Amazon Launches Private-Label Grocery Brand with Most Items Under $5

Amazon (AMZN) intensified its push into the grocery sector Wednesday, unveiling “Amazon Grocery,” a new private-label brand targeting budget-conscious consumers with a focus on items priced below $5. This move signals Amazon’s intent to capture a larger share of the consumer grocery wallet, particularly during an era of heightened price sensitivity.

The Amazon Grocery brand encompasses over 1,000 products, spanning essential categories such as dairy, fresh produce, meat, seafood, snacks, and baking staples, according to a company release. The launch consolidates previously distinct private-label offerings like Happy Belly and Amazon Fresh under a unified banner, streamlining Amazon’s grocery brand architecture.

“At a time when consumers are increasingly focused on value, Amazon Grocery offers a wide selection of quality grocery items across all categories without sacrificing taste or quality,” stated Jason Buechel, Amazon’s vice president of worldwide grocery. “Our aim is to provide low, competitive prices that empower customers to maximize their grocery budgets.”

The announcement reverberated through the market, triggering a sell-off in grocery and retail stocks. Albertsons (ACI) experienced a drop of more than 2%, while major players such as Walmart (WMT), Kroger (KR), Costco (COST), and Target (TGT) all witnessed declines of approximately 1%. This market reaction underscores the potential disruptive impact of Amazon’s expanded private-label grocery offerings on established retailers.

This isn’t Amazon’s inaugural venture into the budget grocery segment. The company previously launched “Amazon Saver” in September of last year, also positioned as a value-focused brand. However, the launch of Amazon Grocery represents a more significant, cohesive effort, suggesting a refined strategic approach to the price-sensitive consumer market. Analysts suggest that the difference between the two lies in the breadth and scope of the product line, as well as a more concerted marketing push behind the “Amazon Grocery” brand.

The launch occurs against the backdrop of a dynamic period for Amazon’s grocery business. The company has been strategically reassessing its brick-and-mortar strategy, recently announcing the closure of all physical Amazon Fresh stores in the U.K. This move reflects a broader effort to optimize its physical footprint and focus on more profitable avenues within the grocery landscape.

Despite streamlining its physical store presence, Amazon remains bullish on its online grocery business. CEO Andy Jassy and other executives have repeatedly highlighted the strong performance of “everyday essentials” sold through its online channels, including staples such as canned goods, paper towels, and snacks. This emphasis on online channels underscores Amazon’s recognition of the evolving consumer preference for convenience and accessibility.

Further emphasizing its commitment to online grocery, Amazon expanded its same-day delivery service for fresh foods to additional regions across the U.S. This expansion aims to encourage consumers to include perishable items like meat and eggs in their online orders, potentially driving higher basket sizes and increased customer lifetime value. This investment in logistics and infrastructure highlights Amazon’s long-term vision for dominating the online grocery market.