Amazon cuts costs again at Whole Foods ahead of the vacations
(Reuters) – Amazon Inc () said on Wednesday it will provide more discounts and steeper cost cuts at Whole Foods Market on many natural foods and groceries popular throughout the vacations.
The plan was revealed just ahead of Thanksgiving and is on the heels of rate cuts in August when Amazon finished its $13.7 billion acquisition of Whole Foods.
“Cost cuts are irreversible,” Brooke Buchanan, a spokesperson for Whole Foods, informed Reuters in an e-mail.
Investors have been closely looking for rate cuts at Whole Foods, worried that more affordable costs would even more hurt U.S. grocers currently struggling to stay competitive with Amazon and Wal-Mart Stores Inc (), which are secured an intense fight for market share.
“Ever since Amazon purchased Whole Foods Market, this is exactly what the other supermarket rivals have been fearing,” Fort Pitt Capital expert Kim Forrest told Reuters.
“Other grocers are going to have to return in competitive replies– and it could be much better service, much better items and much better rates.”
Shares of rival U.S. grocers Costco (), Sprouts Farmers Market () and Kroger () all fell on Wednesday early morning between 1 percent to 2 percent after the news.
Target Corp’s () stock likewise moved lower. The shares were already pressured after the business anticipated frustrating profits for the essential vacation quarter.
Amazon, which forayed into brick-and-mortar retailing with Whole Foods, might upend the grocery market with its deep pockets and large existence, analysts have actually said.
In September, Target slashed costs on countless products, consisting of cereal and baby formula, and stated it would continue to offer discount rates on some items in addition to the price-cuts. ()
Prices at Whole Foods, however, are still higher than most grocery shops because it accommodates an up-market customers.
“As we saw with Sprouts Farmer and truly other grocery reports, the previous cuts haven’t had a product effect on leading gamers,” said Oppenheimer expert Rupesh Parikh.
“(Entire Food) costs are still quite high versus peers,” he stated.
Sprouts Farmer reported better-than-expected third-quarter earnings and net sales this month and raised its full-year projections.
Amazon stated on Wednesday that Whole Foods will offer organic turkeys for $3.49 per pound to all consumers, while Amazon Prime members can purchase them at $2.99 a pound.
The company stated it will also provide lower costs on items from national brand names including Chobani Yogurt and Applegate Hot Dogs, in addition to smaller sized natural brands such as Eden Foods.
A study last month showed Whole Foods’ previous rate cuts on products including bananas, avocados and beef had actually drawn clients far from Wal-Mart, Trader Joe’s and Sprouts Farmers.
Reporting by Sruthi Ramakrishnan in Bengaluru; Additional reporting by Rama Venkat Raman and Karina D’souza; Modifying by Sayantani Ghosh and Bernard Orr