Analysis of Foodstuffs’ Price Change at Ralphs

Thesis: The price change has been orchestrated by price wars that have intensified amongst grocery stores forcing firms to lower prices.

            There has been a sharp decrease in the prices of foodstuffs, more so fast foods at Kroger Supermarket, one of the Supermarkets that I visit frequently in my neighborhood. This has been happening in the last two months and appeared to have reached its peak last week, when I bought a three pound Kirkland Signature pistachios bag at $5 less the normal price ($19). This was quite a surprising drop, and appeared to have been replicated on other foods such as eggs and a wide variety of snacks. This change has been occasioned by a price war that has intensified amongst grocery stores recently. It all began in June with the entry of the German retail giant Lidl into the retail industry. The company offered incredible discounts in all their product categories usurping the traditional leader in low pricing, Walmart. The latter couldn’t let that go down unchallenged and responded by lowering their food prices to counter Lidl. This forced other retail stores to revise their prices down to a touching distance of the two leaders, sparking a price war. The entry of Amazon in the retail food industry moved the competition to another level. Through the acquisition of Whole Foods Inc. shortly after the entry of Lidl, Amazon was able to challenge traditional grocery stores further by offering much lower prices. Their use of both brick and mortar and an e-business model was particularly a large advantage that allowed them to serve more customers with convenience and discounted prices. The economic variable responsible for the lowering of the price for foodstuffs at Ralphs supermarkets is thus the competitive rivalry (price wars) between various firms in the industry which has forced every firm to drop prices.