Whole Foods cut prices, but saved us only 5 cents

The Buffalo News - - BUSINESS NEWS - By Zach Wichter and Karen Weise NEW YORK TIMES

Af­ter buy­ing Whole Foods in 2017, Amazon made a cou­ple of bold pro­nounce­ments about low­er­ing prices at the gro­cery chain. It made a third this week, say­ing it was of­fer­ing lower prices on hun­dreds of items, es­pe­cially fresh pro­duce, with­out going into much de­tail. It is also giv­ing more spe­cial dis­counts to peo­ple signed up for Prime, the com­pany’s mem­ber­ship ser­vice.

“We will con­tinue to fo­cus on both low­er­ing prices and bring­ing cus­tomers the qual­ity they trust,” John Mackey, the chief ex­ec­u­tive of Whole Foods Mar­ket, said in an an­nounce­ment.

But we wanted to see for our­selves if a typ­i­cal gro­cery bill would change much.

To test the new prices, we se­lected a baker’s dozen of the types of items we buy all the time, not nec­es­sar­ily the fresh pro­duce that would be the fo­cus of the price changes. Eggs? Check. Milk? Check. Beer? How could we go with­out?

We bought those gro­ceries on Tues­day at the Whole Foods across the street from Bryant Park in Man­hat­tan. Then, we bought the same ones at the same store on Wed­nes­day, af­ter the price cuts went into ef­fect. We did not ap­ply a Prime mem­ber­ship to ei­ther pur­chase.

The result: We saved a nickel.

The sav­ings came from a small re­duc­tion in the tax charge, not any spe­cific price change. Straw­ber­ries, the only pro­duce we bought, ac­tu­ally got more ex­pen­sive on our sec­ond trip – by 50 cents. But that change was off­set by the cost of LaCroix, which had gone down by 50 cents.

The pre­tax to­tal for the bill was $53.98 both days. But on Wed­nes­day, the tax charge was $1.61, com­pared to $1.66 on Tues­day, because the LaCroix is taxed and the straw­ber­ries are not.

On Amazon’s Prime Now de­liv­ery app in Seat­tle, the price cuts were a lit­tle more no­tice­able. Whole Foods has some vari­a­tions in its se­lec­tion on­line, and in dif­fer­ent states, so the bas­ket was slightly dif­fer­ent. The to­tal or­der, in­clud­ing taxes and the sug­gested $5 tip, fell to $58.60 from $60.10, a 2.5 per­cent sav­ings. The twohour Prime Now de­liv­ery ser­vice – and the $2 off or­ganic straw­ber­ries – are avail­able only to Prime mem­bers, whom Amazon courts heav­ily because they spend far more.

Whole Foods’ an­nounce­ment trum­peted price de­creases of 20 per­cent on av­er­age for the hun­dreds of newly re­duced items, but the small fi­nan­cial im­pact in our cart should not come as too much of a sur­prise.

For more than a year af­ter Amazon bought Whole Foods, prices de­clined. In March, a bas­ket of 60 items tracked by Mor­gan Stan­ley cost 7 per­cent less than in March 2017, be­fore the Amazon ac­qui­si­tion. Prices at typ­i­cal gro­cery stores were down al­most 3 per­cent over those two years.

But like other gro­cery stores, Whole Foods has re­cently been fac­ing stiff mar­ket forces, as pro­duc­ers feel pres­sures from bad weather, flood­ing and tar­iffs. That same bas­ket of 60 items at Whole Foods was 2.5 per­cent more ex­pen­sive in March than a year ago.

Gro­cers have been able to push some costs back to con­sumer pack­aged goods com­pa­nies, but re­tail­ers have had to in­crease their prices, too, said Phil Lem­pert, a food mar­ket­ing an­a­lyst.

“The money’s got to come from some­where,” Lem­pert said.

Whole Foods costs far more than main­stream com­peti­tors. Its prices were 15 per­cent higher than those at a typ­i­cal gro­cery store, driven by a 30 per­cent pre­mium on pro­teins, like meat, ac­cord­ing to an an­a­lyst note from Mor­gan Stan­ley. Even ex­clud­ing pro­teins, it’s al­most 10 per­cent more ex­pen­sive, Mor­gan Stan­ley wrote.

Whole Foods has fo­cused on giv­ing dis­counts to Prime mem­bers, but Mor­gan Stan­ley said those were highly vari­able, based on the spe­cific month and store. Some­times, the Prime dis­count had a “neg­li­gi­ble” ef­fect on their bas­ket of goods, though at one point in the fall, the dis­count amounted to more than 4 per­cent.

This new round of cuts will not make a big enough dent to let Whole Foods shed its moniker of being “Whole Pay­check,” Lem­pert said. “That will never be erad­i­cated.”

Getty Im­ages file photo

Up­scale gro­cery chain Whole Foods Mar­ket, now owned by Amazon, said this week it would lower prices on hun­dreds of items, es­pe­cially fresh pro­duce. But a shop­ping ex­per­i­ment shows a typ­i­cal gro­cery bill would change very lit­tle.

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