Walmart Pushing Food Industry in Healthy Direction

Discussion
Jan 21, 2011
George Anderson

Walmart is looking to make America healthier while saving
its citizens money in the process.

Yesterday, the retailing giant announced it
was putting its clout behind First Lady Michelle Obama’s “Let’s Move” anti-obesity
campaign by committing to reduce salt by 25 percent and sugar by 10 percent
in its own brand products by 2015. It also pledged to remove all trans fats
from its private label. Walmart said it would encourage brand suppliers to
follow its lead and improve the nutritional value of their products, as well.

Beyond
these reductions in its products, Walmart also committed to making it easier
for consumers to buy fruits, vegetables and other more nutritious foods. The
company announced a goal of saving its shoppers approximately $1 billion per
year on fresh fruits and vegetables as a result of improving a variety of supply
chain functions that drive up costs.

“No family should have to choose between food that is healthier for
them and food they can afford,” said Bill Simon, president and CEO of
Walmart U.S., in a statement. “We are committed to working with suppliers,
government and non-governmental organizations to provide solutions that help
Americans eat healthier and live a better life.”

Walmart also said it
would work to reduce or eliminate premiums consumers pay to purchase better-for-you
goods.

“Our customers often ask us why whole wheat pasta sometimes costs more
than regular pasta made by the same manufacturer,” said Andrea Thomas,
senior vice president of sustainability at Walmart. “Customers should
be able to choose knowing the biggest difference in these products is not the
price, but rather that one is better for you.”

Brian Sozzi, an analyst
with Wall Street Strategies, wrote in a research note, “Walmart
is attacking the problem by employing a structural technique. Basically, it
centers on using scale to press suppliers to remove excess commodities …
lower the cost base of Campbell Soup or a Coca-Cola and, in turn, driver harder
bargains on product costs.”

Mr. Sozzi added, “Grocery represents 51 percent
of Walmart U.S. sales and 39 percent at Sam’s Club. Wal-Mart must be
thinking that by lowering the cost component, and then promoting a lower price,
it will lead to share gain in the largest component of its overall business.”

Colin
McGranahan, an analyst at Sanford C. Bernstein, told Bloomberg News, “It’s
largely a big PR effort and part of the larger strategy to win over the hearts
and minds of regulators, politicians and others that oppose Wal-Mart’s
efforts to grow their store base in urban markets.”

“This is a game-changer,” Michael Hicks, an associate professor of
economics at Ball State University, told The Associated Press. “If
Wal-Mart could reduce the prices on healthy food and provide access to them
in more places, you could have a measurable effect on incidences of diabetes
and heart-related ailments.”

“Walmart is in a position almost like the Food and Drug Administration.
I think it really pushes the food industry in the right direction,” Michael
Jacobson, executive director of the Center for Science in the Public Interest,
told The New York Times.

Discussion Questions: How optimistic or pessimistic are you that Walmart will be able to ring the types of costs out of the food supply chain it projects in light of current inflationary pressures? If all goes as planned, what will Walmart’s announcement mean for the chain, its competitors, suppliers and shoppers?

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19 Comments on "Walmart Pushing Food Industry in Healthy Direction"


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Carol Spieckerman
Guest
10 years 3 months ago

If anyone can do it, Walmart can and, with Target P-Freshing stores at an accelerated rate and Walgreens’ getting city government support and kudos for turning urban “food deserts” into oases (Chicago), one could argue that they must. Walmart has taken back control of modular development and ordering and is focusing on local sourcing via its Global Food Sourcing (GFS) and two-tier systems. Even if the ongoing restructures don’t make for sexy headlines, Walmart isn’t just hoping that old efficiencies will drive new realities when it comes to its food operations.

David Livingston
Guest
10 years 3 months ago
I have to applaud Walmart for creating media buzz for simply operating business as usual. Getting Mrs. Obama to play along certainly helped. Walmart’s business model is to sell products at a lower price saving consumers money. So there isn’t anything new going on here. Food manufacturers have been lowering salt and sugar in their products anyway. Many branded companies already offer a low salt or sugar option. So just make that option the private label for Walmart and other competitors, right? This reminds me when Whole Foods figured out they were losing money selling live lobsters. So to make lemons out of lemonade, they told the press they were dropping lobsters because it was cruelty to animals. This way they score points with PETA and drop an unprofitable product at the same time. Walmart is recycling their low price message to make it sound like they will actually be lowering prices more, but what I think they mean is they will simply offer produce at lower prices (relative to the competition). Also their private… Read more »
Kevin Graff
Guest
10 years 3 months ago

Why would anyone doubt Walmart’s ability to do anything it sets it mind to? And why would anyone want this type of initiative to fail?

