Wal-Mart priced it at $2.97--a year's supply of pickles for less than $3! "They were using it as a 'statement' item," says Pat Hunn, who calls himself the "mad scientist" of Vlasic's gallon jar. "Wal-Mart was putting it before consumers, saying, This represents what Wal-Mart's about. You can buy a stinkin' gallon of pickles for $2.97. And it's the nation's number-one brand."
Therein lies the basic conundrum of doing business with the world's largest retailer. By selling a gallon of kosher dills for less than most grocers sell a quart, Wal-Mart may have provided a ser-vice for its customers. But what did it do for Vlasic? The pickle maker had spent decades convincing customers that they should pay a premium for its brand. Now Wal-Mart was practically giving them away. And the fevered buying spree that resulted distorted every aspect of Vlasic's operations, from farm field to factory to financial statement.
Indeed, as Vlasic discovered, the real story of Wal-Mart, the story that never gets told, is the story of the pressure the biggest retailer relentlessly applies to its suppliers in the name of bringing us "every day low prices." It's the story of what that pressure does to the companies Wal-Mart does business with, to U.S. manufacturing, and to the economy as a whole. That story can be found floating in a gallon jar of pickles at Wal-Mart.
Wal-Mart is not just the world's largest retailer. It's the world's largest company--bigger than ExxonMobil, General Motors, and General Electric. The scale can be hard to absorb. Wal-Mart sold $244.5 billion worth of goods last year. It sells in three months what number-two retailer Home Depot sells in a year. And in its own category of general merchandise and groceries, Wal-Mart no longer has any real rivals. It does more business than Target, Sears, Kmart, J.C. Penney, Safeway, and Kroger combined. "Clearly," says Edward Fox, head of Southern Methodist University's J.C. Penney Center for Retailing Excellence, "Wal-Mart is more powerful than any retailer has ever been." It is, in fact, so big and so furtively powerful as to have become an entirely different order of corporate being.
Wal-Mart wields its power for just one purpose: to bring the lowest possible prices to its customers. At Wal-Mart, that goal is never reached. The retailer has a clear policy for suppliers: On basic products that don't change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year. But what almost no one outside the world of Wal-Mart and its 21,000 suppliers knows is the high cost of those low prices. Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.
Of course, U.S. companies have been moving jobs offshore for decades, long before Wal-Mart was a retailing power. But there is no question that the chain is helping accelerate the loss of American jobs to low-wage countries such as China. Wal-Mart, which in the late 1980s and early 1990s trumpeted its claim to "Buy American," has doubled its imports from China in the past five years alone, buying some $12 billion in merchandise in 2002. That's nearly 10% of all Chinese exports to the United States.
One way to think of Wal-Mart is as a vast pipeline that gives non-U.S. companies direct access to the American market. "One of the things that limits or slows the growth of imports is the cost of establishing connections and networks," says Paul Krugman, the Princeton University economist. "Wal-Mart is so big and so centralized that it can all at once hook Chinese and other suppliers into its digital system. So--wham!--you have a large switch to overseas sourcing in a period quicker than under the old rules of retailing."
Steve Dobbins has been bearing the brunt of that switch. He's president and CEO of Carolina Mills, a 75-year-old North Carolina company that supplies thread, yarn, and textile finishing to apparel makers--half of which supply Wal-Mart. Carolina Mills grew steadily until 2000. But in the past three years, as its customers have gone either overseas or out of business, it has shrunk from 17 factories to 7, and from 2,600 employees to 1,200. Dobbins's customers have begun to face imported clothing sold so cheaply to Wal-Mart that they could not compete even if they paid their workers nothing.
"People ask, 'How can it be bad for things to come into the U.S. cheaply? How can it be bad to have a bargain at Wal-Mart?' Sure, it's held inflation down, and it's great to have bargains," says Dobbins. "But you can't buy anything if you're not employed. We are shopping ourselves out of jobs."
