Amazon to cut prices on Whole Foods staples like eggs, beef

FILE – In this May 3, 2017, file photo, customers shop at a Whole Foods Market in Upper Saint Clair, Pa. Amazon is moving swiftly to make big changes at Whole Foods, saying it plans to cut prices on bananas, eggs, salmon, beef and more as soon as it completes its $13.7 billion takeover. (AP Photo/Gene J. Puskar, File)

 

Aug 24, 2017 3:43PM (GMT-07:00)

 

NEW YORK (AP) — Amazon plans to use its deep pockets to make big changes at Whole Foods, saying it will cut prices on bananas, eggs, salmon, beef and more when it completes its $13.7 billion takeover next week.

Helping Whole Foods win back customers who found “good enough” organic and natural products elsewhere — possibly at a lower cost — fits Amazon’s track record of keeping prices low to lock in customer loyalty. Looking ahead, Amazon hopes to give members of its Prime program special savings and other in-store benefits.

It’s an “opening salvo” in the grocery wars, said Neil Saunders, managing director of GlobalData Retail, and shares of other supermarkets fell sharply on the news.

“Rivals should be under no illusion that they are now dealing with a competitor that is not afraid to damage profits and margins if it creates long-term gains,” Saunders said in an analyst note.

Among other Whole Foods items getting discounts Monday: avocados, tilapia, baby kale, apples and rotisserie chicken — all organic, Amazon said. The company also said certain Whole Foods products will be available through Amazon.com, AmazonFresh, Prime Pantry and Prime Now.

Amazon’s announcement comes a day after Whole Foods shareholders gave their approval and the Federal Trade Commission said it would not block the purchase. Amazon will pay $42 per Whole Foods share, an 18 percent premium from its price the day before the tie-up was announced June 16. The stock edged up to $41.98 on Thursday.

By buying Whole Foods, Amazon is taking a bold step into brick-and-mortar, with its more than 460 stores and potentially very lucrative data about how shoppers behave offline. The grocery chain, which has fought the “Whole Paycheck” reputation, had been under shareholder pressure to improve results as customers moved on and discount chains like Lidl and Aldi expanded in the U.S.

Whether Amazon will succeed in the fiercely competitive grocery segment is unclear, but customers are going to benefit from the attempt, said Charlie O’Shea, lead retail analyst at Moody’s Investors Service.

“Amazon can come in and price items very low,” he said. “Its shareholders are agnostic about profit, and seem more interested revenue and market share. That’s a competitive advantage.”

Rivals have been scrambling to catch up with the e-commerce giant. Walmart, which has the largest share of the U.S. grocery market, is expanding its grocery delivery service with ride-hailing service Uber and announced Wednesday that it will join forces with Google to let shoppers order goods by voice on Google devices.

But Walmart’s shares were off 2 percent, and shares of other big grocery businesses fell more. The Kroger Co. dropped nearly 8 percent, and Supervalu Inc. fell more than 6 percent. Costco lost 5 percent and Target fell 4 percent.

While Whole Foods accounts for less than 3 percent of U.S. grocery and supermarket sales, the purchase gives Amazon a foothold in a fragile industry that can ill-afford more price cutting.

“Lower prices could be catastrophic for some operators,” said Madeline Hurley, a senior analyst at market research firm IBISWorld. “It could drive them out of the industry.”

On average, she said, supermarkets only squeeze about $1 of profit out of every $100 in revenue.

Hurley said she is not sure how big competitors like Walmart will fare, but that Amazon is showing a determination to shake things up, and fast.

“There was a lot of speculation that Whole Foods might be left as more of an independent entity, at least in the beginning phases of the acquisition,” she said. “This shows that Amazon is taking a very hands-on approach.”

Financial analysts say one challenge for Amazon is how to cut prices and broaden Whole Foods’ appeal without hurting the chain’s image for quality food. It’s a tricky balance that Amazon itself seemed to acknowledge in its statement.

