Amazon’s $13.7 billion Whole Foods buy has put the grocery industry on its toes, igniting fears of a heated price war in the $800 billion industry. A month after their Aug. 28 tie-up, it turns out some of those fears may have been overblown.
The total price for a basket of 110 items at a Whole Foods store in Princeton, New Jersey as of Sept. 26 was “essentially flat” versus the total basket price at the close of the deal on Aug. 28, according to a study by Gordon Haskett Research Advisors analyst Chuck Grom, whose team visited and studied the prices three times over the past five weeks. Seventeen of the 110 items in the basket--from Yogi Tea's Egyptian Licorice Mint flavor to Annie's Organic Berry Bunnies Cereal--saw an average price decline of 18% during that time, while prices rose for 16 items and remained the same for the other 77.
Amazon made waves when the Whole Foods deal closed when it sharply reduced prices on some best-selling staples items including select fruits, vegetables, meat and fish.
But Grom found price changes far less dramatic than the average reductions of 25% in as many as 20 items that he said were touted by Amazon. “Our most recent study shows no sign of incremental price investments at Whole Foods,” the study said.
Other studies also suggest that Amazon still has yet to come up with a consistent pricing strategy for Whole Foods.
A Market Track study of 11 items among those Amazon advertised would receive price cuts found a discrepancy between in-store and Amazon Fresh prices. Even though average in-store price for the basket dropped 21% from the average in-store price before the acquisition, the average price for that basket on Amazon Fresh actually rose 6.4% in the week the acquisition closed compared to the average in-store pre-acquisition price.There’s going to be a lot of commotion in the grocery industry over the next two months.
“The early in-store price drop was Amazon trying to catch consumers’ attention,” said Ryne Misso, Market Track’s director of marketing, in an interview. “There’s an element of marketing there….It’s very early to see what their pricing strategy is going to be."