Amazon targets Walmart crown in $883 billion grocery battle

Grocery is a huge business. I learned that early on. My first job as a bagger at the local grocery store eventually led to my first full-time job helping manage a store for a major supermarket chain. I saw firsthand in the late 1980s and early 1990s how Walmart sent shockwaves through the industry when it started selling groceries in its supercenters.

In no small part, Walmart contributed to the struggles at the supermarket chain I worked for, eventually causing it to disappear forever.

Walmart went on to become the grocery Goliath, commanding 21% market share, according to Progressive Grocer, citing figures from research firm Numerator. Its control of the market dwarfs that of its largest grocery rivals, like Kroger. However, its dominance faces a new threat from Amazon.

Grocery market share by company (2025):

• Walmart: 21.2%
• The Kroger Co: 8.9%
• Costco Wholesale: 8.5%
• Albertsons Cos: 5%
• Publix Super Markets: 4.1%.
  Source: Numerator

Much like Walmart disrupted the industry forty years ago, Amazon hopes to disrupt it today.

Amazon has been aggressively expanding the selection of grocery items it sells online. In recent months, it's quietly made a significant shift to sell fresh foods, like produce and meat -- high-impact categories worth billions of dollars in repeat sales.

"Over 70% of grocery retailers have integrated online ordering and fulfillment, driven by consumer demand for convenience," according to IBISWorld.

IBISWorld's data shows that the fresh and frozen meat market is worth $114 billion annually, making it the largest category in the $883 billion grocery market. Meanwhile, fruit and vegetables account for 12% and rank third, with $106 billion up for grabs.

Amazon's plan appears to be working and could start making a more meaningful dent in its battle for market share with Walmart as soon as this year, according to Morgan Stanley data.

Amazon targets your refrigerator

The money at stake is massive, and the implications for brick-and-mortar grocery stores are significant. As Amazon improves its distribution and same-day delivery services for Prime members, consumers could accelerate the shift toward grocery e-commerce, putting pressure on traditional physical supermarkets.

The impact on your refrigerator is direct, but much more is at stake. Customers' ongoing demand for convenience suggests more will shift all their consumer goods purchases online if they can shop all at once, rather than having to plan separate trips—one to the computer and the other to the neighborhood store or the closest Walmart Supercenter.

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"Rolling sales growth in meat and produce at AMZN (per data provider tracking) has
accelerated," said Morgan Stanley analysts in a report shared with me, citing Numerator data.

It's not just bargain shoppers embracing the shift at Amazon, which began in earnest in August.

"The acceleration seems to be broad-based and across income cohorts, with lower, middle, and higher income households all reporting accelerating their fresh/perishable spend on AMZN," wrote Morgan Stanley. "Data (combined with AMZN’s ability to drive repeat behaviors) are an encouraging signal of a larger business to come."

Wall Street is bullish on Amazon's grocery push

Morgan Stanley says that third-party data shows a "more than doubling"in fresh and perishable spending on Amazon, and while that's still a very small slice of Amazon's overall revenue pie, the growth could still move the needle thanks to add-on spending per order.

Related: Walmart CEO pay gap widens with workers

"The faster growth in fresh/perishable is leading to faster overall grocery/CPG [consumer packaged goods] spend on AMZN as well…which seems to have accelerated to 35%+ growth, from low double digit growth earlier in the year," said Morgan Stanley.

The investment bank's retail market analysts think that if Amazon's momentum continues, it could lead Wall Street to boost sales and profit targets.

"The extent to which AMZN can deliver faster North American GMV [gross merchandise value] growth from grocery would likely lead to revisions and multiple expansion (as the market would be more confident in multi-year growth)," noted the analysts.

The takeaway: Faster growth for grocery may cause Wall Street to bump up how much investors are willing to pay for each dollar of profit

If so, modeling for a higher stock price-to-earnings ratio could help Amazon's share price climb, given that earnings growth is the lifeblood of stock market returns.

Morgan Stanley thinks Amazon's opportunity is big enough to rate its stock "overweight," with upside to $315 per share. Currently, shares trade near $239, suggesting 32% upside.

What does this mean for Walmart? A fiercer fight to maintain its dominant position at the top of the grocery market pyramid.

According to Numerator, Walmart's year-over-year sales growth for produce and meat has fallen since November, while Amazon's has increased dramatically.

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