Amazon's push into groceries to benefit Morrisons and Ocado, Credit Suisse says

Amazon's acquisition of Whole Foods Market showed it was very serious about entering the grocery market, putting it on a course to eventually become a direct competitor of all the main players in the space, analysts at Credit Suisse said.

In the short-term however, the tie-up was more of a concern for the main US grocers; indeed, Morrisons - and especially Ocado - might be set to benefit as a result.

The mainstream UK grocers all had extensive and somewhat entrenched online operations, the Swiss broker argued, so it left its estimates for them unchanged.

Morrisons was a "special case", according to the analysts, with its existing supply agreement with the American internet giant now more valuable.

Nonetheless, they did not believe it was an acquisition target.

As for Ocado, the merger would make its technology that much more attractive to grocers, particularly in the States, and increased the chances that it would be seen as a takeover target.

Ahold Delhaize was a different matter, with roughly 65% of its sales coming from the States it was levered to US market dynamics, the broker said.

Credit Suisse expected Amazon's move would trigger a "competitive response" from its new rivals, Wal Mart and Kroger. Then there was the arrival of low-cost rival Lidl's entry into the US and Aldi's refurbishment plans to contend with.

The broker stuck to its 'overweight' recommendation on Ahold but cut its estimate for the company's 2018 operating profits and lowered its fiscal year 2018 EBIT multiple for the shares to 10.0.

America's grocery market was set to become "increasinlt challenging", the analysts said.

Going forward, the main potential for Amazon.com in France and other markets was to pursue supply agreements with major suppliers, as it had with Morrisons.