   From the deck of his 106-year-old halibut schooner, undergoing a seasonal
   overhaul at Fisherman’s Terminal in Seattle, skipper Wade Bassi has better
   insight than most into what’s happening at Amazon-owned Whole Foods
   Market, at least as pertains to the product he knows best.

   While he doesn’t buy halibut much — he’s got a freezer full of it — Bassi,
   43 years a fisherman, keeps an eye on how it’s handled and presented in
   the grocery stores and fish markets.

   “When you look at nice halibut, I mean it is pure white,” he said. “And it
   is flaky-looking, and it is beautiful. It’s translucent. If you’ve got
   that in the fish market, people are going to buy it.”

   A few days earlier, Whole Foods touted a rarely seen promotional price for
   halibut as part of its ongoing campaign to revise the grocery chain’s
   high-cost reputation while maintaining its image for quality and
   sustainability.

   “Whole Foods is one of the better ones, to be honest with you,” Bassi
   said. “But you know, Whole Foods, whole paycheck. … They usually do charge
   way more for everything than anywhere else. Which really surprises me that
   they’re selling this for $16-something a pound, because they’re not making
   anything on it.”

   Whole Foods’ halibut deal opens a window into Amazon’s grocery strategy as
   it seeks to combine the defining characteristics of each brand, leverage
   its juggernaut Prime membership program and take a larger share of the
   grocery business from competitors such as Walmart, Kroger and Costco.

   It also draws a long line from a major Seattle industry with roots in the
   19^th century to the dominant economic force of the 21^st.

   Amazon bought Whole Foods in August 2017 for $13.7 billion, its largest
   acquisition and an aggressive move into the grocery business.

   The combination of the two has been steady, said Tom Forte, who follows
   Amazon as a managing director at the D.A. Davidson brokerage. In a few
   more years, he said, “You won’t recognize the original Whole Foods.”

   Within months of the acquisition, Forte said, Whole Foods was selling
   cheaper cage-free eggs and organic ground beef, prices it said were a
   result of the deal.

   Then came the integration of Prime, Amazon’s $119-a-year shipping and
   media-subscription program, which Amazon founder Jeff Bezos said last year
   had surpassed 100 million members. In Whole Foods, Prime operates as a
   hybrid of the customer-loyalty discount programs offered by most grocers —
   in which consumers trade details of their purchasing habits for lower
   prices — and a paid membership like at Costco or Sam’s Club.

   Whole Foods stores have been festooned with yellow and blue signs pointing
   out Prime member benefits, one of which was fresh halibut fillets priced
   at $16.99 a pound, albeit only for a week earlier this month.

   “I was shocked to see that level,” said Tyler Besecker, president of
   Mercer Island-based Dana F. Besecker Company, the largest buyer of Pacific
   halibut. The price, which was matched at Kroger-owned QFC stores in the
   region last week, is “as low as I’ve ever seen.” (Besecker does not
   currently supply Whole Foods.)

   Fresh halibut fillets routinely sell for $24 to $28 a pound, and often
   more.

   He said there’s little if any room for a profit at the promotional price
   offered by Whole Foods and QFC. “They might be selling those at cost or as
   loss leaders just to get people into the stores,” Besecker said.

   In the competitive grocery business, promotions like this happen all the
   time. The thinking is that shoppers will be attracted by the discount on a
   staple or a prestige item, and then fill their carts with other groceries
   sold at a profit.

   A Whole Foods spokeswoman declined to comment on pricing. The temporary
   halibut discount is one of more than 300 such Prime promotions Whole Foods
   plans in the next few months. The company also said it was lowering prices
   across the store, its third such announcement since the acquisition.

   At the seafood counter in the Whole Foods store on Westlake, surrounded by
   Amazon headquarters buildings, a sign advertised “First of the Season
   Fresh Alaskan Halibut” and sported the blue Marine Stewardship Council
   (MSC) Certified Sustainable Seafood label.

