Food-price re­port

Wal-Mart still leader among gro­cery re­tail­ers such as Ama­zon, Tar­get.

Northwest Arkansas Democrat-Gazette - - FRONT PAGE - ROB­BIE NEISWANGER

Ama­zon.com’s ac­qui­si­tion of Whole Foods for $13.7 bil­lion last month sig­naled the ecom­merce gi­ant was se­ri­ous about be­com­ing a ma­jor player in the gro­cery in­dus­try.

But Wal-Mart Stores Inc. is win­ning the price war on gro­ceries, ac­cord­ing to a re­cent note pub­lished by Gor­don Has­kett Re­search Ad­vi­sors.

The note in­di­cated a bas­ket of Ama­zon Fresh prod­ucts was 16.1 per­cent more ex­pen­sive when com­pared with the same items at Wal-Mart in June. It was an in­crease from a 14.6 per­cent pre­mium in May. Gor­don Has­kett se­nior an­a­lyst Charles Grom wrote that Wal­Mart specif­i­cally was “get­ting more ag­gres­sive on food prices into the Fourth of July.”

Gor­don Has­kett has been keep­ing tabs on pric­ing through­out the $700 bil­lion gro­cery in­dus­try. The firm is con­duct­ing monthly stud­ies on a bas­ket of about 45 items in five ma­jor mar­kets: Los An­ge­les, Chicago, Hous­ton, Bos­ton and At­lanta.

In its lat­est re­port, Wal­Mart re­mained the price leader among “mid­dle mar­ket” gro­cery re­tail­ers like Ama­zon,

Tar­get and Kroger. Re­gional stores Al­bert­sons, Ran­dalls and Shaw’s were also in­cluded. Wal-Mart’s prices in the five­mar­ket test last month were 9 per­cent lower than Kroger’s and 7.3 per­cent lower than Tar­get’s, ac­cord­ing to the re­search note.

“For the third con­sec­u­tive month, Wal­mart ex­panded its lead ver­sus peers in our study,” Grom wrote in the note. “Specif­i­cally, Wal­mart now has a 13.5 per­cent price ad­van­tage over its com­pe­ti­tion in the five re­gions that we mon­i­tor, up from 13.2 per­cent in May and 11.8 per­cent in March.”

Suc­cess in the gro­cery aisles is crit­i­cal for Wal-Mart be­cause food sales ac­count for about 56 per­cent of the com­pany’s rev­enue. But main­tain­ing its mar­ket share has be­come more chal­leng­ing be­cause of pres­sure from all sides with com­peti­tors like Ama­zon, Kroger, Ger­man dis­coun­ters Aldi and Lidl, and the dol­lar stores.

Wal-Mart has fine-tuned its pri­vate la­bel of­fer­ings, im­proved

its fresh food se­lec­tion and cleaned up stores to com­pete with other gro­cers. It has em­pha­sized con­ve­nience as well with its gro­cery pickup ser­vice, which is avail­able in more than 800 lo­ca­tions.

One other as­pect of Wal­Mart’s strat­egy has been ag­gres­sively low­er­ing prices in cer­tain mar­kets.

“Pric­ing is not an on-off switch for us, but 18 months ago we talked about that we were go­ing to put sev­eral bil­lion dol­lars into pric­ing,” Wal-Mart Chief Fi­nan­cial Of­fi­cer Brett Biggs said dur­ing a pre­sen­ta­tion at the dbAc­cess Global Con­sumer Con­fer­ence last month. “Price mat­ters and it will al­ways mat­ter, and so cus­tomers no­ticed that as well.”

The Gor­don Has­kett study high­lighted one ex­am­ple of Wal-Mart’s tac­tics, say­ing a 12-ounce pack­age of cheese had been low­ered from roughly $3 to 60 cents lead­ing up to the hol­i­day.

Gro­cery an­a­lyst David J. Livingston said the ef­forts aren’t enough to so­lid­ify Wal­Mart as the clear-cut leader in gro­cery prices. He said dis­coun­ters

like Aldi will con­tinue to con­sis­tently pro­duce lower prices. But Livingston be­lieves the re­tail gi­ant re­mains “the bar for pric­ing” in the gro­cery in­dus­try.

“Wal-Mart is go­ing to con­tinue to try to be innovative in ways to squeeze out costs and main­tain their po­si­tion,” Livingston said. “Wal-Mart doesn’t want to lose their po­si­tion in the pric­ing totem pole.”

Grom cau­tioned in the Gor­don Has­kett re­search note that Ama­zon is “get­ting more ag­gres­sive” on pric­ing in the At­lanta mar­ket. Ama­zon Fresh prices were just 1.8 per­cent more ex­pen­sive than at Wal­Mart. The price dif­fer­ence con­tin­ued to shrink from 4.8 per­cent in May and 8.6 per­cent in April.

But Livingston doesn’t see Ama­zon pos­ing a ma­jor threat to Wal-Mart’s po­si­tion on the pric­ing front even af­ter the Whole Foods ac­qui­si­tion. The com­pany pur­chased the high­end gro­cer and its roughly 450 stores with plans to con­tinue op­er­at­ing the chain un­der its own brand.

“No­body shops Whole Foods be­cause of the price,”

Livingston said. “They shop for the qual­ity and the ex­pe­ri­ence. Will they be­come more price com­pet­i­tive? Pos­si­bly. But I don’t know if that’s the goal.”

Carol Spieck­er­man, a re­tail con­sul­tant and pres­i­dent of Spieck­er­man Re­tail, agreed and said the ac­qui­si­tion presents more of a threat from a con­ve­nience per­spec­tive. She be­lieves Ama­zon will likely lever­age the brick-and-mor­tar lo­ca­tions as de­liv­ery hubs and em­pha­size its “pri­vate brand as­pi­ra­tions.”

While price is im­por­tant to Wal-Mart in the bat­tle for gro­cery dol­lars, Spieck­er­man said other ef­forts — like ex­pand­ing and im­prov­ing its pri­vate-la­bel of­fer­ings — re­main key in the gro­cery com­pe­ti­tion.

“Per­haps Ama­zon will help Whole Foods fully re­al­ize its ear­lier am­bi­tion to open stores ded­i­cated to its pri­vate brands,” Spieck­er­man said. “Ei­ther way, Wal-Mart’s move to ex­pand its Great Value brand into or­gan­ics was pre­scient and im­por­tant in light of Ama­zon’s ac­qui­si­tion.”

AP/KATHY WIL­LENS

Pedes­tri­ans stand out­side a Whole Foods Mar­ket set to open on West 125th Street in Har­lem on Fri­day. Ama­zon.com’s pur­chase of Whole Foods for $13.7 bil­lion last month was a sign the e-com­merce gi­ant is se­ri­ous about be­com­ing a player in the gro­cery in­dus­try.

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