Analysts Less Than Impressed With Whole Foods Market Price Cuts

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Analysts Less Than Impressed With Whole Foods Market Price Cuts

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Analysts are less than impressed with the new discounts at Whole Foods Market. The price cuts were applied in stores as of Monday, following the finalization of the chain's acquisition by Amazon.

While Amazon discounted certain products by as much as 43 percent in an attempt to rid the chain of its 'whole paycheck' reputation, CNBC reports, “a closer look at a broader set of products suggest the discounts are still modest.”

In a note published Tuesday by Gordon Haskett analyst Charles Grom, the average price of 114 arbitrarily chosen products declined only 1.2 percent, and 78 percent of the items saw no price cut whatsoever.

"We will continue to monitor the situation going forward, but our initial checks suggest that Amazon's bark may be greater than its bite," Grom wrote in the note, comparing this announcement to similar ones by Walmart in the past, "announcing a plethora of price actions that on the surface look deep, but in reality only reveal modest reductions.”

The comparisons to Walmart don’t end there. Bloomberg conducted a survey of 18 items in both stores, ranging from store brand goods to brand-name items like KIND snack bars and Blue Diamond almond milk to fresh produce, and found that Whole Foods was 50 percent more expensive on average than Walmart, meaning that if Amazon's goal is to convert customers, the company still has a long way to go.

"Unless they slash prices, they're not going to dramatically expand the income band of customers they go after," Mikey Vu, a grocery expert at Bain & Co., told Bloomberg. "It was a bold statement on the first day, but it wasn't that many items that were moved."

Even when comparing Whole Foods to Sprouts, another natural and organic grocery store, the price discrepancy was still palpable. Analysts William Kirk and Shiyao Ling from RBC Capital Markets found that Sprouts' prices on 14 comparable fresh items were an average of 6.6 percent lower than the new Whole Foods Market prices.

Some analysts, however, are already impressed by the price cuts. Business Insider visited one Whole Foods Market location and found that the price difference of the 15 discounted items listed on Amazon’s press release announcing the price cuts was $22.11, lowering the total price of the items from $97.96 to $75.85.

Amazon and Whole Foods Market first announced the price cuts last Thursday in a joint news release, after the Federal Trade Commission gave its go-ahead for the $13.7 billion acquisition the day before.

“We’re determined to make healthy and organic food affordable for everyone,” said Jeff Wilke, CEO of AmazonWorldwide Consumer, in the release, which included a list of “best-selling grocery staples” whose prices would be lowered. This list included organic bananas, eggs, and animal welfare-rated ground beef.

The news release also noted that more changes would be afoot in the coming months, including additional price cuts and more integration of the two brands, including Amazon deliveries to Whole Foods Market stores and special discounts for Amazon Prime members.

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