Supermarkets ‘starting to collapse’ amid amazon-fuelled battle – article – bnn french fish dishes recipes

Regional chains are filing for bankruptcy. European-born discounters are expanding, forcing competitors to keep their own prices low. And kroger co. ( KR.N) and walmart inc. ( WMT.N), the two largest grocers in the U.S., are investing in technology and expanding delivery as they try to fend off an incursion by amazon.Com inc.

It’s a bleak outlook for a sector that was supposed to be rebounding this year. A historic bout of food deflation — which fueled a price war in the past two years — has ended, but efforts to sell more groceries online are gobbling up investment dollars. And some well-known names are crying uncle.

“the environment is intensely competitive,” said jennifer bartashus, an analyst at bloomberg intelligence. “and I don’t see that easing anytime soon.”

grocery industry

For now, amazon is more of a symbolic threat. It acquired whole foods market last year, but that provided it with less than 500 stores.

The e-commerce giant’s grocery-delivery business, meanwhile, still only has a small slice of the grocery market.

Empire, the owner of the sobeys grocery store chain, has reported quarterly results that topped street expectations. John zechner, chairman and founder of J. Zechner associates, says the company has made an "impressive comeback" but he cautions investors that margins still lag the industry, and it’s in a low-growth business that’s fighting increased competition.

Even so, amazon’s expansion has prodded traditional stores into making costly changes — and the fears of investors have battered their stocks.Grocery industry so far this year, kroger and walmart have lost more than US$30 billion in market value combined.

Along with southeastern grocers, tops friendly markets also filed for bankruptcy in the past month. Based in williamsville, new york, tops has about 170 stores.

Southeastern grocers, meanwhile, has nearly 700 locations. The company announced it was reorganizing on thursday, with plans to close 94 stores.

Even before amazon bought whole foods last year, pressure was ramping up in the grocery industry, which is known for razor-thin margins. In recent years, food has proliferated at dollar stores and pharmacies, with groceries seen as a reliable drive of store traffic.

The rise of meal kits also has given U.S. Consumers another dinner option, and one that often translates to less grocery shopping.Whole foods all of this comes after a building boom in the industry. For years, supermarkets were seen as a safe investment because they were mostly immune to the disruptive forces of e-commerce.

That feeling of security has evaporated. Last year, new grocery store openings plunged 29 per cent as companies curtailed expansion plans, according to a report from JLL.

To be sure, some chains are still adding stores, most notably aldi and lidl. The two longtime german rivals currently account for 27 per cent of the grocery stores recently built or in progress, according to data from research firm planned grocery.

Aldi has been operating in the U.S. Since 1976 and now has more than 1,750 stores. It’s spending more than US$5 billion to remodel 1,300 existing stores and build an additional 750 locations over the next five years.Grocery industry

The remodels have included more selling space for natural and organic items, part of a bid for wealthier shoppers, according to jason hart, who leads the chain’s U.S. Operations. Over the last three years, the company’s organic produce sales have surged more than 200 per cent.

“we’ve made the aldi concept appeal to a broader set of consumers,” he said in an interview. “the momentum we have currently is something we always thought we should have — the concept just makes sense.”

All of the competitive pressure comes as the grocery industry averaged only about 2 per cent growth over the last five years, according to a report from forrester research inc. That means the industry is mainly fighting for market share at this point.

So far, amazon hasn’t said much about its broader plans for whole foods.Whole foods the premium chain has been struggling under the new management, with complaints rolling in about out-of-stock items and quality problems. That shows amazon might not have the easiest time turning the business into a fine-tuned part of its operations.