The gallon jar of pickles at Wal-Mart became a devastating success, giving Vlasic strong sales and growth numbers--but slashing its profits by millions of dollars.
There is no question that Wal-Mart's relentless drive to squeeze out costs has benefited consumers. The giant retailer is at least partly responsible for the low rate of U.S. inflation, and a McKinsey & Co. study concluded that about 12% of the economy's productivity gains in the second half of the 1990s could be traced to Wal-Mart alone.
There is also no question that doing business with Wal-Mart can give a supplier a fast, heady jolt of sales and market share. But that fix can come with long-term consequences for the health of a brand and a business. Vlasic, for example, wasn't looking to build its brand on a gallon of whole pickles. Pickle companies make money on "the cut," slicing cucumbers into spears and hamburger chips. "Cucumbers in the jar, you don't make a whole lot of money there," says Steve Young, a former vice president of grocery marketing for pickles at Vlasic, who has since left the company.
At some point in the late 1990s, a Wal-Mart buyer saw Vlasic's gallon jar and started talking to Pat Hunn about it. Hunn, who has also since left Vlasic, was then head of Vlasic's Wal-Mart sales team, based in Dallas. The gallon intrigued the buyer. In sales tests, priced somewhere over $3, "the gallon sold like crazy," says Hunn, "surprising us all." The Wal-Mart buyer had a brainstorm: What would happen to the gallon if they offered it nationwide and got it below $3? Hunn was skeptical, but his job was to look for ways to sell pickles at Wal-Mart. Why not?
And so Vlasic's gallon jar of pickles went into every Wal-Mart, some 3,000 stores, at $2.97, a price so low that Vlasic and Wal-Mart were making only a penny or two on a jar, if that. It was showcased on big pallets near the front of stores. It was an abundance of abundance. "It was selling 80 jars a week, on average, in every store," says Young. Doesn't sound like much, until you do the math: That's 240,000 gallons of pickles, just in gallon jars, just at Wal-Mart, every week. Whole fields of cucumbers were heading out the door.
For Vlasic, the gallon jar of pickles became what might be called a devastating success. "Quickly, it started cannibalizing our non-Wal-Mart business," says Young. "We saw consumers who used to buy the spears and the chips in supermarkets buying the Wal-Mart gallons. They'd eat a quarter of a jar and throw the thing away when they got moldy. A family can't eat them fast enough."
The gallon jar reshaped Vlasic's pickle business: It chewed up the profit margin of the business with Wal-Mart, and of pickles generally. Procurement had to scramble to find enough pickles to fill the gallons, but the volume gave Vlasic strong sales numbers, strong growth numbers, and a powerful place in the world of pickles at Wal-Mart. Which accounted for 30% of Vlasic's business. But the company's profits from pickles had shriveled 25% or more, Young says--millions of dollars.
The gallon was hoisting Vlasic and hurting it at the same time.
Young remembers begging Wal-Mart for relief. "They said, 'No way,' " says Young. "We said we'll increase the price"--even $3.49 would have helped tremendously--"and they said, 'If you do that, all the other products of yours we buy, we'll stop buying.' It was a clear threat." Hunn recalls things a little differently, if just as ominously: "They said, 'We want the $2.97 gallon of pickles. If you don't do it, we'll see if someone else might.' I knew our competitors were saying to Wal-Mart, 'We'll do the $2.97 gallons if you give us your other business.' " Wal-Mart's business was so indispensable to Vlasic, and the gallon so central to the Wal-Mart relationship, that decisions about the future of the gallon were made at the CEO level.
Finally, Wal-Mart let Vlasic up for air. "The Wal-Mart guy's response was classic," Young recalls. "He said, 'Well, we've done to pickles what we did to orange juice. We've killed it. We can back off.' " Vlasic got to take it down to just over half a gallon of pickles, for $2.79. Not long after that, in January 2001, Vlasic filed for bankruptcy--although the gallon jar of pickles, everyone agrees, wasn't a critical factor.
Article continues at great length..... and is well worth reading! Includes Huffy Bicycle, Levi Strauss, and Master Lock experience.
