Walmart Buying Clout

Walmart has recently been in the news seeking suppliers to find ways to reduce the cost of their goods to Walmart stores. While this type of initiative isn’t new, and was similarly done last year when Loblaw acquired Shoppers Drug Mart, what is interesting is the strength of Walmart’s arm in the arm wrestle.

It is reported that PepsiCo does $8 billion in sales at Walmart, which represents 12% of its total revenue. Kraft does $4.7 billion, or 26% of its total. Campbell Soup does $1.6 billion, or 19% of its revenue. JM Smucker does $2.3 billion, or 30% of its total. Clorox does $1.5 billion at Walmart, or 26% of its revenue.

These examples are staggering, especially in light of Amazon’s growth in grocery and mass and its strategy of using private label. Major brands that spend millions on marketing have choices to make: whether to cave in to Walmart’s demands or risk losing market share. This question is further complicated by the fact that if Walmart says no to next month’s orders, that sheer volume might take the sales efforts of many, with many customers at discount margins, to be neutral to the lost Walmart business.

Consolidation in the retail world only makes this problem more interesting.