Amazon’s Whole Foods deal worries packaged-food industry

Wall Street is betting that Amazon.com's push into groceries will be very bad news for the packaged-food industry.

It's up to the likes of Mondelez International to prove that notion wrong.

The snack giant, which makes everything from Oreos and Tang to Trident gum, has been selling more products over the internet and retooling its supply chain for a digital world, said Jeff Jarrett, Mondelez's e-commerce chief. The idea is to show it can shift business online without getting crushed by Amazon, which is famous for squeezing suppliers' margins.

But it may be facing an uphill fight. After Amazon agreed to buy Whole Foods Market in June for $13.7 billion, food producers saw their shares tumble. And few analysts are predicting a rally any time soon.

Amazon is expected to transform grocery shopping into an industry where brands have less sway over consumers and prices are lower. That's put pressure on Mondelez and others to build their own direct relationships with customers, helping preserve their influence.

'You'll continue to see big brands focus on the online channel like never before,” Jarrett said in an interview.

Amazon hasn't said much publicly about its plans for Whole Foods, but the company is expected to bring prices down at the notoriously expensive chain. And most analysts agree that Jeff Bezos's business will play tough with suppliers.

While Amazon's grocery ambitions were well-established before the Whole Foods deal was announced, only about two percent of the food business has moved online. The prospect of the Seattle-based company taking over an upscale grocer was seen as the latest piece of bad news for the group of companies known as Big Food.

The day the Whole Foods acquisition was announced, 10 of the largest food companies in the United States - including Kraft Heinz, General Mills, Mondelez and Campbell Soup - lost almost $8 billion in market value combined.

Food producers already were getting squeezed by Wal-Mart Stores, where groceries account for more than half of revenue. Amazon's push into the business will put food at the center of a massive retail battle between the two companies, hurting vendors in the process, according to Bloomberg Intelligence analyst Michael Halen.