Can Whole Foods’ business afford higher prices?
Prices are on the rise at your local grocery store as consumer packaged goods companies pass along increases to retailers, citing higher commodity costs as the primary factors behind their decisions.
A Wall Street Journal article published earlier in the week pointed to plans by national brand manufacturers including Church & Dwight, Colgate-Palmolive, Clorox and Procter & Gamble to put through increases on a wide variety of everyday staples. New price increases come on top of others put through last year.
The inflationary pressures facing major CPG brands also extend to other suppliers, including those filling smaller niches such as organic groceries. Another Journal article, published yesterday, cited internal documents from Whole Foods showing the chain had raised prices to consumers in response to increases put through by suppliers.
While higher prices at the supermarket may or may not get the attention of shoppers, the symbolism of upward changes may mean more for Whole Foods under the ownership of Amazon.com, which has made a show of lowering some prices at the chain since the acquisition in 2017.
Not long after being acquired, John Mackey, co-founder and CEO of Whole Foods, said that Amazon had saved the grocery chain from the “trap” of its “Whole Paycheck” image.
As in the past, the CPG brand price increases force retailers to make some decisions. The first is whether they can accept a higher cost in the first place. Assuming that delisting a particular item is not the answer, grocers are left with either passing the full increase along to their customers and protecting their own profits or doing some “investment spending” — i.e., eating some of the cost in an effort to keep consumer prices down.
According to the Journal, a Whole Foods spokesperson said the chain was passing along some of the increases it has received while absorbing others.
- Prepare to Pay More for Diapers, Clorox and Cat Litter – The Wall Street Journal
- Amazon Slashed Prices at Whole Foods. Now They’re Climbing Back Up. – The Wall Street Journal
- Has Amazon really saved Whole Foods from its ‘Whole Paycheck’ trap? – RetailWire
- Analyst: Prime perk could eventually double customers at Whole Foods – RetailWire
DISCUSSION QUESTIONS: Do you think Whole Foods has more room to raise prices than other grocers or is it limited by its recent promises to lower prices? Are you concerned that higher prices may decrease consumer spending at retail over the next year?