Amazon expands Amazon Restaurants, gears up for 'grocery wars' with Whole Foods rethink

Amazon, which acquired Whole Foods for $13.7 billion in August, is working to reshape the way Americans buy, and each of its individual stores sells, groceries.

In addition, Amazon is now setting its sights on expanding its delivery of prepared foods from mid-price chain restaurants.

After slashing prices on staples such as milk and eggs, Whole Foods "very quietly" deployed hundreds of items from its 365 Everyday Value store brand on the online behemoth's Amazon Prime and sold a half-million dollars worth in the first week, said Ferdinand Wirth, associate professor at St. Joseph's University's department of food marketing. "And that has ramifications for the manufactures of name brands it typically sells on its website."

"These are major salvos in the developing grocery wars right now," Wirth said.

Whole Foods also announced it would streamline the product mix available in each of the chain's 477 stores, according to a report in the Wall Street Journal. Whole Foods, which holds its quarterly meeting next week in Seattle, said it would stop allowing third-party vendors to promote products in individual outlets. A spokeswoman told the Journal the practice was distracting to employees and inefficient.

Among locally produced products on Whole Foods shelves are pasta sauces by Wayne-based Vesper Bros. Foods; Sunniva Super Coffee drinks, developed by former Philadelphia University men's basketball point guard Jordan DeCicco and his brothers; and PiperWai natural deodorant, created by Friends' Central alums Jess Edelstein and Sarah Ribner.

Amazon, which already delivers groceries, announced Friday it had struck an alliance with a company called Olo to expand its Amazon Restaurants program. The service, launched in 2015, is expected to offer delivery service from Buca di Beppo, Shake Shack, Chipotle, Five Guys, and Wingstop. Delivery competitor GrubHub saw its stock price dip about 6 percent Friday morning before rebounding to close at $51.69, down 3.4 percent.

The new emphasis on delivery appears to be a challenge to Walmart, considered "the 900-pound gorilla" of discount grocers, said Wirth. Walmart offers curbside pickup for online orders of groceries and is working with Uber and Lyft for delivery services.

"Amazon is doing a flanking attack against Walmart by creating synergies between Whole Foods stores and its website," Wirth said, "because the future is going to be online."

Industry analysts said the number of products at Whole Foods would shrink as the chain pursues greater efficiency and higher profits.

Other rival grocers, like the German-owned Aldi, have seen sales explode as Americans embrace winnowed inventories at deep discounts. Aldi, which typically sells about 1,500 selections per store (a tiny fraction of what Whole Foods stocks), recently announced a $3.4 billion expansion with an eye toward operating 2,500 stores by the end of 2022, according to the Journal.

The grocery wars may leave traditional supermarkets battered and bruised, Wirth said. A chain such as Target can reduce food prices to remain competitive because "it (like Walmart) has lots of other products they can sell. But the Acmes and the Giants don't have that option."

In the first days after it was bought by Amazon, Whole Foods saw foot traffic rise 16 percent over the same period the previous year, according to inMarket, an industry analyst. Some competitors saw slight declines. Customers at the privately owned Trader Joes dipped a little more than 1 percent, and at Kroger, customer share declined by 2.7 percent. Kroger stock is down 50 percent from its all-time high in late 2015, closing at $20.15 on Friday.

Staff writer Diane Mastrull contributed to this article.