WHOLE FOODS MARKET

Whole Foods prices still higher than competitors, study finds  

Posted April 3rd, 2018

When Amazon first lowered prices at Whole Foods Market after buying the grocer in August, customers wondered if the changes could eventually make Whole Foods as affordable as other stores. 

Eight months later, Whole Foods remains more expensive than some competing grocery chains, according to a report by investment firm Morgan Stanley. 

A basket that Morgan Stanley measured at Whole Foods decreased by 5.3 percent year-over-year. However, similar baskets at competitors Kroger and Sprouts Farmers Market are still lower despite the drop in price at Whole Foods. The Whole Foods basket is also higher than the average basket cost for “regional conventional food retailers,” Morgan Stanley reported.

The basket, which Morgan Stanley said consists of 60 items across fresh and packaged foods, in March cost $193 at Whole Foods, $152 at Kroger, $158 at Sprouts and was $175 on average across regional food retailers. The firm did not list which conventional food retailers it checked. 

Courtesy of Morgan StanleyA chart shows a comparison of a basket at Whole Foods Market compared to competitors.

Whole Foods’ basket cost is the lowest recorded by Morgan Stanley since it began price checking in 2014. The firm has price-checked seven times since August. 

Whole Foods’ sharpest price drop since the merger closed has also happened during the past three months, according to Morgan Stanley. But the Austin-based grocer’s prices remain higher than the average.

“Whole Foods pricing is 5.8% higher than the conventional grocery store, with packaged seeing the smallest premium (+0.7%) to the group,” the report, wrote Vincent J Sinisi, the lead analyst in the report. “We also note that Amazon introduced Prime member pricing in November, which will likely not be captured by the survey.”

Courtesy of Morgan StanleyA line graph shows pricing at Whole Foods Market measured by Morgan Stanley.

Despite maintaining higher prices, Whole Foods could be gaining on competitors. Kroger’s year-over-year basket cost decreased by only 1.7 percent, while Sprouts increased by 1.1 percent. 

Market analysts have said price changes at Whole Foods could be gradual as Amazon figures out the grocer’s strategy with vendors and because grocery chains often have to raise prices on some items when they lower it on others to offset the deficit.

At the same time, Amazon has garnered a reputation for having an aggressive pricing strategy that keeps margins thin but boosts revenue. 

Whole Foods today largely looks like the same store it did eight months ago. Besides adding some Amazon products and shipping lockers, and shifting around some grocery products, the store has not dramatically changed. 

Amazon has also started two-hour delivery at Whole Foods and integrated some of the grocer’s products on its website. Some costs have also risen for Whole Foods suppliers, though that shift largely began before the merger. 

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