Speaking to an industry source the other day, I asked if there were any further rumblings about Wal-Mart and their new pilot program for procuring apples.

Not a whole lot of illumination (and I also just asked the Wal-Mart press department in an email if they could help me on the matter), but the source did describe how the new system might work.
Wal-Mart feels like they have been paying more than some other buyers during the last few years for similar fruit.  That, in fact,  may be true. However,  the extra $1 or so  per box was quickly absorbed by service and personnel costs dedicated to that W-M business.

 Now, Wal-Mart believes they have software in place that can predict the needs of their stores and distribution centers instead of relying on the staff of their suppliers to work replenishment numbers.

Wal-Mart’s new model is forcing price buying.  The way Wal-Mart did business before, they offered broad specifications, allowing shippers to send any of the top three grades of size 48 to size 80 apples for any given day. The new design is apparently specific to size and grade.

And Wal-Mart appears to be asking for big volumes of the lower grade fruit (at lower prices)  but asking shippers to “sub up” with mid range and premium fruit if they don’t have the volume of the lower grade fruit.

The long and short of it is that marketers can’t afford – for any length of time, at least - to give Wal-Mart or any buyer an $18 per carton of fruit for $15 per carton.

That seems to set up the dilemma. In consideration of the all important returns to growers, marketers can’t afford to provide Wal-Mart with upscale fruit at downscale prices, but considering the volume of apples that Wal-Mart buys, they may have to think long and hard about it.