Wal-Mart Stores Inc.âs push to slash supply-chain costs promises to further squeeze U.S. fruit and vegetable growers and shippers, industry analysts say.
Many growers, already dealing with thin margins, may simply choose to not sell to Wal-Mart and seek out other buyers, said Phil Lempert, a food industry consultant.
âThis is like a wet towel being wrung out,â Lempert said. âThere are a lot of companies that canât be squeezed any tighter. A lot of produce companies are going to throw up their hands â¦ You will see certain people walk awayâ from Wal-Mart.
Bentonville, Ark.-based Wal-Mart, the worldâs biggest retailer, this year plans to launch a plan to cut billions of dollars of supply-chain costs by combining its store purchasing across national frontiers, the Financial Times reported earlier this week.
The effort is part of Wal-Mart plans to increase the proportion of goods it buys directly from manufacturers rather than through third-party procurement companies or suppliers, the Financial Times reported.
Wal-Martâs plans include expanding initial combined purchasing of fresh fruit and vegetables for its stores in the U.S., Canada and Mexico, after an initial pilot test with apples that it says led to a 10% reduction in purchasing costs, according to the report.
In 2008, Wal-Mart said it would buy more fruits and vegetables from local suppliers âto keep produce prices down,â according to a company statement. Wal-Mart is the largest purchaser of locally grown produce, buying an estimated $400 million from U.S. suppliers in 2008, the company said.
Still, if Wal-Mart tries to force prices down too much, many U.S. growers may look to other options, including independent retailers, traditional supermarket chains and farmers markets, Lempert said.
A Wal-Mart spokesman referred to an Oct. 21 investor presentation by Eduardo Castro-Wright, a company vice chairman. Responding to questions on Wal-Martâs sourcing, Castro-Wright said there are several global brands âthat we can leverage the entire supply chain from development through sourcing.â
The spokesman declined to comment further.