Amazon Effect Eyes Grocery Aisles In Germany?

And so the Amazon effect comes to Europe – this time with a purported Amazonian appetite for (grocery) aisles.

News came Friday (Sept. 14) that German retailer Metro AG is looking to offload its Real hypermarkets via sale, and the firm, said Reuters, “remains confident” of a transaction.

A possible deal for Amazon – one worth $1.2 billion? According to Reuters, bankers remained skeptical of that scenario, and said that private equity firms would be the most likely suitors. The newswire noted that foreign companies have been loath to enter the German grocery arena, described as “cutthroat.”

Metro has said it wants to train its sights on its wholesale business. And to get a sense of the competitiveness of the German market, consider the fact that Walmart lost $1 billion there more than a decade ago, selling its stores to Metro. The Real hypermarkets may not be appetizing for European players such as Ahold or Tesco.

But might Amazon be interested? Real has more than 80 stores in the country and had been looking to beef up its eCommerce operations, with – as Reuters noted – 2 percent of sales done over the web.

Amazon, of course, is no stranger to the food business, having bought Whole Foods in 2017. And it is no stranger to Germany, which is the second largest market for the eCommerce giant after the United States.

“Germany’s grocery ecommerce is very underdeveloped, and Germany is a very important country for Amazon,” Reuters quoted Bernstein Analyst Bruno Monteyne as saying in contemplation of such a deal. And a $1 billion price tag? Not a huge stretch for Amazon, which has about $22 billion of cash in its coffers.

Perhaps Metro might be a motivated seller, having been busy separating out businesses that do not seem to gel with the aforementioned wholesale focus. The company has sold off its department store holdings and already has experience selling off at least some of its grocery operations, this time around to Auchan in a deal consummated six years ago.

Amazon, for its part, has been in Germany since 2016, and though the sales there are dwarfed by the U.S. (itself at about $121 billion last year), Germany represented a top-line contribution of about $17 billion.

Metro said it has had interest from a number of parties, Reuters reported Friday. And eCommerce seems to be the name of the game, on a global scale – whether or not Amazon shells out the $1 billion to acquire Real.

As spotlighted in this space just Friday morning, Walmart announced it had acquired Cornershop for $225 million, bringing on-demand delivery for items, including groceries, to Mexico and Chile. And Amazon itself has been boosting its reach into groceries, too, with Amazon Go in the U.S. set to expand to the East Coast. Amazon Prime Grocery is adding another 10 locations. These are markets different than might be seen in Germany, but the trend is toward acquisitions that are marked by expansion, on-demand and eCommerce-driven efforts.