Wal-Mart Looks to Lift Spirits

Discussion
Aug 26, 2005
George Anderson

By George Anderson


As a Wall Street Journal piece from Aug. 17 correctly pointed out, Wal-Mart’s alcohol-free headquarters is located in a dry county and, when it comes to the sale of hard liquor, the retailer is a far ways from the dominant position it holds in numerous other product categories.


That doesn’t mean, however, that the retailer isn’t out to change things.


As John Westling, Wal-Mart’s senior vice president for nonperishable food told the WSJ, “We’re putting hard liquor in our stores where we can. This is an area where we are focused on growing sales.”


As it has done elsewhere, Wal-Mart is likely to select the most popular products and run them out on the floor with huge displays and extremely low prices.


The retailer is also following suit by partnering with the leading manufacturer in the category, in this case Diageo PLC, to work out a supply and merchandising plan that includes tripling the amount of space dedicated to stores carrying spirits. Wal-Mart is also looking at new store construction with the intent of opening units where stores will be able to sell spirits.


Some question whether Wal-Mart’s decision to increase its share of the spirits market is in keeping with the public image it seeks to perpetuate “as a folksy all-American enterprise and an arbiter of social mores.”


Mothers Against Drunk Driving and other groups have raised concerns whether busy supermarkets — Wal-Mart’s or any other company’s — can be as effective in reducing the sale of alcoholic beverages to underage drinkers as those stores that primarily sell alcohol.


Wal-Mart has also found an opportunity, as others have, in building new stores with larger departments for spirits or expanding hard liquor sets in locations that stand just outside dry counties.


A case in point is a new store Wal-Mart opened in Pineville, Mo. last January. While shoppers in Bentonville may not be able to purchase spirits, they can drive 10 miles to the new Wal-Mart in Pineville where they will find a separate 5,000-square-foot section selling spirits at prices well below other retailers in the market.


“We would not have enough space in that store, if we hadn’t built a separate liquor department,” said Wal-Mart’s Westling. “We are looking at our other stores where we are running out of stock quickly in spirits and trying to find where we can get more space from.”


As you might expect, Wal-Mart’s push into the business has other spirit retailers understandably nervous.


Moderator’s Comment: What will Wal-Mart need to do to succeed in growing spirit sales and market share? What will its competitors need to do if they
wish to remain viable?

George Anderson – Moderator

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9 Comments on "Wal-Mart Looks to Lift Spirits"


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Gene Hoffman
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Gene Hoffman
15 years 6 months ago

What should Wal-Mart do to grow spirit sales? Give more space to liquor departments in existing stores and open new liquor stores. W-M’s lower pricing will serve as a magnate to draw in thirsty quaffers. Despite the implied religious connotation associated with WM and any possible resulting complications, low-price liquor merchandising is a natural for the Big WM.

What will their competitors need to do to remain viable? Become very innovative in their presentations (I have a few ideas) and, of course, rely on prayer.

Ed Dennis
Guest
Ed Dennis
15 years 6 months ago
The alcoholic beverage business is a very complex one. Unlike every other business, alcoholic beverages must be paid for at the time of delivery (in some form or another) which means that Wal-Mart can’t manage inventory using the distributors’ credit float. It is also a very fragmented business that requires experience and study to craft a selection of products to satisfy clientele. Wal-Mart can’t do this so they will cherry pick brands and offer a limited selection. Diageo may be a good partner for them because they have only done a marginal job protecting brand image over the years. They seem to be much more interested in the short term than the long term. Other distillers and vintners will view Wal-Mart in a different light. I don’t think you are going to see Jack Daniels on a huge endcap with give-away pricing. Also, while Diageo controls production and allocation, it can only do so to the extent that its distributors participate. According to law in almost every state, distillers must sell their products through an… Read more »
David Livingston
Guest
15 years 6 months ago

Wal-Mart has been a major liquor retailer for a long time. This includes Sam’s Club for the serious consumers. But liquor seems to have been an afterthought at Wal-Mart. Usually the first sign that a supercenter is coming to your town is Wal-Mart applying for a liquor license. Liquor has been one of the weaker departments at Wal-Mart, and they have a lot of potential for improvement. Liquor is normally hidden in a 25 x 50 foot cove towards the back of the store or one of the rear aisles towards the back. I think Wal-Mart will need to give liquor more visibility if it wants to improve sales. Like any other retail, convenience, service and price are the key ingredients. Wal-Mart can’t compete on the first two so there will always be a need for the corner liquor store or the wine shoppe. Wal-Mart might want to take a lesson from Meijer who displays liquor very close to the front of the grocery department.

