|
#1
|
|||
|
|||
Whole Foods/Wild Oats merger
WSJ is reporting that the FTC plans to oppose this merger. Anti-trust concerns. If true, this will be one of the worst decisions in recent memory. The only way to extract monopoly rents in the grocery industry is to have a sweet location. Any by sweet location I mean protection from competition through zoning regulations. A merger of these two companies will do nothing to prevent this kind of localized monopoly. There is however a somewhat convincing history of economies of scale in the grocery industry. Meaning a merger of Whole Foods and Wild Oats could actually reduce prices for consumers, which is a good thing.
|
#2
|
|||
|
|||
Re: Whole Foods/Wild Oats merger
[ QUOTE ]
Meaning a merger of Whole Foods and Wild Oats could actually reduce prices for consumers, which is a good thing. [/ QUOTE ] Hahahahaha. No. The only thing that would lower prices at Whole Foods would be if Walmart started carrying organic. Of course, then all the Whole Foods customers would have to start shopping at Walmart at 2 AM is disguise, because we all know that no loyal Whole Foods customer would be caught dead shopping at Walmart. |
#3
|
|||
|
|||
Re: Whole Foods/Wild Oats merger
Mr. Mon,
Walmart doesn't have to carry organic to keep prices lower at Whole Foods. |
#4
|
|||
|
|||
Re: Whole Foods/Wild Oats merger
. . . it's going to be call FedUP
(oops, i thought this was the punchlines only thread) |
#5
|
|||
|
|||
Re: Whole Foods/Wild Oats merger
[ QUOTE ]
There is however a somewhat convincing history of economies of scale in the grocery industry. Meaning a merger of Whole Foods and Wild Oats could actually reduce prices for consumers, which is a good thing. [/ QUOTE ] scale economies mean that the average unit cost to producers will decrease as the company gets bigger. whethere those savings are passed along to the customer depends on the market structure. and you're right to point out that location is the main source of market power for grocery stores (and many other retailers). |
#6
|
|||
|
|||
Re: Whole Foods/Wild Oats merger
econ - If the industry is competitive then the lower per unit costs will be passed on to consumers. Of course in the real world not ALL of the benefits of a lower cost structure will be passed on to consumers. My point in the OP is that this merger will not lead to higher prices and could lead to lower prices. Therefore why not let it go through? If the merger is allowed and we all of sudden start seeing Wild Oats or Whole Foods stores being shut down, I'll admit I was wrong.
|
#7
|
|||
|
|||
Re: Whole Foods/Wild Oats merger
econophile,
if the average cost to the producer goes down in a competitive economy, shouldnt the average cost to the consumer also go down? this argument would seem like the foundation for the point Boris is making wrt prices falling. all i care about is that they get their [censored] odwalla prices down a bit. 3.99 for a 16 ounce thing of juice? boooooo. |
#8
|
|||
|
|||
Re: Whole Foods/Wild Oats merger
[ QUOTE ]
[ QUOTE ] Meaning a merger of Whole Foods and Wild Oats could actually reduce prices for consumers, which is a good thing. [/ QUOTE ] Hahahahaha. No. The only thing that would lower prices at Whole Foods would be if Walmart started carrying organic. Of course, then all the Whole Foods customers would have to start shopping at Walmart at 2 AM is disguise, because we all know that no loyal Whole Foods customer would be caught dead shopping at Walmart. [/ QUOTE ] Walmart is carrying organic food. |
#9
|
|||
|
|||
Re: Whole Foods/Wild Oats merger
I don't know the specifics of this of this merger, as I've been out of the industry for a while. but I will just add that Whole Foods differs from traditional grocers in the amount of leeway they give to store managers/regional managers to run their stores the way they want. it's very decentralized, so much that any merger would have a smaller impact on prices than it would on a traditional supermarket merger.
as an aside, I think Whole Foods does it the right way. the idea that buying and merchandising decisions for Boston stores should be done in Boise is...you know. a buddy of mine covers Whole Foods and has a lot (in all senses) invested in them. we talk about them a lot...will be interested to hear his thoughts. |
#10
|
|||
|
|||
Re: Whole Foods/Wild Oats merger
Econ - "i don't want to derail this thread, but your and boris's argument is based on a perfectly competitive output market. "
You're not derailing the thread at all. My argument is that there are A) close substitutes for organic food (namely non-organic food); and B) there is plenty of competition in the retail market for organic food from independent health food stores and established super markets. Furthermore, if the new merged entity starts making money hand over fist from monopoly prices, Walmart, Safeway 99 Ranch, etc... are more than capable of offering a competitive product. Therefore the market is competitive. Some stores may have prices above marginal cost but this only because of a sweet location. These stores will continue to earn monopoly rents regardless of whether or not the merger goes through. I have a hard buying the argument that the demand curve for organic food is not highly elastic, except in a few localized instances. |
|
|