Some prices are beginning to fall at Whole Foods Market around the country as promised by Amazon when it completed its purchase of Whole Foods Market on Monday, (Aug. 28).
Jeff Wilke, CEO of Amazon Worldwide Consumer, said late last week the retailer would lower prices without compromising Whole Foods Market’s long-held commitment to high standards.
Consumers shopping Whole Foods did see lower prices on a number of food and non-edible consumable products. Fayetteville-based Field Agent checked the prices of 12 items on Monday in Whole Foods in about a dozen locations across the country and calculated the average basket savings to be 5% over prices checked earlier this month.
Chris Medenwald, marketing manager at Field Agent, said seven of the products in the 12-item basket did have prices lowered as of Monday. Whole Foods dropped the prices of Tom’s of Maine deodorant 26%, and Skinny Pop Popcorn Original by 29%, which were the biggest declines in the Field Agent basket on Monday.
“Three other products remained stable from the beginning of the month to now, while two items — Ricola Cough Drops and Mrs. Meyer’s Dish Soap — actually went up in price, 7% and 24%, respectively,” Medenwald noted a blog post Tuesday.
He said the Field Agent study did show prices have dropped, but the overall decline was mixed across the basket and in some cases prices were raised. Two of the items in the Field Agent basket were Whole Foods private label products, 365 Everyday Value Organic Milk and 365 Organic Unrefined Coconut Oil. These product prices were 11% and 2%, lower, respectively.
PRIVATE LABEL FOCUS
A separate pricing study conducted by Raymond James & Associates retail analyst Budd Bugatch in the Tampa market found prices on its 40-item grocery basket were 8.4% lower on Monday (Aug. 28) than the day before. Bugatch said the Raymond James basket contained 40 items, with 30 of those organic and the majority Whole Foods’ private label brands.
“Admittedly, our survey could potentially be skewed a bit toward products that were reduced in price, given so many of the products were private label,” he said.
Bugatch said out of the 40 items in his basket, 16 items had lower prices. He said the lower prices ranged from single digits up to 40%.
“So far, it appears Amazon is more focused on lowering prices on its own private label products (365, Whole Foods brands) versus branded manufacturer products,” Bugatch added.
The biggest price gap in the Raymond James basket was the 40% savings on the individual non-organic Hass Avocados which sold for $1.49, down from $2.50. The organic Hass Avocado (individuals) cost $1.99 on Monday, down 33.4% from the previous day. Following are other price declines reported by Bugatch.
• Non-organic bananas – 49 cents per pound, down 29%
• Organic Gala apples – $1.99 per pound, down 33.4%
• 365 Organic Butter – $4.49 for 16 oz., down 25%
• 365 Organic Milk – $3.49 for 2%, half-gallon, down 12.5%
* 365 Organic large brown eggs – $3.99 per doz., down 16.75%
• Organic Rotisserie Chicken – $9.99, down 28.6%
“From our store walk it appeared the most significant price investments were in produce (higher traffic items), while the rest of the store was not reduced (yet) to the same magnitude,” he said.
Bugatch also found 24 of the items in the basket were the same price on Monday, with no savings reported.
In spot checking some of the items with lower prices against comparable items at Wal-Mart, Talk Business & Politics found non-organic bananas were priced at $55 cents a pound, 12% higher than the lower price at Whole Foods. Non-organic avocados at Wal-Mart cost 89 cents each, 60 cents cheaper than comparable products at Whole Foods. Wal-Mart’s private label carton of large organic eggs cost $3.97, two cents cheaper than at Whole Foods.
Walmart U.S. CEO Greg Foran has said the retailer is focused on basket savings given it works closely with suppliers to get their best overall prices. In terms of Wal-Mart’s growing private label business, the retailer also has focused on improving quality while keeping price separation from the name brands.
“Whole Foods isn’t wasting any time cranking up the buzz machine and that’s a smart strategy,” said Carol Spieckerman, CEO of Spieckerman Retail. “By many accounts, the price changes aren’t particularly widespread at this point but any changes will have the effect of shifting perception as the media is essentially providing free advertising by covering the reductions.”
Medenwald said consumers may in the future see true structural price changes at Whole Foods, but for now it looks somewhat promotional.
MORE PRICE CUTS PREDICTED
Ben Bienvenue, a retail analyst at Little Rock-based Stephens Inc., recently analyzed price drops at Whole Foods and found Amazon could invest up to 10% in key traffic-driving categories and still have gross margins at parity with its natural/organic peers.
The Stephens basket contained 13 items and the cost reduction was 21% for the average. Some items were as much as 37% cheaper on Monday. Bienvenue said he believes this is indicative of how much Wal-Mart would be willing to invest in key items to drive traffic.
“This makes us incrementally more cautious on the grocers as we believe that significant price investments will be required for natural/organic competitors. We also believe additional price investments will need to be made for conventional (non-organic) items to achieve the necessary price-gaps,” Bienvenue noted.