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Also, see a January 2006 article titled THE MAN WHO SAID NO TO WAL-MART
Every year, thousands of executives venture to Bentonville, Arkansas, hoping to get their products onto the shelves of the world's biggest retailer. But Jim Wier wanted Wal-Mart to stop selling his Snapper mowers......
What struck Jim Wier first, as he entered the Wal-Mart vice president's office, was the seating area for visitors. "It was just some lawn chairs that some other peddler had left behind as samples." The vice president's office was furnished with a folding lawn chair and a chaise lounge.
And so Wier, the CEO of lawn-equipment maker Simplicity, dressed in a suit, took a seat on the chaise lounge. "I sat forward, of course, with my legs off to the side. If you've ever sat in a lawn chair, well, they are lower than regular chairs. And I was on the chaise. It was a bit intimidating. It was uncomfortable, and it was going to be an uncomfortable meeting."
It was a Wal-Mart moment that couldn't be scripted, or perhaps even imagined. A vice president responsible for billions of dollars' worth of business in the largest company in history has his visitors sit in mismatched, cast-off lawn chairs that Wal-Mart quite likely never had to pay for.......
In 2002, Jim Wier's company, Simplicity, was buying Snapper, a complementary company with a 50-year heritage of making high-quality residential and commercial lawn equipment. Wier had studied his new acquisition enough to conclude that continuing to sell Snapper mowers through Wal-Mart stores was, as he put it, "incompatible with our strategy. And I felt I owed them a visit to tell them why we weren't going to continue to sell to them."
Selling Snapper lawn mowers at Wal-Mart wasn't just incompatible with Snapper's future--Wier thought it was hazardous to Snapper's health. Snapper is known in the outdoor-equipment business not for huge volume but for quality, reliability, durability. A well-maintained Snapper lawn mower will last decades; many customers buy the mowers as adults because their fathers used them when they were kids. But Snapper lawn mowers are not cheap, any more than a Viking range is cheap. The value isn't in the price, it's in the performance and the longevity.......
Jim Wier believed that Snapper's health--indeed, its very long-term survival--required that it not do business with Wal-Mart......
Article continues at great length..... and is also well worth reading!
ALL YOU HAVE TO DO TO BE FAVORED BY WALMART IS TO BE QUEER
AMERICAN FAMILY ASSOCIATION Pass Along Sheet
Make Copies of this sheet and pass along to your family and friends.
Wal-Mart asks for, and receives, permission to join homosexual marriage group
Wal-Mart comes out of the closet
Wal-Mart, the largest retailer in the world, has asked for and received permission to join the National Gay & Lesbian Chamber of Commerce. The NGLCC is a leading promoter of homosexual marriage.
Although Wal-Mart has never excluded homosexuals from being employees, customers, or suppliers, the company wanted to be more closely identified with promoting the homosexual agenda. Wal-Mart is now a “corporate member” of the NGLCC, putting their approval on the NGLCC’s efforts to abolish the definition of marriage as the union of one man and one woman. A Wal-Mart vice president will serve as an advisor to the NGLCC, helping them promote homosexual marriage.
Wal-Mart agreed to give $25,000 to the NGLCC and to pay for two conferences scheduled by NGLCC. Also, Wal-Mart will give homosexual-owned businesses special treatment when making purchases. Companies not owned by homosexuals will be moved down the list.
NGLCC called Wal-Mart’s action "part of the company's ongoing commitment to advancing diversity (homosexuality) among all of its associate, supplier and customer bases."
Wal-Mart is offering the same kind of support for homosexual marriage which Ford Motor Company has been giving to homosexual groups for years.
TAKE ACTION
1. To make sure your voice is heard, please call Wal-Mart's home office headquarters and ask for Chairman Rob Walton at 479-273-4000. Also, call your local Wal-Mart manager and express your concerns. Please, be polite when you call!
