- 17 Oct
Smaller Grocery Chains Feel the Pressure from Amazon’s Whole Foods Purchase
Although Amazon purchased Whole Foods only a month ago, the effects on other grocery-store chains is still being felt. That can be seen even recently as Private-equity company Apollo Global Management gave $50M to Fresh Market, as the high-end chain struggles in the current market.
Analysts say that things should only get worse for food-store chains. Whole Foods has been cutting prices on big name items over the last month, as Amazon Co. don’t seem to be worried about profit margins. However, smaller regional chain stores seem to subsist solely on having feasible margins and face extreme pressure from Amazon’s attempts to push out smaller competitors.
As well, national and global food trends add to the problem. The market is dealing with the most extreme food-price deflation in the last 60 years. Within the United States, food prices rose in July, increasing for the first time in the last 19 months. These low food prices are great for shopping consumers, but terrible for grocers dealing with large shipments of goods that can spoil, ruining potential profits.
Fresh Market faces particular issues with its identity, trying to fill the role of providing both gourmet foods and wide selection. The chain is flanked by stores such as Whole Foods, with both promoting organic produce. It also is affected by larger stores such as Wal-Mart and overseas competitors Aldi.
As well, the recent Hurricane Irma dealt a blow to the chain, as over half of Fresh Market’s stores are located in states affected by the storm. This nexus of problems is creating a strain on Apollo and portends future problems for the many grocery chains affected by Amazon’s giant purchase.
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