(Reuters) - Amazon.com Inc AMZN.O said on Wednesday it will offer more discounts and steeper price cuts at Whole Foods Market on many organic foods and groceries popular during the holidays.
The plan was announced just ahead of Thanksgiving and is on the heels of price cuts in August when Amazon completed its $13.7 billion acquisition of Whole Foods.
“Price cuts are permanent,” Brooke Buchanan, a spokeswoman for Whole Foods, told Reuters in an email.
Investors have been closely watching for price cuts at Whole Foods, concerned that cheaper prices would further hurt U.S. grocers already struggling to stay competitive with Amazon and Wal-Mart Stores Inc WMT.N, which are locked in an intense battle for market share.
“Ever since Amazon bought Whole Foods Market, this is exactly what the other grocery store competitors have been fearing,” Fort Pitt Capital analyst Kim Forrest told Reuters.
“Other grocers are going to have to come back in competitive replies – and it could be better service, better products and better pricing.”
Shares of rival U.S. grocers Costco COST.O, Sprouts Farmers Market SFM.O and Kroger KR.N all fell on Wednesday morning between 1 percent to 2 percent after the news.
Target Corp's TGT.N stock also moved lower. The shares were already pressured after the company forecasted disappointing earnings for the key holiday quarter.
Amazon, which forayed into brick-and-mortar retailing with Whole Foods, could upend the grocery industry with its deep pockets and large presence, analysts have said.
In September, Target slashed prices on thousands of items, including cereal and baby formula, and said it would continue to offer discounts on some products in addition to the price-cuts. (bit.ly/2vT4elO)
Prices at Whole Foods, however, are still higher than most grocery stores because it caters to an up-market clientele.
“As we saw with Sprouts Farmer and really other grocery reports, the prior cuts haven’t had a material impact on leading players,” said Oppenheimer analyst Rupesh Parikh.
“(Whole Food) prices are still quite high versus peers,” he said.
Sprouts Farmer reported better-than-expected third-quarter profit and net sales this month and raised its full-year forecasts.
Amazon said on Wednesday that Whole Foods will sell organic turkeys for $3.49 per pound to all customers, while Amazon Prime members can buy them at $2.99 a pound.
The company said it will also offer lower prices on items from national brands including Chobani Yogurt and Applegate Hot Dogs, as well as smaller organic brands such as Eden Foods.
A study last month showed Whole Foods’ previous price cuts on items including bananas, avocados and beef had drawn customers away 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; Editing by Sayantani Ghosh and Bernard Orr
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