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I never said Walmart invented the space. They did innovate in the space however and have used it at a scale that had not remotely been seen before. I entirely

I never said Walmart invented the space. They did innovate in the space however and have used it at a scale that had not remotely been seen before. I entirely disagree with your premise that Walmart's primary leverage against the large brands is their scale. The reason I was so specific on pressure on brands, is because that's where Walmart has the weakest position versus the core brands in cases of segment dominance. Kraft for example is an extraordinarily large and powerful supplier at what they do. Without the very cheap, near zero margin version of their Great Value competing products, Walmart has few good options for applying pressure to a supplier the size of Kraft that dominates so many spaces. There are no replacement products that can blanket fill up their thousands of stores coast to coast and always meet demand as the sole supplier. You can't get that kind of supply & guarantee from small mom & pop labels that are heavily regional.

elgenie 7y ago
Kraft-Heinz scale ($18B sales) is impressive, but it's still not much compared to Wal-Mart scale ($514B). That scale is what underlies the negotiation, just as Kraft-Heinz's scale typically let's them attempt to dominate their other customers. "Weakest position" for Wal-Mart, even if true, is relative and the absolute value is still quite strong. Every regional grocery store chain has private labels from which they get roughly the same stuff; store brands are a mid-1850s innovation for exactly the same leverage over suppliers as Walmart want to get. Walmart making a decision to vertically integrate an element of their supply chain as opposed to regionally contract also isn't an innovation: it's simply an obvious and logical step at scale. Finally, dismissing regional contracting as a possibility is silly: Florida and Washington state having their generic mac-n-cheese rolling out of different factories is not a deal breaker.

elgenie 7y ago

Kraft-Heinz scale ($18B sales) is impressive, but it's still not much compared to Wal-Mart scale ($514B). That scale is what underlies the negotiation, just as Kraft-Heinz's scale typically let's them attempt to dominate their other customers. "Weakest position" for Wal-Mart, even if true, is relative and the absolute value is still quite strong. Every regional grocery store chain has private labels from which they get roughly the same stuff; store brands are a mid-1850s innovation for exactly the same leverage over suppliers as Walmart want to get. Walmart making a decision to vertically integrate an element of their supply chain as opposed to regionally contract also isn't an innovation: it's simply an obvious and logical step at scale. Finally, dismissing regional contracting as a possibility is silly: Florida and Washington state having their generic mac-n-cheese rolling out of different factories is not a deal breaker.