"Whole Paycheck? Not anymore." That was the assessment of Whole Foods' pricing position by JPMorgan analyst Charles Grom in an interview with the New York Post.
According to Mr. Grom's firm, Whole Foods has dropped its prices on food by an average of five percent since December. Of course, even with lower prices, Whole Foods is still seen as being significantly higher priced (about 14 percent) than traditional grocery store rivals such as Harris Teeter, Kroger and Safeway.
In a separate market basket analysis, Ryan Krueger, co-founder of Krueger & Catalano in Houston, concluded that Whole Foods is -- in its way -- price competitive.
Mr. Krueger told the Minyanville website, "I spent time with a store manager putting together a basket of everyday items -- stuff like chips, bread, and peanut butter. We compared 10 average products to the closest big grocery chain and it was closer than you would think: $25 vs. $21. The unknown might be that the $21 basket came from Whole Foods, and its private labels. Traditional grocery stores typically sell other company's products after the slimmest of one percent or two percent margins. Resellers in any business will tell you the real money is made by those creating a proprietary product, not a shelf to put it on. Whole Foods' private labels are now on plenty of those shelves. If they make their own peanut butter, they keep all the profit, and I am inclined to choose it because I trust them and their ingredients."
Libba Letton, a spokesperson for Whole Foods, told Minyanville, "We've long said that if you compare like for like items, Whole Foods is actually less expensive, especially in organic grocery items. In general, over the last couple of years, it's been a focus of ours to be competitive on price and highlight the value that's already in our stores."
Discussion
Questions: Do you think consumers have gotten the message that Whole Foods
is more price competitive than it had been in the past? Do you think the price
message is compelling enough to bring more frugal consumers into the chain's
stores?
[Editor's Note] As a point of contrast, Wal-Mart Stores, which just announced
a price rollback on thousands of items, raised prices on food items by
2.3 percent since February according to JPMorgan's research.
Linda Blakley, a spokesperson for the chain, told the Post, "We've stepped it up where our customers need us to -- with the basics of consumables and food."