According to reports, a number of contracts that Whole Foods had signed to lock in lower prices on various food items are on the verge of expiring – which means consumers can expect to take a hit.
Though overall levels of inflation have remained low, Whole Foods is facing higher costs from its suppliers, many of which will not be renewing their lower-price contracts with the Jeff Bezos empire.
"The inflation-based increases at Whole Foods range from 10 cents to several dollars," reports indicate, citing a price list recently reviewed by The Wall Street Journal (WSJ).
"Soaps, detergent, oils and nut butters have some of the highest increases. The average hike was 66 cents," these reports further add.
The same WSJ analysis found that, among 52 consumer goods surveyed, nearly half of them will cost more this year compared to last year. And a sample basket of 40 select items that just last month cost $191 will soon cost 3 percent more.
It's all part of an upward trend in food prices that's afflicting not only Whole Foods, but also many other grocery chains that, for those familiar with the business model of grocery retail, already struggle due to tight margins.
Some manufacturers are planning to hide these increasing costs by creating new packaging that looks similar but weighs less, while others like Amazon plan to offset these costs, at least for Amazon Prime members, with special deals.
"We ... offer hundreds of thousands of sale items daily and we're continuing to lower prices for all shoppers and Prime members," the company revealed in a recent statement.
At the same time, Amazon Prime members are also being forced to fork over more money for their memberships, as the annual cost of an Amazon Prime membership has reportedly increased by 20 percent, and now costs $119 per year.
The pinch may not affect a sizable segment of Whole Foods' customer base, many of whom are upper-middle class and can afford to absorb the higher prices. But for younger Whole Foods customers like 37-year-old Will Armstrong, the changes will be affecting his shopping habits.
"I am no longer likely to go to my local Whole Foods," the software developer from San Francisco, who's not an Amazon Prime member, is quoted as saying.
On the other hand, Amazon Prime members seem likely to stick around, as a survey of 1,168 shoppers conducted by data firm Numerator last fall found that the discount perks associated with having an Amazon Prime membership is a big reason why many people shop at Whole Foods in the first place.
Another thing to keep in mind is that, if suppliers are the ones raising prices here, then all grocery retailers are going to be forced to raise their prices.
"If WFM is hiking prices, its competitors like Albertson's and other large regional supermarkets are doing the same," explains ZeroHedge.com.
"After all, most grocery chains are struggling, low-margin businesses that don't have the luxury of a massive e-commerce behemoth (and lucrative web-hosting platform) to cushion them from losses. And as more economists (including the NYT's Paul Krugman) grow worried about a looming recession, a hit to consumption is just what the U.S. economy can't afford right now."
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