Amazon's (AMZN) Private Label Push Should be No Surprise; Cowen Affirms at 'Outperform'

Cowen and Company is out with commentary on Amazon.com (Nasdaq: AMZN) following recent reports that Amazon is expanding its private-label business. Cowen rates AMZN at Outperform with a price target of $830.

Analyst John Blackledge commented, Last week, The Wall Street Journal reported AMZN was preparing to expand its private label business in a meaningful way, including its entry into perishable foods and popular household products (nuts, tea, coffee, baby food, laundry detergent, diapers, etc). AMZN has sold private label products since '09, primarily under the AmazonBasics brand, although it's been largely concentrated in consumer electronics such as batteries, power cords, etc. While the revenue contribution is unknown, we note private label represents less than 1K of AMZN's 500MM+ SKUs. According to WSJ, the new private label products could come online as early as this month and will only be offered to current Prime members. We estimate ~45MM US Prime subs, per our most recent proprietary Consumer Survey and likely tens of millions Int'l Prime subs.

While AMZN has not commented on its private label ambitions, we believe the news should come as no surprise given the size of the Consumables and Food & Beverage markets in the US, markets we have explored in great detail in our prior work. We have highlighted AMZN's push into these markets previously, and assuming our growth forecasts are correct, selling its own private label goods seems to be the appropriate next step, as the majority of large legacy players in these markets operate large private label businesses (Walmart, Costco, Publix, etc.) [...] As a reminder, we estimate AMZN will be the #2 player in the $425BN US Consumables market (ex-Food&Bev) by '18 per our estimate, as well as a top-10 player in the ~$795BN US Food & Bev Grocery market by '19, Blackledg noted.

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