Grocery stocks fall again as Amazon cuts prices at Whole Foods

Amazon Gets Deep Into a Cut-throat Supermarket Scene (AMZN)

Amazon Prime will become Whole Foods Market's customer rewards program, providing members with special savings and other in-store benefits.

Amazon said last week that Whole Foods' private label products - including 365 Everyday Value, Whole Foods Market, Whole Paws and Whole Catch - will be available through Amazon.com, AmazonFresh, Prime Pantry and Prime Now. Other price drops include organic rotisserie chicken ($13.99 to $9.99); Whole Trade bananas (.79 cents per pound to.49 cents per pound); and tilapia ($11.99 per pound to $7.99 per pounds).

Traditionally, Whole Foods (nicknamed "Whole Paycheck" by some) has been known for their high prices and boutique selections.

In addition to offering its Echo speakers in stores, Amazon has also been cutting prices on many of Whole Foods' staples grocery items. The Kroger Co. dropped almost 8 percent, and Supervalu Inc. fell more than 6 percent.

Whole Foods has two stores in Pasadena, one in West Pasadena at 465 South Arroyo Parkway, and another in East Pasadena, at the Hastings Ranch Shopping Center at 3751 E. Foothill Blvd.

The high-end, organic-focused grocery store will also begin selling food on Amazon's various websites and installing "click and collect" lockers in stores. There are an estimated 85 million Prime members in the United States, a huge and mostly higher-income group that could help build up Whole Foods' sales. Many people buy the same groceries each week; a system that learns users' food preferences and then automates their delivery or provides sales based on that knowledge would resemble Amazon's ability to provide subscription deliveries via online purchases of nonperishable goods.

But Whole Foods is a different story, because Whole Foods is a different business model, with revenue growth plateauing and net income falling, which has all impacted gross margins and operating margins.

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When Amazon.com (AMZN) announced that it would purchase Whole Foods Market in July, Barron's dubbed it the "grocery apocalypse" for the impact it could potentially have on companies like Kroger (KR), Costco Wholesale (COST) and Wal-Mart Stores (WMT). Wall Street might come down on Amazon a little harder - might say they're over-leveraged, spending too much money, in a war with WalMart.

First announced in June, the $13.7 billion offer for the upscale supermarket retailer sent shockwaves throughout the market.

"There was never any doubt that Amazon would lower prices, and even offer further discounts in-store to Prime members", said Baird Equity Research analyst Colin Sebastian.

The Echo was discounted from $179.99 to $99.99 at the Gowanus Whole Foods store. But under Amazon, Whole Foods poses a legitimate threat.

Salmon at Union Square Whole Foods.

Analysts were expecting the price cuts, although some noted that they are coming sooner than expected.

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