   Whole Foods has been a pioneer in sustainable-seafood marketing, beginning
   in 1999 when it began to stock fish with the MSC label. In the mid-2000s,
   Pacific halibut fishermen sought the certification — a system of
   third-party audits that tracks seafood from catch to market — and Whole
   Foods was there from the beginning.

   “They were the first ones to market the MSC halibut,” said Bob Alverson,
   head of the Fishing Vessel Owners Association, representing boats that
   catch halibut and black cod and a driver of the certification effort. “It
   turned into quite a marketing advantage. Whole Foods saw that early. They
   were focusing on sustainable, high-quality food products. They had quite a
   bit of foresight, I think, in that direction.”

   The certification comes with added costs borne by the fishermen and
   buyers, and passed on to consumers. But it’s also an assurance “that
   people are watching out for the resource,” he said.

   As it tries to convince people it has lower prices, Whole Foods has been
   very careful to maintain the reputation built on products like
   MSC-certified halibut.

   Amazon-owned Whole Foods touted a price cut on halibut as part of an
   announcement recently about lower prices on hundreds of items. (Ellen M.
   Banner / The Seattle Times) Amazon-owned Whole Foods touted a price cut on
   halibut as part of an announcement recently about lower prices on hundreds
   of items. (Ellen M. Banner / The Seattle Times)

   Whole Foods future

   New signs in stores appeared this month, spelling out the value
   proposition it’s trying to strike: “New lower prices. Same high
   standards,” reads one, against a background image of carrots.

   At the same time, the company claims its new prices and Prime deals have
   saved customers “hundreds of millions of dollars” since the Amazon
   acquisition.

   If prices are being lowered and the quality bar stays the same, something
   else has to give.

   Analysts provided a few theories:

   Amazon could be willing to accept losses or slimmer profits within Whole
   Foods, as it has done in other businesses, in an effort to expand its
   customer base.

   “Do they take the profit from their non-retail efforts, which today is
   primarily cloud computing, and then reinvest those profits to take share
   in grocery?” Forte said.

   That could eventually open up an avenue to growth as the rate of expansion
   slows in Amazon’s broader U.S. retail sales.

   “That’s why they need grocery to work,” Forte said. “Grocery’s a very big
   category.”

   Whole Foods could also press suppliers to reduce their prices, essentially
   cutting their profit.

   “The worry with that is that it puts the squeeze on the producer
   upstream,” said Ananth Iyer, a professor at Purdue University whose
   research includes sustainability in supply chains. If producers are
   squeezed too much, he noted, they may start to cut corners.

   So far, there’s no evidence this is happening in halibut, where fishery
   practices have been carefully managed with a goal of sustainability for
   nearly a century. Also, Whole Foods does not yet have the scale as a buyer
   to dictate prices the way a company like Costco does.

   Forte said that even if it did have such clout, this would be a risky
   strategy that would undermine the very attributes of the Whole Foods brand
   that make it most valuable.

   Another theory is that Amazon could apply more of its technology and
   expertise in logistics to create supply-chain efficiencies that would
   maintain its profits while benefiting producers and consumers,
   particularly with perishable grocery products, Iyer said. This is part of
   the promise of the acquisition in the first place.

   “That’s a powerful combination,” Forte said. “The sustainable, the
   organic, the healthier food — all those qualities of Whole Foods, with the
   supply-chain technology of Amazon. It plays to the strengths of both
   sides.”

   Forte said he expects Amazon to continue its aggressive moves on grocery
   pricing at Whole Foods. But he wonders when the price cuts will be
   broader, particularly as Amazon competes with the likes of Walmart and
   Kroger for a bigger slice of U.S. food and beverage retail sales, which
   totaled $726 billion in 2017. Whole Foods said it has lowered prices on
   hundreds of items, with an emphasis on fresh produce.

