This Vine Could Trip Some Supermarkets

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Some shoppers pay premiums for window cleaners, carpet cleaners, soap, and cosmetics that lack harsh ingredients. Whole Foods (NASDAQ: WFM) and other health-food stores carry wide selections of environmentally friendly household products. Traditional supermarkets have picked up on the health product trend, and Safeway (NYSE: SWY) even developed its own Bright Green label. Now Amazon (NASDAQ: AMZN) has challenged both Whole Foods and Safeway with Vine.com, Amazon's own natural products store, which showcases the potential of this sector. The Vine.com launch could be good news for the natural products companies that supply the grocery stores, though, since these suppliers have just gained a big new customer.

New York Times reporter Claire Cain Miller explained that Amazon worked with well-known green product suppliers, such as Seventh Generation, to make sure that the products on Vine.com met shoppers' standards. The Vine.com site lists many brands that appear on the shelves at health food stores, including Tom's of Maine, Weleda, SimplyFido, and Full Circle. Vine.com offerings include dog chew toys, yoga clothing, and even Schwinn bicycles.

Annie's (NYSE: BNNY) and Burt's Bees, the latter owned by Clorox (NYSE: CLX), both appear at the Vine.com store. Vine.com stocks 193 of Annie's products, and Annie's shelf stable product line fits well with Vine.com's delivery system. 203 Burt's Bees products, which include shampoo, lip balm, and hand cream, appear at Vine.com. Vine.com also lists 18 of Clorox' Green Works cleaning products. If Vine.com takes off, Annie's could pick up new customers, since Annie's products don't show up at every grocery store. Vine.com might not provide major revenue growth for Clorox, since many stores stock regular Clorox bleach, but higher Burt's Bees and Green Works sales could help Clorox' margins.

Safeway's Bright Green private label brand could help the grocer compete with Amazon, even if Amazon negotiates discounts from other green product suppliers. Bright Green products include compact fluorescent light bulbs, tissue paper, and toilet paper, as well as laundry and cleaning supplies. Vine.com offers a much wider variety of light bulbs and other household products than Safeway does, so price competition might be Safeway's most effective Bright Green label strategy. Safeway also offers same-day grocery delivery right now, depending on the time when a shopper makes an order, but a future Amazon same-day delivery service might also ship products from Vine.com.

The premium products section of Whole Foods' web site web site lists shampoo, soap, and lotions from Dr. Bronner's and Alaffia. Both of the latter brands also show up at the Vine.com site, along with many other body and hair care brands, suggesting that Vine.com could weaken Whole Foods' differentiation advantage. Some Whole Foods stores deliver groceries, and third-party services provide delivery from other Whole Foods stores, but grocery delivery isn't Whole Foods' main selling point. In this respect, Safeway may have the advantage in grocery delivery in many locations.

Organic household products sell for premium prices, which could help Amazon's margins. The e-tailer's sales would have to rise from $54 billion to over $1 trillion to reduce its 307 P/E down to around 15 without higher margins, so Vine.com looks like a step in the right direction for Amazon. Vine.com may also be good news for Annie's and Clorox because of its potential to boost their sales. Vine.com poses a bigger challenge for Whole Foods and Safeway, although these grocers won't give up the green household products market easily.

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Eric Novinson owns shares of Whole Foods Market. The Motley Fool owns shares of Amazon.com, The Clorox Company, and Whole Foods Market. Motley Fool newsletter services recommend Amazon.com and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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