NOT HUNGRY FOR WAR
Canadian grocers will likely avoid a price war with Amazon’s newly acquired Whole Foods,
Cheaper avocados at Whole Foods might get fans of the organic grocery chain salivating over savings, but retail analysts say it probably won’t launch price wars at most Canadian supermarkets.
The country’s biggest grocers are unlikely to play along with deep cuts by Whole Foods’ new owner Amazon in the produce aisles of its 13 locations across Canada. That’s partly because the imminent threat of the high-end chain wouldn’t justify the financial hit of reacting with deep food discounts, suggested Brynn Winegard, a marketing expert at Wine- gard and Company.
“Places like Loblaws, Sobeys and Longo’s won’t necessarily be able to afford that,” she said.
“But what you will be looking at is a huge market play towards loyalty.”
Winegard expects established chains to lean on their reputations — and points redemption programs — in hopes of keeping customers from straying to competitors in the short term.
Expect better deals on taking home three bottles of spaghetti sauce instead of two, for example, and more appealing bonus-point offers designed to get customers back into stores.
Both are generally more affordable, and effective, than deep cuts to a wide assortment of products.
Price wars have a long history of offering Canadian grocers little up- side, especially if their profit margins are cut to the bone. It’s happened in the past, most notably when Walmart Canada bulked up its food offerings nearly 10 years ago and some chains dropped prices in response.
Winegard says those fights usually only generate “short-term wins” for the retailer when they should be focused on the big picture of an evolving industry where Amazon is looking to get a stronghold on the Canadian shopping basket.
Mark Lee, associate professor at the Ted Rogers School of Retail Management, said the Whole Foods price cuts won’t be particularly effective in attracting consumers on the hunt for deals.
“Whole Foods is already marked up quite high,” he said. “The price reduction is really just getting back to the level of regular grocery prices.”