The devastation of Hurricane Harvey is already causing significant problems for grocery retailers throughout Texas, as the storm’s landfall has caused massive property damage and flooding throughout the state. The Category 4 Hurricane ravaged the Gulf Coast, leaving both local retailers and produce farm operations severally disrupted. As if this natural disaster weren’t enough, online retailer Amazon’s recent acquisition of the Whole Foods Market brand has led to several financial repercussions for its competitors.
Amazon began its tenure as Whole Foods Market’s owner by slashing grocery prices up to 43 percent within just the first day of operating. While prices were cut across the board, the online retailer additionally targeted organic and specialty produce items, among them avocados, Fuji apples and other fruit and vegetable favorites.
While the drop in price is certainly a win for customers, other grocery chains are suffering as a result. Monday through to Wednesday’s market close saw $12 billion worth of market capitalization drop out from the combined value of Costco, Walmart, Target, Supervalu, Kroger, and Sprouts Farmers Market. Sprouts was the most severely impacted, with the organic-focused supermarket falling roughly seven percent. Supervalu followed closest behind with a three percent drop. In comparison Amazon grew little, seeing around a 0.4 percent increase during the same period. Target and Walmart were less impacted as their “big box” status means they depend less on grocery sales for revenue.
Sprouts Farmers Market’s sharp decline is clearly linked to both Hurricane Harvey and Amazon’s entry into the brick-and-mortar grocery industry. Sprouts’ focus on natural and organic products put them in direct competition with Whole Foods, a chain which also emphasizes specialty food items. With Amazon cutting the price of avocados a whole dollar and Fuji apples a substantial two dollars and fifty cents, it’s unsurprising that the comparatively smaller Sprouts was impacted. Kroger, SuperValu, and Costco focus less on organic branding and were therefore more insulated from Amazon’s price-dropping.
Likewise, Texas is a vital market for the Sprouts Farmers Market brand. The grocery retailer has seven locations in the Houston area alone. The landfall of Hurricane Harvey significantly disrupted economies throughout the Gulf Coast region, with Houston being one of the hardest hit cities. The sheer loss of business naturally played a role in Sprouts’ stock rapidly dropping. That said, while damaged retail locations will eventually recover, Amazon’s dramatic price cuts will likely have more long term repercussions for not only Sprouts, but grocery retailers