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Walmart’s Evildoing & Pickles

Here’s a Paul Solman report on Walmart’s dominance where he mentions that Walmart’s rise explains 10% of America’s productivity growth. According to economist, Arin Dube,

We have found that Wal-Mart employees take up 40 percent more in public assistance like food stamps or public health programs than other retail workers in California.We have found that Wal-Mart employees take up 40 percent more in public assistance like food stamps or public health programs than other retail workers in California.

Here’s a longish article by Charles Fishman on Walmart’s evildoing .Read more for longer quotes about how Walmart ruined Vlasik’s pickle business.

.This is the product that Wal-Mart fell in love with: Vlasic’s gallon jar of pickles. 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.

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.

{ 4 comments… add one }
  • Henry Schlatman 8/26/2004, 9:37 am

    Your point of view only shows one side of the story. The facts prove that as a business Wal-Mart can offer this low prices because they can buy in large bulk orders. However as a community leader, the company fails to meet the standard set by most BBB’s.

    Therefore, it is up to consumer groups to educate the public that if they continue to shop at stores that follow these policies, the consumer actually pays more not at the cashier, but in local, state, and federal taxes. In Doing a conparision based on adding in those factors into the price, many consumers would come to the conculsion that Wal-Mart like stores products cost them a lot more than the local Mom & Pop shop. Is our future worth saving a penny now to pay a dollar later?

  • Robert Nagle 8/26/2004, 10:51 am

    I am very ambivalent about Walmart. ON the one hand, I recognize that they are not paying a livable wage. On the other hand, I have to recognize their business efficiency and their ability to drive down prices. Actually, though I’d prefer not to, even I–a relatively educated consumer–end up shopping there a good number of times.

  • Sahil Manekia 10/1/2007, 1:29 pm

    Ask a cashier or helper at Walmart, and they’ll tell that they tried to get a job someplace else. But since they DIDN’T get a job anywhere else or WEREN’T ABLE to, we can only conclude that had Walmart not hired them, they would be sitting on some unemployment line, collecting welfare. Its bizarre therefore to hear people accuse Walmart of draining welfare. If anything, the reverse is true

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