Whole Foods cuts prices after Amazon deal; some items sell out in downtown Minneapolis

If anyone doubted that Whole Foods Market would get a temporary traffic bump after being acquired by Amazon.com Inc., the proof was easy to find.

Shelves of Gala apples, bananas, ground beef and rotisserie chicken, all organic, sat empty or nearly empty at the Whole Foods store in downtown Minneapolis Monday afternoon.

Whole Foods slashed prices in an attention-getting first day of business after Amazon officially took control. The companies signaled the selective cuts last week.

Major supermarket chains and grocery sellers, including Kroger Co., Sprouts Farmers Market Inc., Supervalu Inc., Costco Wholesale Corp. and Wal-Mart Stores Inc., already were grappling with growing pricing pressure when Whole Foods and Amazon announced their $13.7 billion merger in mid-June. Shares in those food sellers have fallen on worries that Amazon could disrupt the grocery business in the same way it did with other product categories.

Amazon relies on convenience and product availability more than low prices to attract customers. It sets prices competitively, often below average, but it rarely offers the best price on any product, analysts note. Even so, customers perceive enough value on price, along with Amazon's ability to quickly move any product from one of its warehouses to a customer, that over two decades they have made the Seattle-based company a leading seller of virtually every good.

With Whole Foods, Amazon has plenty of room to make selective price cuts to spur store traffic, but some analysts estimate that Whole Foods would have to cut prices by 10 to 15 percent overall to truly compete with ordinary grocery stores.

Whole Foods shoppers in downtown Minneapolis on Monday saw 30 percent savings on two popular meat items. Organic rotisserie chickens that were $14 last weekend no longer roosted on the shelf after the price was lowered to $10 for 32 ounces. Organic, grass-fed 85 percent lean ground beef dropped from $9.99 to $6.99.

Other items that saw prices slashed were salmon, tilapia, almond milk, eggs, butter, salad greens and avocados. One employee said that more than 1,000 items throughout the center store (canned and packaged items) saw discounts. Most were marked with orange Whole Foods + Amazon signs with the old price and the new, lower price.

The merger sent shock waves through an already competitive industry. Supermarket chains nervous about cutthroat competition are seeing even more reasons to freshen stores, add new locations and expand their organic and grab-and-go selection.

Aldi is spending $34 million in Minnesota to refresh 28 of its stores. Target spent $10 million to remodel its downtown Minneapolis store and just finished updates in the St. Paul Midway and St. Louis Park stores. Hy-Vee has been adding two to three stores per year in the Twin Cities after opening in 2015.

John Creager of Santa Rosa, Calif., said the Amazon deal made him curious enough to go into a store where he rarely shops.

"I could see myself stopping by once a week instead of every other month," he said as he shopped the Minneapolis Whole Foods with his wife and a Twin Cities friend. "Pretty much everything I have in my shopping basket is at a lower price — bananas, avocados, milk."

Amazon is hoping to sway shoppers who patronize other supermarkets into Whole Foods with the lower prices.

"Lower prices would make a difference for me," said Amy Kern of Minneapolis, who was shopping at Lunds & Byerlys in Uptown on Monday. "Organic is so outrageously expensive and I like the wider variety of produce at Whole Foods."

The Amazon Echo, a voice-activated electronic assistant, was also featured in the store at $99.99, down from its regular price of $180. The smaller version called Dot was selling for $45, a $5 savings.

Reuters contributed to this report.

John Ewoldt • 612-673-7633