Thanksgiving surge showcases Whole Foods price issues

Craig Giammona

The Thanksgiving holiday is providing a window onto a thorny problem for Whole Foods Market Inc.: its reputation for being overpriced.

The price of a basket of 20 ingredients commonly used to prepare Thanksgiving dinner — things like turkey, potatoes, canned corn, stuffing and green beans — rose 7.6 percent to $94.63 at the organic grocer this year, even as food deflation pulled down grocery prices across the industry, according to a price study conducted this week by Bloomberg Intelligence at stores in northern New Jersey.

Whole Foods, mired in its worst sales slump in at least a decade, has been cutting prices and pushing digital coupons to compete with mainstream retailers like Wal-Mart Stores Inc. and Kroger Co. that have aggressively boosted their organic offerings. That’s brought intense competition to a market that Whole Foods helped create in the U.S., pressuring sales and profit and weighing on its stock price. The situation has been exacerbated by 10 straight months of food deflation, which has prompted a margin-sapping price war among grocers.

“It’s a difficult environment for them,” said Jennifer Bartashus, the Bloomberg Intelligence analyst who completed the pricing study.

Overall, the average price of the Thanksgiving shopping basket fell 3.4 percent to $66.15 this year, according to the study, which examined 14 grocery retailers. At Wal-Mart, the price dropped 3.3 percent, while the basket was roughly flat at Trader Joe’s, a key source of competition for Whole Foods. Prices for the Thanksgiving items surged at Stop & Shop, a chain owned by Royal Ahold Delhaize NV, with the basket rising 9.8 percent to $69.48. That was primarily the result of higher turkey prices, Bartashus said.

For a shopper looking to serve a fully organic meal, Austin, Texas-based Whole Foods was the only retailer in the study where the 20 items were available. The price of the organic basket was $134.95, up almost 26 percent year-over-year. Whole Foods made its name as a supplier of items that shoppers couldn’t find elsewhere, but with organic food moving to the mainstream, there are now supply constraints. That’s made it tricky for company to keep prices down, Bartashus said.

“There are only so many organic turkeys out there,” she said. “Supply isn’t expanding as quickly as demand with some of the specialty items — it makes it harder for them to bring down prices.”