Europe's Grocers Feel Amazon's Heat

By Nick Kostov and Saabira Chaudhuri Features Dow Jones Newswires

Amazon.com Inc.'s Whole Foods deal is adding urgency to European grocers' push to shift from bricks to clicks.

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Carrefour SA, Europe's largest listed grocer by sales, reported disappointing results and warned it would fall short of sales forecasts, sending shares down 13%. But Thursday's miss is also part of a much broader scramble to cope with fast-changing consumer tastes and shopping habits. Amazon's purchase of Whole Foods, meanwhile, has punctuated the still-little-understood threat posed by online grocery delivery services.

"People are shying away from a sector that was never really loved and credited with sustainable returns, and is going through such dramatic change that it becomes too unpredictable and too risky," said Bernstein analyst Bruno Monteyne.

Amazon's threat in the Old World isn't necessarily imminent. Whole Foods has nine stores in Europe, all of them in the U.K. Those shops lowered prices this week, just like their counterparts in the U.S. Whole Food products are also now available on Amazon's various grocery-delivery sites, mostly servicing London. The small scale, and the U.K.'s already cutthroat price competition, probably won't change the game much there any time soon.

Still, Amazon's beachhead in Europe is underscoring the need for quick action by the continent's big grocers. Tesco PLC, the U.K.'s largest grocer, last year launched a same-day click-and-collect grocery service at more than 250 stores across the country, while rival J Sainsbury PLC earlier in August began a trial that allows customers to pick up groceries in store within 30 minutes of ordering them online. All of Britain's big grocers offer home delivery on groceries.

Carrefour last year completed the acquisition of home goods marketplace Rue du Commerce and it now has more than 500 sites where online shoppers can pick up groceries. The retailer's previous chief executive, Georges Plassat, pledged earlier this year to more than triple the value of merchandise Carrefour sells online by 2020.

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France's Groupe Casino SA, which owns online marketplace Cdiscount.com, is making an increasing number of fresh products available for one-hour delivery through some of its banners.

Carrefour's online grocery operations, however, are "woefully small," according to Bernstein's Mr. Monteyne. He figures the company has lost 1.5 percentage points in market share due to online competition.

The small online presence could prove enticing for Amazon, which already claims France as its third-largest European retail market. Amazon in March rolled out its Pantry service in France, allowing members of its one-hour Prime delivery service to buy groceries, beverages, household and baby products.

In comments to investors, Carrefour Chief Executive Alexandre Bompard didn't address Amazon by name, but he said his priority since coming aboard in July has been to accelerate online expansion and reshape stores to accommodate "rapidly changing customer behavior."

"The frontiers between online and offline are indeed blurring in all of our countries and in all our businesses," he said.

Including Thursday's rout, Carrefour shares have shed more than 25%, or about $4 billion in market value, since Amazon disclosed the Whole Foods deal in mid-June. Several other big European grocery chains also have been hit.

Groupe Casino is down 11% in that same period, after falling 3.6% Thursday. Shares of Ahold Delhaize NV, the Dutch-Belgian giant that owns U.S. chains Food Lion and Hannaford, were off 1.5% and are down 18% since the Amazon-Whole Foods deal.

France-based Carrefour pioneered the hypermarket in the 1960s -- sprawling warehouselike outlets that sell everything including baguettes and bicycles. Like elsewhere, that model has fallen out of favor as shoppers migrate to smaller stores tucked closer to where they live, particularly in Europe's densely packed urban centers. Online grocery shopping also has taken off more quickly in many European cities.

Last year, online shopping made up 6.2% of the U.K. grocery market and 4.3% in France, according to Bernstein. In the U.S., it stands at just 2.1%.Consultancy IGD predicts the French online grocery market will reach EUR12.5 billion ($14.8 billion) in 2020, double from the EUR6.6 billion in 2015.

Mr. Bompard, 44 years old, had previously served as chief executive of Fnac Darty, where he was credited with turning around the book, music and electronics retailer's online operations. Shares in Fnac Darty have roughly tripled since its IPO in 2013, even as other French retailers slumped in the face of stiff competition from Amazon.

Write to Nick Kostov at Nick.Kostov@wsj.com and Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

August 31, 2017 13:03 ET (17:03 GMT)