Changes to the way Bentonville, Ark.-based Wal-Mart does fresh produce business is rubbing produce suppliers and distributors the wrong way.
Industry perception that the retail giant might make life even harder than it has been for grower-shippers became clear as a majority of respondents to The Packerâs latest Produce Pulse survey adamantly opposed the direction Wal-Mart is heading.
âTheir margins will stay the same. The way they will achieve savings is pressure the growers and shippers to reduce their costs and take less for their hard work,â one grower-shipper said.
One produce distributor offered this take on Wal-Mart: âI think they will likely fail. When Wal-Mart takes on the grower-direct business model, they will increase their overhead, and likely lose growers if they do not understand how to manage them and their requirements. There are many unanswered questions:
- What will an offshore supplier do with rejected product?
- Will Wal-Mart offer preseason advances?
- What premium will Wal-Mart offer the growers over their current arrangements?
- What will a Wal-Mart grower do with the ârest of the cropâ that is not the premium sizes?
- Will Wal-Mart pay its growers in seven to 14 days like we do?â
When asked specifically about Wal-Martâs changing initiatives and how they might affect produce businesses, many of those polled expressed frustration, even anger.
Comments were made under the condition of anonymity, making for more candid responses.
âI hate Wal-Mart,â commented one director of produce, perishables or merchandising.
âWal-Mart is a big bully and suppliers should shut them down,â one grower-shipper said.
Other respondents even went so far as to use expletives in referring to their disgust with Wal-Mart and the companyâs alleged alienation of growers, small and large.
âIt could have adverse effects if they are going to try to buy as cheap as they can. It may put some growers out of business,â one said.
âIt will affect the market, no doubt about it, and will also threaten the supplier/grower to a point where they will lose suppliers,â another grower-shipper commented.
Survey participants also sounded off on the perception that Wal-Mart is taking advantage of produce suppliers and cutting into grower-shippersâ profits.
â(Wal-Mart is) a very difficult vendor to deal with. We have turned them down as a local supplier and ship to their warehouses only as a last resort,â one said.
Another: âFrom what I understand, their new initiatives will make things much more chaotic for suppliers. Not a good move on Wal-Martâs part.â
In support of Wal-Mart
Still, some grower-shippers said they think Wal-Mart is going in the right direction, focusing on continuing to slash costs and targeting growing demographic markets, such as Hispanics in the U.S.
Among the few positive responses:
- âWal-Martâs new model could present significant opportunities for us.â
- âIt will hopefully drive volumes for the industry.â
Other respondents made somewhat guarded positive remarks about Wal-Mart, expressing hopes of doing new or increased business with the company â but sounding more like theyâre taking that stance only out of necessity:
- âI expect that we will figure out a way to continue doing a lot of business with Wal-Mart.â
- âNot sure â¦ Maybe can get some produce into Wal-Mart â¦ (but) not sure that we want to.â
- âLike all key customers that change direction in purchasing, we are concerned. The fact of the matter is they will need more produce and not less, so we will see how it all pans out.â
Whatever the future holds for the produce industryâs relationship with Wal-Mart, itâs clear from these survey results that the retail giant needs to mend fences with its suppliers to maintain the ability to offer top-quality produce to its consumers.
The backlash from alienation of too many suppliers now may seem like a small price for Wal-Mart to pay, but, in the end, it could ruin Wal-Martâs entire produce department strategy.
What do you think about Wal-Mart's procurement tactics? Leave a comment and tell us your opinion.