Walmart desires to attract customers to their stores in a variety of ways. One of these ways is to provide high quality steaks, while also keeping the prices for these steaks low.
This has led Walmart to work directly with cattle workers to create their own Angus beef supply chain.
Walmart announced last April that they will work together with ranchers, a beef processor, and a cattle-feeding company so they can supply steaks and roasts to five hundred of their stores in the southeastern part of the country. The name of this new line of steak for Walmart has not yet been given. The new steak line is anticipated to hit stores this coming fall.
A Walmart shareholder meeting last week revealed that executives believed entering the meat supply chain would improve Walmart credibility with consumers regarding steaks, which they consider an important item in their store.
Scott Neal, senior vice president of meat at Walmart, told CNN that this desire to enter the meat supply chain is an important priority for Walmart, stating that this is because meat is typically the main focus of meals for many people. This focus on meat is what brings customers to Walmart, according to Neal.
Customers are increasingly looking for transparency in terms of how their food is produced, explained Neal. Neal told CNN that by working directly with ranchers and feeders, Walmart can obtain increased visibility in the meat supply chain and better transparency for the consumer when they are shopping at Walmart for steak and roasts.
Walmart is also seeking to control some beef production in order to get an upper hand on suppliers. By owning their own beef supply, Walmart will increase their standing and power concerning the negotiation of prices with other companies.
Currently, Walmart gets their beef primarily from Tyson Foods and Cargill. This is according to Walmart US chief Greg Foran. Foran wants to change this.
The entrance of Walmart into the industry seriously threatens Tyson because Tyson depends heavily on Walmart. Walmart is clearly the largest customer for Tyson and accounts for more than seventeen percent of Tyson sales.
Despite this dependency, Tyson has downplayed concerns that the move by Walmart will severely hurt their sales.
Tyson CEO Noel White told market analysts last month regarding the issue that business with Walmart is strong and White considers it a great partnership.
Walmart has made a similar move with milk recently by building a milk processing facility in Indiana. Through the facility, Walmart is able to supply milk to over five hundred stores.
Foran explained that Walmart typically searches for other options when the suppliers price increases in a given industry. This is what happened in the milk industry recently.
According to Foran, the goal is not to supply every single Walmart store with milk using their own facilities, but rather to provide leverage in terms of negotiating better contract deals with distributors through supplying some of their stores with milk from their own facilities.
Other retailers are also attempting to take control of their food supply chains. There reasoning is the same as Walmart’s, to control their costs.