Friday, November 11, 2011

Interesting Fact of the Day: More Than Half of Walmart Sales Come from Its Groceries Business

We typically think of Walmart as a retail giant, so I was surprised to learn in today's WSJ that for the last several years more than 50% of Walmart sales have come from its grocery business. 

The article "Wal-Mart Sets Prices Sizzling For Choice Beef" discussed how "The massive buying power of Wal-Mart is driving the wholesale price of choice beef to a nearly eight-year high as the retailer stocks its refrigerator cases for the first time with higher-quality cuts."

Because Wal-Mart is purchasing domestic beef, "The interest by Wal-Mart in higher quality meat is being welcomed by the cattlemen who raise choice animals. They haven't always been rewarded for the higher feed costs and better animal genetics it takes to produce choice beef."

And how are Wal-Mart's purchases of choice beef benefiting American cattle producers' bottom lines?

"The shift by Wal-Mart has translated into a noticeable jump in profits for ranches such as Mushrush Ranches, in Strong City, Kan. Ninety percent of the cattle it produces achieve the grade of choice."

We also frequently think of Wal-Mart purchasing most its retail inventory from China and Mexico, but that's likely changing as the company has increasingly shifted towards selling food, and now sells more groceries than electronics products, clothing and toys.  It's probably the case that the shift towards groceries means that Wal-Mart now buys more of its products (e.g. milk, eggs, meat, cheese, vegetables, fruits, etc.) from American producers today than in the past when electronics, clothing, footwear, toys, etc. were the majority of its sales.  If that's the case, there are probably thousands of American farmers like the Kansas cattle producers who have higher profits today because of Wal-Mart's shift to being America's largest grocer.     


At 11/11/2011 5:08 PM, Blogger aorod said...

So why are we subsidizing these ranchers?

At 11/11/2011 5:25 PM, Blogger Don said...

If you think that's surprising, do some research on the MARKUP for most grocery items. Based on what I know about our biggest local chain (who, BTW is kicking the crap out of Walmarts grocery business if the number of people in the aisles is any basis for judgement), many items are at or even blow 1%.

I was floored when I found that out.

At 11/11/2011 7:26 PM, Anonymous Anonymous said...

Sorry, the meat offered at my local Wal-Mart is mostly pre-packaged and low quality. Hamburger in a plastic tube? Gas injected packaging to improve meat coloring? Forget about it.

The corner butcher gets my business even though he charges more. The quality is supreme and the service exceptional.

At 11/11/2011 7:35 PM, Blogger AIG said...

Yes but if you live in the middle of nowhere Iowa, or Montana, or Kansas...a Walmart store near you is the most amazing and wonderful thing you can get.

At 11/11/2011 8:59 PM, Blogger Ed R said...

Not sure what this article means in macro terms:

Where were consumers of beef buying before Walmart came along?

Has total beef consumption in the USA increased because of Walmart buying practices?

Is choice beef more or less expensive to consumers than it used to be?

At 11/11/2011 9:47 PM, Blogger juandos said...

I'm pretty much with dadisinthehouse on the Walmart beef...

There plenty of other food items definitely worth buying at Walmart but beef isn't my first choice...

At 11/12/2011 7:36 AM, Blogger Larry G said...

What's interesting is that this summer on our Western tour, we ran into Walmarts that sold groceries but not fresh produce or meat.

In those locations, invariably there was a Safeway that did.

Where I live, Walmart offers fresh cut meats and IMHO, they are just as good as the competition offerings with the possible exception of Wegmans.

We have some local butcher shops but I would guess they are less than 5% of the market.

At 11/14/2011 7:26 AM, Blogger Ian Random said...

I've noticed for the last couple months that the big guys charge a lot for ground pork $2+/lb, while the small downtime store actually beats their price at $1.28/lb. And no this isn't the exception to the downtown parking being a factor as they offer free parking just like the big guys.


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