“Everybody should be able to eat Whole Foods Market quality — we will lower prices without compromising Whole Foods Market’s long-held commitment to the highest standards,” said Jeff Wilke, CEO of AmazonWorldwide Consumer.

Earlier this month, Amazon sold $16 billion of bonds in order to pay for the purchase. Its shares were down 0.6 percent to $952.45 on Thursday.

NYC hikes price of pack of cigarettes to $13, highest in US

Cigarettes are displayed on a shelf, Monday, Aug. 28, 2017, in New York. Mayor Bill de Blasio is expected to sign legislation raising the legal minimum price for a pack of cigarettes to $13. The hike from $10.50 further cements the city’s claim on having among the most expensive cigarettes in the country. (AP Photo/Mark Lennihan)

Aug 28, 2017 2:33PM (GMT-07:00)

 
NEW YORK (AP) — The price of a pack of cigarettes in New York City is going up — to at least $13 — and the number of places you can buy them is going down under legislation signed Monday by the mayor.
The new minimum price law, which takes effect on June 1, will make New York the most expensive place in the U.S. to buy cigarettes, Health Department officials said.

“We are sending a loud and clear message that we will not let their greed kill any more New Yorkers without a fight,” Mayor Bill de Blasio said at a bill signing ceremony at a Brooklyn hospital. “These new laws will not only help reduce the number of smokers in our city, but also save lives.”

Currently, the minimum allowed price per pack is $10.50.

The planned price hike is one of seven bills the Democratic mayor signed Monday aimed at pressuring the city’s 900,000 estimated smokers to quit.

Another new rule will reduce by half the number of retailers licensed to sell tobacco products. About 8,300 businesses now have a license. The numbers will be reduced through attrition, officials said. Philadelphia and San Francisco have similar licensing restrictions.

Other laws will ban the sale of all tobacco products in pharmacies, require licensing of e-cigarette retailers and require all residential buildings to have smoking policies that are given to all current and prospective tenants. Some residential buildings will be required to ban smoking in common areas like hallways.

New York began a regulatory war on smoking under the previous mayor, Michael Bloomberg, a Democrat-turned-Republican-turned-independent. The city has long subscribed to a theory that driving up prices, either through high taxes or by setting price minimums, causes people to either give up smoking or not start.

Smoking rates in the city have declined from 21.5 percent in 2002 to about 14.3 in 2015. City health officials said they believed the new restrictions could decrease the rate to 12 percent by 2020.

Opponents of the price increase say it may push many smokers into buying untaxed, unregulated cigarettes on the black market.

So-called butt-leggers already evade taxes and price minimums on a widespread scale by hauling in cases from low-cost states like Virginia and North Carolina, or even from elsewhere in New York.

“These measures will destroy the business investment of retailers who have been leading the effort to prevent youth access to tobacco products, and the result will be lost revenue, lost jobs and an increasing number of sales in unregulated and illegal settings,” Jim Calvin, president of the New York Association of Convenience Stores, said after the legislation passed earlier this month.

He said no decision has been made by his organization, which is part of a national trade group representing convenience stores, on whether to challenge the legislation in the courts.

A spokeswoman for RAI Services Company, a subsidiary of Reynolds American Inc., said the company agrees with the mayor’s desire to curb youth tobacco usage.

“However, there should be concern that this ordinance will most likely only further exacerbate the illicit trade of cigarettes in New York City, which already has the highest percentage of contraband cigarettes in the country,” said Brittany Adams.

Ann Boonn, director of research at the Campaign for Tobacco Free Kids, noted that New York City’s current $10.50 minimum price doesn’t prevent some retailers from selling packs at more than that. She noted a Chicago ordinance setting an $11.50 per pack minimum on cigarettes is on hold pending litigation.

Also, she said some states require a minimum markup on cigarettes based on a percentage of the base price set by manufacturers and wholesalers, which in some cases already puts those prices at more than $11.50 a pack.