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Walmart's Big Push into Groceries is Not Good for Small Farmers

For related articles and more information, please visit OCA's Breaking The Chains page.

 Groceries make up more than half of Walmart's retail sales, an amount that's risen significantly over the past 10 years.

 The rise makes sense from a business standpoint, since shoppers are still spending more on basic needs like food than they are on electronics or other household items - and Walmart's product offerings have shifted to take advantage of that.

 The retail giant is, however, claiming that its foray into foods, particularly local foods, has not only saved customers over $1 billion, but also helped farmers in the process - a claim that just doesn't add up.

Why Walmart is Not a Boon to Small Farmers

 On Walmart's corporate web site, it claims the company is "  strengthening local farmers and economies, while providing customers around the world with long-term access to affordable, fresh food."

 And it would superficially appear that they have made some progress, increasing locally sourced produce by 97 percent in 2011 alone (still, this only accounts for 10 percent of the produce they sell). They also tout some lofty goals, including:

    •Selling $1 billion in food sourced from 1 million small- and medium-sized farmers     
   
    •Increasing the income by 10-15% for the small- and medium-sized farmers they source from
   
    •Doubling sales of locally sourced produce in the United States

 Yet Walmart, which reportedly has grocery sales higher than those from Kroger, Safeway, and SuperValu grocery chains combined (for a total of about 145 billion in 2011), is uniquely positioned to actually cut small farmers' profits, by virtue of their sheer size and market power. As Trefis reported:

     "To maintain its low cost provider status, WMT [Walmart] uses a two pronged approach. First, it leverages its scale to exert buying power on its suppliers and obtains a lower price for its inventory than competitors.

     Second, WMT is relentless on cutting costs across its supply chain and maintaining as lean a structure as possible. By doing these two things, the company is able to pass on its savings to customers while still maintaining margins that are equivalent or higher than competitors.

     To note an example, even when the U.S. grocery market was feeling the impact of food price inflation in the latter half of 2012, Wal-Mart was able to lower its grocery prices and take share from competitors who had no choice but to raise prices to maintain their margins."




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