Jeff Bezos just drove a tank into the middle of the food fight going on between Wal-Mart and the packaged goods industry.

Amazon's $13.7 billion deal to purchase Whole Foods is expected to be disruptive for grocers and other retailers, but it couldn't come at a worse time for big brand food companies, already hurt by the heavy hand of Wal-Mart's discount pricing and the expansion of online shopping.

Now with Amazon jumping into the grocery business with a more than 400-location retailer, the price slashing — and competition from private labels — can only intensify. As consumers also look for fresher foods and more organic and natural offerings, shelf space in the supermarket center aisles, long dominated by big brands like Kellogg, Kraft Heinz and Campbell Soup — is also simply shrinking.

The Amazon merger is just another blow that reinforces these trends.

"I would say it's the smaller brands that are going to be most affected. Conagra and the midtier companies are probably going to be the most hurt. There's probably a lot of independent brands that are owned privately around the country that have the least pricing power and will be hit hard by this," said Bernstein analyst Alexia Howard. It's not good news "for the cereal companies, but it's generally not good news for packaged companies."

Howard covers companies, like General Mills, Kraft Heinz, McCormick, Dean Foods, Mondelez, Hershey's and Kellogg, and she turned more negative on the sector in March.

She said Wal-Mart is not only fighting it out with Amazon online, but it is facing new competition from German retailers Lidl and Aldi. Lidl is a deep discounter and just opened its first stores in the U.S., while Aldi is expanding its presence. Analysts say Wal-Mart is expected to expand in private label and fresh food offerings.