Far too many people eat “awful-for-you” foods, either because of ignorance or economic reasons. Provide better food at better prices and we all win.

Who wants to lead the Walmart cheer this morning? Give me a “W”… give me an “A” ….

Warren Thayer
Guest
10 years 3 months ago

Walmart is doing what it has always done: following the money. There’s critical mass now in “healthy” foods, and Walmart felt itself losing that customer. Having said that, I’m very happy about the move. Walmart has long known how to bring about significant change in the industry via changes in its specs and order blanks. This is a rare win-win: good for shoppers, and good for Walmart but it’ll put more pressure on Walmart’s competitors.

As for pricing, you can’t get blood out of a stone, and even Walmart knows that. They’ll squeeze hard as ever, and find some new efficiencies, as they always have. As they gain further share, it’ll hurt small suppliers. And despite their efforts to put SKUs back on the shelf that were foolishly cut before, Walmart will continue to reduce differentiation in the marketplace overall.

Suppliers generally speak highly of Walmart as a trading partner, price squeeze or not. They say the sales process is more honest and straightfoward, with less Monte Hall and “Let’s make a deal!” nonsense.

Doug Stephens
Guest
Doug Stephens
10 years 3 months ago

As counterintuitive as it may seem, my belief is that Walmart may actually do more than just tackle obesity. I believe they will also make a positive difference on the environmental and human rights fronts as well. Not because it’s the most profitable strategy or because they are all powerful but because the world will demand it of them.

Cathy Hotka
Guest
10 years 3 months ago

This is a genius move on Walmart’s part. They will undoubtedly be successful in pressuring manufacturers to create healthier products, and cities will likely be more amenable to accommodating smaller format Walmart stores in underserved neighborhoods.

This is also a genius move by the White House, which now has the power of the largest company in the world behind a key initiative. Everyone wins.

Mark Burr
Guest
10 years 3 months ago

Does this mean that Michelle Obama and Walmart will both give me permission to eat the pie next Thanksgiving? And, in the meantime, I have to eat my fruits and veggies?

There should be no surprise in the pairing. However, the motivations are entirely different. If anyone thinks this has anything to do with eating healthier on the part of Walmart, I think its naive. For their part, it’s strictly about fortifying their low price perception not fortifying our health. It’s about enhancing domination of this category of their stores. It’s about any means necessary, possible and available to reinforce domination. Attributing it otherwise is well, I already said that–naive.

The timing of the announcement would be curious if it wasn’t so obvious.

Gene Hoffman
Guest
Gene Hoffman
10 years 3 months ago

Walmart folks are clever dudes. They always promote “low prices” so their promising to cut prices further on healthy foods and getting Michelle Obama involved is praiseworthy.

Will the program succeed? This morning an additional moment of enlightenment entered my radar screen. I received via e-mail of a series of photos of a good many overweight people shopping at Walmart. It would seem that those customers might be a good target for testing if this program is truly healthy or weighty.

Gene Detroyer
Guest
10 years 3 months ago
There is no question about it. 1.They will be able to make an impact on the cost of healthy foods, and… 2. They are going to have an enormous impact on the food industry. They’re going to force food suppliers or the suppliers of packaged processed foods to cut down the amount of salt and sugar in their products. This will turn a lot of products into what are called better-for-you products and are going to raise an important philosophical question which is: Is a better-for-you processed food a good choice? Is a processed food a good choice at all? They may be able to do what the government could not–force the food industry to consider selling products with real nutrition rather than real chemicals. However the key is to move people from processed foods to real fruits and vegetables. The fact is pricing fruits and vegetables at a level in which people can actually afford have benefited the food industry. Fruits and vegetables have gone up by 40 percent since 1980, whereas the index… Read more »
Bernice Hurst
Guest
10 years 3 months ago

How much would I love to take this at face value and say hip hip hooray? Sadly the skeptic in me prevents this.

There are so many ways and means that Walmart can appear to make good on what it is now gaining praise and congratulations for. Let me think…beat down suppliers (of product and packaging) on price? And what about the truck drivers who ship the stuff all over the country? Make packs smaller so prices can appear lower? Change ingredients and recipes, perhaps finding some way to replace what they claim they are omitting? Take credit for what their suppliers are doing anyway? Or maybe just say they’re doing bla bla bla and hope everyone believes them? When and how is anyone ever going to know? Will we be back here every year for the next five until they allegedly achieve what is now being promised in order to check progress? Let me think some more….

Marge Laney
Guest
10 years 3 months ago

I’m with Scanner on this one.

Anne Howe
Guest
10 years 3 months ago

I suspect that Walmart and the administration have studied the diabetes infographics! Scores of overweight shoppers and voters converge geographically for both. Working together allows them to put the squeeze on the whole system to offer “solutions.” If shoppers don’t buy the healthy stuff, will they go back to unhealthy pallet displays to get the trip, the vote and the dollar? This feels like PR and less like a holistic solution.

