Organic grocer adopts aggressive pricing strategy

Amazon officially took over Whole Foods Market Monday and the company immediately followed through on its promise to lower prices.

Bloomberg reported that a Whole Foods store in New York City slashed prices, marking down organic rotisserie chicken from $13.99 to $9.99 each and organic fuji apples went from $3.49 per lb. to $1.99 per lb.

It’s unlikely that those foods, sold in Manhattan, were produced on Canadian farms.

But Amazon’s new policy of lower organic prices could impact Canadian farmers because Whole Foods is a major player in the organic trade.

“The concern, for me (and) from a farmer perspective… is often lower prices at the store level can mean prices being pushed down (for) farmers. That money needs to come from somewhere,” said Marla Carlson, executive director of Sask Organics, which serves organic growers and promotes organic agriculture.

Amazon, the online shopping juggernaut, bought Whole Foods earlier this year for about US $13.7 billion. The grocery chain, specializing in organic and natural foods, has 448 stores in the U.S., 13 in Canada and nine in the United Kingdom.

Cutting prices is core to Whole Foods new strategy.

“By working together with Amazon… we can lower prices and double down on that mission and reach more people with Whole Foods Market’s high-quality, natural and organic food,’ said John Mackey, Whole Foods Market chief executive officer, in a statement.

Western Canada is a major producer of organic grains, like wheat and oats. A large share of that production is exported to the U.S. and used to manufacture a long list of organic foods.

If a major grocer like Whole Foods lowers organic prices, in store and online, prices at the farm gate would logically also fall. But there is a possibility that increased sales at Whole Foods boosts demand for organic commodities and supports on-farm prices.

Increased demand is normally good news, but it could be problematic for North America’s organic industry.

There’s been a shortfall of organic production in Canada and the U.S., particularly of feed grains.

“I know they are coming in (feed grains). I don’t know how much,” said Becky Lipton, executive director of Organic Alberta, in 2016.

A portion, perhaps a large percentage of those imports may come from countries like India, Bulgaria, Romania and China. Those imports became controversial this spring when the Washington Post reported that organic soybeans shipped into the U.S., from Ukraine, weren’t actually organic.

Whole Foods and Amazon may want to dramatically increase organic sales but that might be easier said than done.

Boosting organic production in Canada and the U.S. is more complicated than lowering price tags because the switch to organic production takes three years.

“I’m not saying they didn’t do their research (but) the idea of doubling production and (the) real understanding of what that is going to take, all the way through the value chain,” Carlson said.

“It’s different in the organic sector…. We do have that shortage of supply.”

Carlson added it’s too early to know what this all means for Canadian organic farmers, but it likely will mean something.

“This (Amazon) is obviously going to increase access to people who haven’t had access to organic food, because (there) isn’t a store in their area that sells it,” she said.

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