Dive Brief:

• Wegmans has cut prices on many store brand products, including produce, dairy, packaged goods and frozen foods, according to the Rochester Democrat & Chronicle. 
• The prices are competitive with discounters and Walmart. For example, Wegmans 48-oz. ice creams are priced at $2.49, while Aldi’s comparable Belmont brand is $2.29; Wegmans 20-oz. yellow mustard is 99 cents, while Aldi’s Burman yellow mustard is 59 cents; and a Wegmans 12-ounce Toasted Oats cereal is $1.50 a box, while Aldi’s 14-ounce Millville Crispy Oats cereal is $1.29 a box. 
• The prices cuts focused on products popular with families, reported The Buffalo News. Wegmans last cut prices on a variety of items in 2016, and the company said those prices remain the same. 

Dive Insight:

Wegmans has a reputation as for offering a high-service, health-conscious supermarket experience with numerous amenities in each store. Aldi is a no-frills, limited selection retailer with prices on comparable items 25% to 50% lower than other chains. So it’s news that Wegmans is cutting prices on certain high-velocity items to almost the same level as Aldi.

This isn’t the first time Wegmans, with its upscale image, has cut prices to meet a low-price competitor. In 2002, with Walmart entering its market with Supercenters, Wegmans went to an everyday-low-price model to compete, cutting prices on about 4,000 grocery items. The retailer sent over 1 million videocassettes with company president Danny Wegman explaining the change as “a simpler way to shop, a simpler way to save.” Since then, Wegmans has cut prices numerous times to meet competition.

Walmart is still driving price competition, but so are Aldi and fellow discounter Lidl. As Wegmans moves south into the mid-Atlantic, and as pricing pressure heats up across its operating markets, the popular grocer wants to make sure it's drawing high-value customers to its stores.

Amazon’s purchase of Whole Foods Market is also a key competitive factor. Amazon’s online prices are a particular threat as the company expands its assortment and gets more aggressive with Whole Foods private label offerings. Wegmans is offering Instacart same-day delivery to compete in the rapidly growing online space.

Writing in Food Dive last month, Victoria Gustafson, CPG/grocery strategy vertical lead at Astound Commerce, had this to say for grocers competing against Amazon-Whole Foods: “Thinking strategically about how they can differentiate themselves through localization and shopper insights, valuable in-store merchandising and convenience will be critical maintaining their share of the market.” This is something Wegmans historically has done exceptionally well, and is exemplified in this latest round of price cuts.

Nationally, grocery prices remain flat, and in an inflationary economic environment, that means retailers are reluctant to pass along their costs to consumers. The grocers are going after lower operating expenses first before raising prices. For example, Kroger is cutting operating costs while charging suppliers for late shipments. Last fall, Target promised wide-ranging price cuts on thousands of grocery items and other consumables. That announcement came the same day that Kroger reported a 7% decrease in profits due to sweeping price cuts.