Michael L. Howatt
Guest
Michael L. Howatt
15 years 6 months ago

Have you ever heard of anyone you know refer to Wal-Mart as a “folksy all-American enterprise and an arbiter of social mores”? WM may want to have such an image but it’s laughable. Most people just think of Wal-Mart as the place to get everything really cheap, which is why they put up with their crowded parking lots and aisles.

If WM can get name brand alcohol and sell it at cheap prices (where’s the Jack?), it will do well. Regarding the religious sector, spare me. They may be outspoken about WM policy at the “corporate” level, but their congregation drinks as much (if not more…see Catholics: hey, I should know, I was one) than the general public. Last I checked, doesn’t WM sell guns and cigarettes?

Bernice Hurst
Guest
15 years 6 months ago

Gosh, darn it, are you suggesting that alcoholic spirits might affect emotional and economic spirits, driving those who want cheap, cheaper and cheapest to protest at a mere principle? Whether or not the pious and self-righteous on either side of the Wal-Mart counter approve of drinking spirits will not stop their sale. The bottom line is a far greater deity than that.

Mark Lilien
Guest
15 years 6 months ago

WM can sell the heck out of anything, if they devote the resources to it. Liquor is tricky because they don’t want pickets leafleting outside the store. They can make it more convenient and reduce the pricing to the lowest that is legal. But to sponsor in-store tastings, create displays outside the liquor department, and run ads for liquor would certainly invite some backlash. Backlash can lead to picketing and leafleting. My guess is that WM knows this and will stick to aggressive pricing and convenience, without the tastings, displays outside the liquor department, and ads. Furthermore, the fundamentalist sensitivity may be more of a factor in some regions than others. Arkansas has dry counties. California doesn’t.

Mark Burr
Guest
15 years 6 months ago
I think Bernice has it about right. It’s a non-issue. If WM wishes to expand its share in spirits, it will likely do so with little impact. Sure it may raise a brow or two from a minority of consumers. That, however, will not even be a blip on the radar screen. Even ‘hard’ spirits are now sponsoring NASCAR. Kind of ironic? You might think so, but Budweiser, Miller and others have been sponsoring cars for years. By volume, there is no difference in the alcohol content. In that case, there was a slight clamor but it has gone on and NASCAR remains as popular as ever – maybe even more so. Wal-Mart will be, as well. In fact, if they had the same audience, and one could make the argument that they do, it could even be a big plus for WM. Even more so than we imagine. In the end, it’s just one more category to be successfully managed. Also, as mentioned about cigarettes and beer, WM’s appearance of a stance on principles… Read more »
philips oriaran
Guest
philips oriaran
15 years 6 months ago

Wal-Mart’s promise is “Low Price Always”….therefore, with more visible displays than what currently prevails at Sam’s Club and with the lowest price around even for the premium wines, Wal-Mart is sure do very well. People I have talked to believe Wal-Mart’s promise, and everyone, irrespective of class, feels that Wal-Mart has something for them.

Nicholas Pasquine
Guest
Nicholas Pasquine
15 years 6 months ago

I don’t understand all this nonsense about Wal-Mart and liquor. The local Sam’s carries hard liquor and their prices are no better than the local discount liquor store chain — and, you don’t have to pay $35 for the “privilege” of buying there.

The state sets the minimum price so Wal-Mart cannot sell any cheaper. They also do not sell individual bottles of wine any cheaper. There are some multi-packs made up for Sam’s, but the savings is not enough to make membership worthwhile plus having to buy in quantity.

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