2. Send an email to Wal-Mart Chairman Rob Walton by visiting www.afa.net.
I can proudly say that I have purchased exactly 2 things at Wal-Mart in my entire life - and that was because no other store carried the item I needed.
I do not shop in Wal-Mart and never will. They are building a new one 5 miles from my home - still won't walk in the place. I don't support China, Bangladesh, India or any other country.
I agree that we ARE shopping ourselves out of jobs all over the country and the blame lies on the shoulders of stockholders expecting ever increasing profits and consumers expecting ever lowering prices - the two don't match.
It's Saturday, so this must be a WALMART PING!!!!!!!!!!!!!
If you hate Wal-Mart, DON'T SHOP THERE! PLEASE! Give the rest of us who do shop there a break. The crowds are getting ridiculous.
Sure enough, they forced me to get dressed, hauled me downstairs, and threw me into a van. They didn't have to tell me where they were taking me. I knew. Wal-Mart. Every two weeks, the Republican stormtroopers roust me out of bed and force me to shop at Wal-Mart. I see my neighbors there, too. Each of them hauled around on a leash by a Republican stormtrooper. They force us to buy things. How did America come to this? Where are the unions? Where are the Democrats? |
By the way, I agree with the Snapper guy but the rest of the article is pure crap.
two OLD stories, two tales of business decisions made by the individual companies. Wal-Mart didn't force Vlasic to do business with them, they could've walked away at any time, and should have if the relationship wasn't healthy for their company.
As for Snapper, they made a decision and it seems to be to their benefit, good for them.
As for you, dredging up old news in order beat that dead horse one more time is pathetic and lame. If Wal-Mart closed their doors today, do you honestly believe Americans would never buy anything from China again?
Wal-Mart is anti-union. Good.
Wal-Mart is cheap. Good.
Costco puts little guys out of business and is expensive. Bad.
So is this Vlasic's excuse for reportedly* hiring so much illegal labor and helping the illegals hide from police, while competitor Mt. Olive made sure their immigrant labor was legal, and helped police when they came to the camps? How about an exposé on how Mt. Olive can't compete with Vlasic because of this, and how it all goes back to eeeeevil Wal-Mart?
*I don't have any direct connection with this...I base these statement on law enforcement officers who refuse to buy Vlasic--inisting instead on Mt. Olive.
Yes, the same Paul Krugman who is far more famous as the virulent anti-Bush/GOP Op-Ed writer for the New York Times, caught in numerous lies over the years as the DNC voice on economics.
Nice try.
I just bought a knife at Wally world the other day. It's a Kershaw Model 1620H3. Excellent American made knife, at $34.98 it was a bargain. I did not buy any chinese crap.
Wal-Mart has the power to squeeze profit-killing concessions from vendors.
No it doesn't.
Nobody is forced to sell to Wal-Mart and nobody but a fool would sell to Wal-Mart if it killed their profits.
You have to be an idiot to believe this stuff.
Vlasic is now owned by Pinnacle Foods Corporation
(BTW, Pinnacle is not a publicly traded company. The "old" Vlasic company was)
I think I know what I'm talking about. I was a Vlasic shareholder for many years. I watched it's sad demise.)
Insofar as selling pickles in one gallon jars, my grandmother "put up" pickles in one gallon jars. I still have her old pickle crocks. If there are those who've never seen an old pickle crock let me tell you they're Big and heavy. I believe the smallest is about 3 gallons. The most common was 5 gallons.
I believe this to be just another "hit piece" against Wal Mart.
IMHO
"I could go to my grave, and my tombstone could say, 'Here lies the dumbest CEO ever to live. He chose not to sell to Wal-Mart.' "
You have got to be kidding me! Has anyone bought anything from a J.C. Penney in the last 10 years?
I still don't shop there due to her past tenure on their Board...thankfully I can afford to shop elsewhere.
So don't shop there. It's always too crowded anyway.
A sad tale this morning, Freepers. I was awakened at 7 am by the sound of Republican stormtroopers breaking down my door. "Oh no, not again," I thought.