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Amazon.com, Inc.

Report: Amazon to launch private label food items

Roger Yu
USA TODAY
Amazon plans to sell more private label food products.

Amazon is expanding the grocery business by broadening its private-label brand, Elements, into food items, according to a report by The Wall Street Journal.

In December, Amazon launched the Elements brand by selling baby diaper wipes, which are sourced from a vendor, to Amazon Prime members. By paying $99 a year, Prime customers get expedited shipping and access to streamed movies and TV shows.

At the time, company watchers speculated that the brand will be used to launch other products, mirroring the private-label strategy used by other large retailers.

Costco (Kirkland), Walmart (Great Value) and Target (Up & Up) use their private label brands – an arrangement in which products are exclusively manufactured by a third-party for a retailer – to drum up sales in popular categories at their stores.

Private labels allow retailers to control product quality, pricing, size, distribution and packaging. They also help build customer loyalty -- just ask some Costco fans about the Kirkland brand – and pad retailers' profit margins since they don't require as much marketing costs.

An Amazon spokesman said the company doesn't comment on rumors or speculations.

Amazon has approached several food manufacturers to partner in the plans, including Oak Brook, Ill.-based Treehouse Foods. Treehouse couldn't immediately be reached for comment.

Shares of Treehouse rose 0.04% in after-hours trading to $70.74.

Amazon rose 0.1% to $427.

The Elements strategy initially called for selling diapers along with wipes. But about a month after the launch, Amazon ditched Elements diapers after customers complained about the quality. "Based on early customer feedback, we are making some design improvements to the diaper," the company told customers in an email.

Amazon has never been shy about its ambition to enter the grocery business, and customers can buy a wide array of items -- but not perishable products -- on the site. Its grocery shopping service, Prime Pantry, was introduced a year ago, in which Prime members can add items to their online cart and have them delivered to their homes for $5.99 a box.

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