   Forte described his attempt after the acquisition to get the ingredients
   for Rice Krispies Treats at Whole Foods. It was perhaps doomed from the
   start: Whole Foods doesn’t carry Rice Krispies. But he found an organic
   brown rice puff cereal and organic marshmallows. They were “so wildly
   expensive that we didn’t finish the exercise. I took the kids to Walmart
   and bought the ingredients for a pittance,” Forte said.

   That points to the bigger question of how Amazon plans to position Whole
   Foods for the long term in its expanding array of physical retail-grocery
   formats. It now has 11 automated Go convenience stores and is rumored to
   be planning a new, low-priced grocery chain of its own that may deploy the
   same cashierless checkout technology.

   Meanwhile, Whole Foods is not opening any new 365 stores, a smaller,
   lower-priced version of the main brand highlighting the company’s
   private-label products. Whole Foods co-founder and CEO John Mackey said in
   an internal memo that the “price distinction between the two brands has
   become less relevant” as Whole Foods lowered its prices, Yahoo Finance
   reported earlier this year.

   Amazon, too, is finding success with a growing stable of private-label
   brands — it had more than 100 as of last July, according to Coresight
   Research, double the number in 2017. One of these, Solimo, sells generic
   versions of everything from K-Cup coffee pods to Epsom salts to garbage
   bags and racked up more than $6 million in sales in January alone,
   according to data analysis firm 1010data.

   Of course, there’s nothing generic about a “fresh, sustainable wild-caught
   halibut fillet.”

   Back on the schooner

   The day after Easter, Bassi and his crew — three family members and an
   unrelated father-and-son team — loaded up the Polaris, one of four
   century-old wooden schooners still chasing halibut out of Seattle. (The
   broader Washington-based halibut fleet numbers about 100 vessels.) Bassi’s
   father fished on the Polaris, which Bassi co-owns with Rolfe McCartney.
   Bassi’s grandfather fished halibut back when schooners carried small
   dories out to the fishing grounds, which made the landing of a fish that
   can grow to 500 pounds all the more exciting.

   The Polaris motored out of Fisherman’s Terminal and through the Ballard
   Locks to begin the three-day journey through the Inside Passage to
   Ketchikan, Alaska. There, they take on tons of ice and bait, herring for
   the black cod Bassi will target first, and later chum salmon, codfish or
   octopus for the halibut.

   From a base in Kodiak, Alaska, the Polaris makes a series of trips, at sea
   for a week or longer at a time, to fish as far away as Attu Island at the
   far western edge of the Aleutian Islands chain. “It’s a big range that we
   fish,” Bassi said.

   The Polaris will trail long lines of hooks, leaving them to soak for
   several hours before reeling them in. The fish are stunned, bled and
   dressed, and put on ice in the hold. It is this fishing method that
   contributes to the quality of the halibut and sustainability of the
   fishery, as it reduces by-catch — the inadvertent taking of other species.

   They negotiate to sell the fish with four or five buyers, such as
   Besecker, at a price that fluctuates throughout the season. This is a peak
   time of year for halibut, with consumers seeking out fresh fish for Easter
   and Mother’s Day, Besecker said. Fishermen are typically paid between $5
   and $6 a pound for halibut.

   The Alaskan halibut fishery has its troubles — as nearly all fisheries do
   — but has been rationalized and managed successfully, particularly over
   the last quarter-century. Alverson, a commissioner on the Seattle-based
   International Pacific Halibut Commission, which has managed catch limits
   for U.S. and Canadian fishermen since 1924, described it as a stable but
   declining resource.

   This year, the halibut fishery in the Northern Pacific and Bering Sea is
   capped at 29.4 million pounds, with most of that allocated to commercial
   fishing and smaller amounts reserved for recreational and tribal fishing,
   as well as by-catch of other commercial fisheries.

   Alverson summed up the journey from a wooden fishing boat in the Bering
   Sea to the fish counter of a grocery store owned by a company that has
   redefined modern buying and selling: “It’s Seattle old school meets
   Seattle new school with Amazon.”
