Following the surprise announcement last week that Sainsbury is to buy rival Asda to create a behemoth new supermarket-cum-marketplace, rumours abound that Amazon is planning to up the ante by buying Morrisons.
Following much better than expected results at the grocer – Morrisons reported like-for-like sales, excluding fuel, were up 3.6 per cent in the 13 weeks to 6 May – analysts are predicting that it could be a target for Amazon, which has long been circling the UK grocery business, but has yet to make a big play.
Amazon already has a deal with Morrisons to provide food deliveries to UK customers using its Pantry and Prime services.
Following Thursday’s trading update from Morrisons, Bryan Roberts, global insight director at marketing firm TCC Global, hailed the supermarket’s solid performance, but said mergers in the groceries sector could spur a tie-up with Amazon.
He told reporters:
“Investors will be nervous about the growing threat from consolidation in the grocery market following the recent slew of mega mergers, with the planned deal between Sainsbury’s and Asda announced last week and Tesco and Booker earlier in the year. But Morrisons’s own strategy is bearing fruit, with its wholesale business on track to reach £700m in sales this year. Looking ahead, a takeover bid from Amazon is not beyond the realms of possibility, as the ecommerce behemoth looks to grow its footprint in UK retail – something that became clear after rumours surfaced that it made moves to buy Waitrose in 2017.”
– Bryan Roberts, global insight director at marketing firm TCC Global
There are no firm facts around such a deal – yet – but it is clear that the Sainsbury’s-Asda deal has shaken up the grocery sector in the UK and possibly fired a starting gun on a round of M&A. With Amazon keen to enter the market and with its previous targets, Sainsbury’s and Waitrose, seemingly out of the running, Morrisons, with its good results and existing deal looks a prime – if you’ll pardon the pun – candidate.
One to watch.
