Trader Joe’s appears to be slashing prices, which could put new pricing pressure on Whole Foods, according to Deutsche Bank analysts.
The analysts checked the prices on 77 similar items at a New York-based Trader Joe’s store and nearby Whole Foods and found that Trader Joe’s was about 26% cheaper.
The basket at Trader Joe’s was $240 and the basket at Whole Foods was $303.
That’s a much wider price gap than in previous checks, leading analysts to believe that Trader Joe’s is implementing across-the-board price cuts, similar to what the company did a couple years ago.
In 2013, when Trader Joe’s reached about 300 stores in the US, the retailer slashed prices across roughly 200 items.
The move “caught [Whole Foods] off guard,” and forced Whole Foods to follow suit with its own price cuts on similar items, according to Deutsche Bank analyst Karen Short.
Now that Trader Joe’s has about 500 stores open, the company appears to be slashing prices again.
“TJ’s might be once again catching WFM off guard because prior checks have not shown such disparity,” Short wrote in a research note.
Trader Joe’s did not immediately respond to a request for comment.
Trader Joe’s prices were 30% cheaper than Whole Foods for perishables and 24% cheaper for non-perishables, according to the price check.
Trader Joe’s private-label items were also 15% cheaper than Whole Foods’ 365 private-label goods. Both retailers tout their private-label foods for being free of artificial flavours, preservatives, genetically modified ingredients, trans-fats, and other potentially unhealthy ingredients.
“The wide price delta between TJ’s private label products and WFM’s ‘365’ private brand … was a surprise to us given that the ‘365’ brand strategy has generally been to match TJ’s on price in private label despite the fact that WFM’s private label is meaningfully higher in quality and therefore justifies a premium,” Short wrote. “In prior price checks, WFM’s private label has matched TJ’s item by item — until this most recent check.”
Whole Foods has been promising to lower its prices and get rid of its “whole paycheck” image.
The company says it has been cutting prices across the board, as well as highlighting more limited-time discounts.
Whole Foods will also be introducing a range of lower-priced products at its new chain of 365 by Whole Foods Market stores.
The company plans to open three 365 stores in fiscal-year 2016 and up to 10 stores in fiscal-year 2017.
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