Industry News –
By Rita Jane Gabbett
meatingplace.com
Wal-Mart is still gaining share against supermarkets in food sales growth, but a slowing of that growth could push Wal-Mart to roll back food prices and promote those rollbacks even more aggressively this year, according to a research report by BMO Capital Markets.
Wal-Mart’s U.S. food sales growth decelerated to 7 percent in fiscal 2010 from 9 percent to 10 percent in the previous three years, largely due to price deflation.
“We have learned not to underestimate how far Wal-Mart’s management will go to maintain its price leadership,” the report said, noting that a recent conversation with Wal-Mart CFO Tom Schoewe, “made it clear to us that Wal-Mart is just getting started with this program.”
The report also said Wal-Mart’s more aggressive communication of its rollbacks is having an impact. “Unfortunately, whether Wal-Mart is or isn’t getting more aggressive on price is almost irrelevant because consumer perception is more important than reality. Given Wal-Mart’s more aggressive communication of the rollbacks, we see risk of traffic returning to Wal-Mart from the conventional food retailers given the improved price image.”
The report cited Kroger as most vulnerable to Wal-Mart, given the significant geographic store overlap.
Editor’s note: For more in-depth coverage of Wal-Mart’s rollback initiative, read “How low can you go?” in the May issue of Meatingplace magazine.
