Amazon cuts Whole Foods prices for Prime members in new grocery showdown

SAN FRANCISCO: Amazon.com Inc and Whole Foods Market are making a surgical strike in the already brutal grocery price war.

On Wednesday, Whole Foods debuted a much-anticipated loyalty program that offers special discounts to Prime customers, including 10 percent off hundreds of sale items and rotating weekly specials such as $10 per pound off wild-caught halibut steaks.

Those perks are available now in Florida and will roll out to all other stores starting this summer.

Amazon previously announced free two-hour delivery from Whole Foods stores for members of Prime, its subscription club with fast shipping and video streaming.

The new loyalty strategy will test whether Amazon´s $13.7 billion deal for Whole Foods brings much-feared disruption and an intensified price war to the $800 billion U.S. grocery industry dominated by Walmart Inc and Kroger Co. Whole Foods, with 463 U.S. stores and roughly 1 percent share of the fragmented U.S. grocery market, has gained momentum since the Amazon merger last summer, Whole Foods co-founder and Chief Executive John Mackey told Reuters.

Closely watched basket size - the number of items purchased per transaction - has grown since the merger, said Mackey. He declined to offer specifics.

Mackey is betting on Prime to convince shoppers wary of its "Whole Paycheck" reputation that it is an affordable option for more of their purchases.

The new perks could make Whole Foods cheaper than conventional grocers for about 8 million of its customers who already subscribe to Amazon Prime, according to Morgan Stanley analysts. Prime members scan an app or input their phone numbers at checkout to receive the discounts.

Still, Philadelphia-area Whole Foods shopper and Prime member Heather Kincade, 46, is going to need convincing.

While Whole Foods´ prices on staples like rotisserie chicken, bananas and avocados have come down, she still thinks some every day items are prohibitively expensive.