Wednesday, February 5, 2014

Wal-Mart stepping up food marketing

Wal-Mart is increasing the volume of fresh food it will be offering as it spends $500 million this year to build new stores and expand existing ones.

It’s now 20 years since Wal-Mart entered the Canadian market and it has 389 stores; it plans to increase that to 395 this year and to add fresh food to the 142 stores that haven’t yet offered it.

While some might think this would be welcome news for farmers who now have more companies competing to buy what they produce, the opposite is unfolding as Sobey’s has kicked off another round of cost-squeezing on suppliers.

Sobey’s is deducting two per cent from invoices, retroactive to November. Suppliers who don’t accept the cut in prices won’t remain Sobey’s suppliers, cutting off their access to about a third of the market.

Loblaws is also squeezing suppliers, albeit not in exactly the same fashion, to stay ahead of Sobey’s as the number one supermarket company across Canada.

Wal-Mart is famous for pressuring suppliers for low prices and to provide free services.

As part of its strategy, it intends to reduce the number of suppliers and to cut out middlemen, such as food brokers, and deal more directly with suppliers.