Roger Saunders
Guest
10 years 3 months ago
A sign of Leadership on Walmart’s part in multiple ways: 1. They recognize a real obesity issue in this country, and are using the power of the First Lady to raise the voice2. They are listening to the consumer who is seeking a way to control food costs, a very real inflationary point that will be addressed by households in 20113. Their own customers, who shop Walmart MOST OFTEN for groceries, lead the way on this type of issue On Point # 3, based on the November, 2010 Consumer Intentions & Actions (CIA) survey, when over 9,000 Adults were asked about “Life Changes” made in the past 6 months, Adults who shop Walmart most often for Groceries said: A. They have become more budget conscious (48.4% vs. 42.3% of total adults) B. They have become more conscious about Food Safety (20.4% vs. 17.8% of total adults) C. They are eating more Home Cooked meals (45.3% vs. 40.3% of total adults) D. They are spending more time with their families (28.8% vs. 23.1% of total adults… Read more »
Gordon Arnold
Guest
10 years 3 months ago

The 21st century will see food replace energy as the greatest demand from both business and consumers. After food will be health care and then shelter. As India and China continue to open their borders, so too will the world economy expand and reduce boarder restricted markets. Walmart is aware of this and is positioning to be successful.

The demand for food faces market threshold pricing that insist on improved shelf life and lower costs to the consumer. The same goes for health products, medicine and shelter. This is what the world wants and will pay for. The problem is, they only have a little money per individual. The first corporations to meet these demands with valid solutions will win big.

Mark Plona
Guest
Mark Plona
10 years 3 months ago

I must say, if this is being done in earnest, then kudos to Walmart for taking this on.

They will almost certainly provide the “Better(Good)for you” movement the leverage it needs to move demand on supply, and perhaps raw materials as well.

That said, maybe in the long term this will prepare the food industry to further shape advancements in research and development to improve the quality of food found on grocery store shelves.

Either way this will certainly refocus lower income families toward some new possibilities becoming available to them and fall in line with all the hype and messaging they have experienced in the past few years about eating better and the DIY approach to maintaining a healthier lifestyle.

But will they be receptive to it?

Well, money talks….

David Livingston
Guest
10 years 3 months ago

Wow, me and Bernice in total agreement. Who would have thought that day would come?

Craig Sundstrom
Guest
10 years 3 months ago

Depending on where your cynic-o-meter is set, this is either laudatory or clever…but I have doubts what impact it would have even if it’s “successful” (however one might define that word): does any thoughtful person really think the eating-related problems in this country are due to other than poor choices by consumers??? Or that it is “the high cost of whole wheat pasta” that makes someone choose a dinner of mac-n-cheese and Oreos, washed down with a 32oz soda???

Herb Sorensen
Guest
10 years 3 months ago

I’m halfway between the skeptics (my natural inclination) and the cheering section. Social engineering (which is what this is) ordinarily is an abysmal failure, if not delivering unintended consequences.

As a biochemist, I observe that people eat too much, don’t exercise enough, and don’t drink enough water. Tinkering with just what they eat has often been just simply scientifically misguided. Lowering dietary cholesterol and salt are two worthless objectives. The first, because serum cholesterol (the danger) has little or no relation to dietary cholesterol. On the second, for the tiny segment of society that is potentially benefited by lowering sodium in the diet, nothing except very nearly ZERO sodium in the diet will help them–and nobody is willing to eat that diet. For the rest of us, it is a non-health issue. Nevertheless, billions have been spent on stupid initiatives, at great cost, for example, to the egg industry. As Josh Billings noted, “The trouble with most people isn’t that they don’t know, but what they know ain’t so!”

Liz Crawford
Guest
10 years 3 months ago

I hope, but somehow doubt, that Walmart will do a controlled store test of the prices and product offerings, so that they can actually measure the results of the new initiatives on behaviors. A panel would be ideal.

When discussing (bemoaning) the urban grocery deserts, one aspect that continually seems to be omitted from the discussion is home economics. Here’s a parent, working two jobs, strapped for both cash and time. Here’s a $1 breakfast burrito or hamburger. Compare this option to buying perishable goods (eggs, milk, cheese, spinach) and taking the time to cook them. Often the fast-food option is both cheaper and less time consuming than the fresh option.

These are issues that Walmart will be facing too. So even smaller format Walmart stores don’t guarantee “healthy” grocery success (and “healthier” behaviors) in certain geographies. This is why testing is needed to really measure the impact among consumers…and this is a great role for the first lady to play–accountability watch dog.

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