Wal-Mart looks local to deal with food costs

Posted by Daniel Palmer on 3rd July 2008

Wal-Mart has announced that they will source more local produce in their endeavour to keep prices down.
The announcement comes at a time when America is readying itself for its’ annual Independence Day celebration and is part of Wal-Mart’s strategy to evoke greater connection to their customers on patriotic grounds.

Wal-Mart use hundreds of growers across the United States and already are America’s largest purchaser of local produce. In the summer months about one fifth of produce sold in the fruit and vegetable section is sourced from the state in which the store operates.

“Offering local produce has been a Wal-Mart priority for years, and we’re taking it to a new level with a pledge to grow our partnerships with local farmers. We’re committed to purchasing locally grown produce whenever possible,” said Pam Kohn, Wal-Mart’s senior vice president and general merchandise manager for grocery.

Wal-Mart estimates that it currently purchases more than 70 per cent of its produce from US-based suppliers, making the company the biggest customer of American agriculture. This year, Wal-Mart expects to source about $400 million in locally grown produce from farmers across the United States. Beyond agricultural produce, Wal-Mart also has a strong focus on US suppliers with 61,000 providing goods to the company in 2007.

The renewed dedication to local suppliers may be of concern to exporters hoping to expand their business with America’s largest retailer. Their move, however, is symbolic of the times as retailers worldwide look for ways to reduce costs.

They are also embarking on a change to their logistics and supply chain management. The idea is to streamline operations and reduce “food-miles”. Such strategies tend to be very successful with Woolworths an obvious example of how much more cost effective an improvement in the efficiency of a supply chain can be.