of Australian food and grocery brands including Coca-Cola Amatil, Fairy and Swisse are taking the plunge.
One such company is Honest to Goodness, a 16-year-old family-owned health foods business that plans to sell about one-third of its 1000-odd products, including grains, nuts, seeds and spreads, on Amazon.com.au.
Co-founder Karen Ward says the move may cannibalise sales from Honest to Goodness’ e-commerce site, but is expected to boost overall sales, which have been growing between 10 and 30 per cent a year.
“For us it’s about making [our products] much more accessible to everyday Australians,” Ms Ward told The Australian Financial Review.
“A lot of our specialty products just aren’t available in stores, such as our range of superfoods, and it’s a good way of getting some unique Australian products to people who might not be aware of them.
“You can’t go to a shop and buy [organic beetroot powder] … there are products like that I think will go quite well.”
Ms Ward also said Amazon’s logistics would help the company reduce delivery costs to customers. “A lot of our products are heavy (e.g. five kilogram packs of almonds) and it’s expensive to have them delivered,” she said.
“If they can use Amazon logistics its makes it much easier for them and makes it much more affordable as well – they’re not paying freight if they’re Prime members.”