Whole Foods to Cut Prices on Some Items

By Laura Stevens and Heather Haddon

Amazon.com Inc. said it would begin slashing prices on grocery staples at Whole Foods Market Inc. on Monday, the first changes the online retailer plans for its $13.7 billion acquisition.

Amazon said Thursday it will also introduce a customer rewards program at Whole Foods and new deals through its Prime membership program, a key way to drive more shopping. Amazon added that it plans to close its acquisition of Whole Foods on Monday.

"We're determined to make healthy and organic food affordable for everyone," said Jeff Wilke, CEO of Amazon Worldwide Consumer.

Shares of grocery store companies fell in response to Amazon's planned price cuts, which will affect bananas to beef. Kroger Co., Wal-Mart Stores Inc. and Costco Wholesale Corp. were all trading lower. Grocers and investors are concerned that Amazon's move might start a price war as Amazon works to broaden the reach of the food seller.

The announcement of the closing came a day after Amazon received Federal Trade Commission approval on the deal, and Whole Foods shareholders voted in favor of it.

The announcement marks Amazon's first reveal of plans for its newest and biggest acquisition, which gives the online retailer a network of more than 460 brick-and-mortar stores overnight. Some of those stores will soon be equipped with Amazon's in-store lockers for package pickups, Amazon said. Whole Foods' private-label items, such as the 365 Everyday Value brand, will be sold on Amazon.

United Natural Foods, Inc., Whole Foods's main distributor that depends on the grocer's business, saw its stock drop by more than 5%.

The deal, which came together in about six weeks, didn't give the two companies much time to determine exactly what a combined company would look like. Since then, the companies have made progress.

A key component will be the introduction of a Prime membership-based loyalty program that will offer Amazon shoppers deals in store. The program, which costs $99 annually and offers perks including unlimited two-day shipping, could draw more Amazon customers into Whole Foods stores, as well as prompting some more sign-ups.

There is a big overlap between the two retailers already, something Amazon's Mr. Wilke mentioned during a recent public appearance. A Morgan Stanley survey shows about 62% of Whole Foods shoppers are members of Amazon's Prime service, opening the door for cross-selling to entice customers who shop at both to spend more.

Amazon said that it will start integrating Prime into Whole Foods' point-of-sales system starting Monday, and that the membership benefits will be added after that.

Amazon has also been expected to use the acquisition -- which gives it its first major brick-and-mortar network -- to help reduce delivery costs. The pickup lockers are a potential first step in further integrating the two companies' logistics operations, something that could eventually lead to more grocery pickup or delivery options.

Whole Foods once owned the natural and organic food market, but increasingly faced competition as mainstream grocers began to carry similar products at cheaper prices. The Austin, Texas-based company has seen its sales slump in the past two years, and began lowering prices, running promotions and advertising on television for the first time in years.

Still Whole Foods continued to lose sales and shopper surveys have shown that many customers believe the chain is too expensive. A Morgan Stanley survey earlier this month found that Whole Foods prices were down slightly from last year, but that they still averaged roughly 15% higher than regional supermarkets.

Austen Hufford contributed to this article.

Write to Laura Stevens at laura.stevens@wsj.com and Heather Haddon at heather.haddon@wsj.com

(END) Dow Jones Newswires

August 24, 2017 15:18 ET (19:18 GMT)

Grafico Azioni Whole Foods Market, Inc. (NASDAQ:WFM)
Storico
Da Feb 2025 a Mar 2025