Whole Foods is quietly raising prices on small brands and industry insiders worry the grocer could be returning to its 'whole paycheck' image

• Whole Foods is raising prices on some emerging brands, according to food-industry insiders.
• Whole Foods' recent price increases are larger than many expected, even with inflation.

Whole Foods is hiking prices on some emerging food brands, Insider has learned. The increases suggest a change in strategy for the Amazon-owned grocer.

The price increases have occurred over the past few months, according to brokers and consultants who advise food brands on their Whole Foods strategy as well as the founder of a brand that sells its products at the grocery chain.

Some of the increases have added as much as a dollar or two to on-the-shelf prices of products that sell for $20 or less, according to the people.

Grocers regularly raise prices in order to protect their margins and cover costs. But the people Insider spoke to said that the increases are more than they would expect to see from Whole Foods, even with retail food prices rising at historically fast rates.

The higher prices come after several rounds of price cuts at Whole Foods in the years after Amazon acquired the grocery chain in 2017. Those price cuts were meant to counter Whole Foods' reputation as expensive.

The price increases are also the latest sign that Whole Foods has lost its reputation as a place for emerging brands to get their start.

One grocery broker Insider spoke with works with an upstart food brand that sells three varieties of its product at Whole Foods and saw prices increase on one variety but not the other two.

In at least one case, Whole Foods has raised prices at some stores but not others in the same region, according to the broker. Historically, Whole Foods has kept pricing consistent on the same product within each of its 12 regions.

The broker said Whole Foods offered no explanation when they reached out to the company.

"I even said, 'Can I speak to your pricing team?' and they said 'No, we can't share that,'" the broker said. "There's basically no visibility."

Whole Foods did not respond to a request for comment from Insider.

Insider spoke with two brokers and one consultant as well as the founder of a brand that sells its products at Whole Foods and has been affected by the price increases. Brokers act as advocates for food brands, especially when it comes to working with retailers to increase brands' distribution.

One broker asked to speak anonymously for fear of retaliation. The broker's identity is known to Insider.

'Consumers don't know that it's not the brand that's raising the price'

It's common for brands to have little control over how much their products sell for on store shelves.

Brands can suggest retail sales prices to retailers. In practice, though, retailers often deviate from those. The reasons can include the retailers' own pricing strategy or costs that are passed on from distributors, such as United Natural Foods, Inc.

But Whole Foods' recent price increases are larger than many expected, even with inflation, according to the consultants Insider spoke to. Food-at-home prices have risen about 13% since July 2021.

Sarah Delevan, a consultant to early-stage food brands, said two companies that she works with have seen price hikes at Whole Foods in the past few months.

In one case, a brand's distributor raised prices by 53 cents to offset higher costs. But on Whole Foods' shelves, the price went up by $2.

"When a distributor raises prices, it makes sense for a retailer to raise their price," Delevan said. "What I take issue with is the disparity between the distributor and the retailer."

Felice Thorpe, a consulting sales director who works with small food businesses, said that brands she works with have had to raise their prices just to cover their rising cost of goods.

"I am concerned that the price increases at the retail level have been significantly higher than that," she said.

Now, Delevan said, the brands are worried about customers looking for cheaper alternatives or simply avoiding their products.

Few early-stage brands can afford that, since many get into Whole Foods expecting to attract new consumers and keep them buying, Delevan said. For decades, Whole Foods has been a destination for emerging brands looking to attract new customers and grow distribution.

"Consumers don't know that it's not the brand that's raising the price," she said. "There is a negative feeling towards a brand that's increasing their shelf price $2 per unit."

Leah Ferrazzani, the founder of Semolina Artisanal Pasta, told Insider that prices on her products at Whole Foods in Southern California went up this summer.

Ferrazzani had held off on increasing the price of her products to her distributors and Whole Foods. Now, in addition to her margins, she's watching sales on her pasta to see if Whole Foods' higher on-the-shelf prices affect sales.

"Fall is peak season," she said. "The next few months will be really telling on whether the impact will be big overall."

Whole Foods might be learning to live with its 'whole paycheck' image

In the years after it was acquired by Amazon in 2017, Whole Foods made multiple rounds of price cuts on its shelves.

The Whole Foods CEO and cofounder, John Mackey, described the cuts as part of a "virtuous cycle" that would attract more business to Whole Foods. At the time, price and consumer studies showed that Whole Foods was among the priciest grocers in the US.

But the higher prices suggest that Whole Foods might be learning to live with its "whole paycheck" image, said Nishant Shrikhande, a senior analyst of retail insights, e-commerce, and omnichannel at Kantar.

Despite cutting prices on some items, Whole Foods' customer base remains affluent. The company's Amazon Fresh concept targets a more budget-conscious shopper, Shrikhande said. Amazon has opened about 40 Fresh stores over the past two years, each with a focus on low prices and Amazon's private-label products.

According to Kantar data, 46% of Whole Foods customers have household incomes of at least $100,000 a year. That's higher than consumer incomes at most other national grocers, such as Kroger, where 39% of customers have household incomes of at least $100,000.

"I think they're really trying to see, 'How much can we push this and how much do our shoppers value the quality of the products?'" Shrikhande said.

Demand for delivery is also weighing on Whole Foods, he added. Over the past year, the chain added a fee for delivery to Amazon Prime members and consolidated its delivery workforce. Even Whole Foods' new CEO Jason Buechel has acknowledged that delivering groceries is expensive.

"They're trying to figure out, 'Where can we make up for those costs? Where is the shopper willing and able to stretch their wallet a bit?'" Shrikhande said.

The price increases are also one of the reasons that emerging brands have found it harder to sell at Whole Foods over the past decade, according to a broker who has advised brands that were sold at Whole Foods before Amazon acquired the chain.

While some of the changes predate Amazon's 2017 acquisition of Whole Foods, others are more recent: Under Amazon, for instance, Whole Foods began charging brands a fee when the retailer rearranged products on the shelf, known in the industry as a reset.

In the past, Whole Foods charged fewer fees, the broker said. The grocery chain's regional staff was also more transparent with brands about their choices.

"The climate at Whole Foods was really to come up alongside the brand," the broker said. "You really don't see that anymore."

The broker added: "These changes were something that were already being instigated, but Amazon really locked it in."

Do you work at Whole Foods or have information to share? Reach out to Alex Bitter at abitter@insider.com or via encrypted messaging app Signal at (808) 854-4501