By Gene Lucht, quotes Mary Hendrickson
Iowa Farmer Today
November 15, 2003
DES MOINES - The signs rest in the basement, waiting for a
fresh coat of paint.
They are about Wal-Mart and although they aren't especially
derogatory, they don't endorse the retailing giant.
"We've got to be really careful we just don't pick on
the top dog," cautions Mary Hendrickson, an assistant professor at the
University of Missouri who serves as co-director of the Food Circles Networking
Project.
"Wal-Mart has implemented new ways of doing business
that are not all good . . . but at the same time it's not them alone," she
adds.
Still, Wal-Mart is the relatively new but very big fish in
the pond when it comes to food retailing, Hendrickson says.
That means farmers need to know how the picture in food
retailing today is dramatically different than it was just 5 or 10 years ago.
That goes back to Wal-Mart.
The company is one of the retailing success stories of
modern times, analysts say, in part because it had a specific goal of being the
low-cost retailer and in part because it was very creative in finding ways to
meet that goal.
For example, the company is famous in business school
circles for the way it reduced inventory levels and kept track of items by
their bar codes, ordering only when needed instead of keeping warehouses full.
It also cut costs in each store and in its corporate structure.
"There's no slotting fees," says Mark Palmquist,
COO at CHS Cooperatives in Inver Grove Heights, Minn.
The farmer-owned co-op deals with Wal-Mart through its
partnership in Ventura Foods, a company that deals in vegetable-oil based
products such as cooking oil and margarine.
Some retailers require suppliers to pay slotting fees to get
shelf space in the store.
Palmquist says Wal-Mart does not require such fees, but does
demand suppliers meet its cost-and-supply criteria.
Wal-Mart keeps close tabs through its bar code analysis of
exactly what products are selling and where they are selling and what is needed
in inventory.
That can help Wal-Mart, but it also can help suppliers
better manage inventory and respond faster to market trends, Palmquist says.
However, Hendrickson and others who spend their time
promoting ideas such as locally grown food and locally owned businesses find
the trend toward bigger national chain stores to be ominous, especially when it
comes to food retailing.
"I think they've taken corporate domination of retail
to new heights," says State Rep. Ed Fallon, D-Des Moines, and executive
director of 1,000 Friends of Iowa, an organization that has spent much of its
time fighting urban sprawl.
It's here, in the headquarters for 1,000 Friends of Iowa
that the Wal-Mart signs rest. There's four of them, a series, that are in the style
of the old Burma Shave signs, telling a story. These say "Wal-Marts and
roads sprout up like weeks and our tax dollars are the seeds."
The message alludes to tax funds that often go to build
roads and other infrastructure items to new Wal-Marts and other large retailing
operations.
For Fallon, the idea of a national or international chain
building a 120,000-square foot store to sell items shipped in from other parts
of the nation is not progress.
He instead likes to talk about the new Metro Market started
by an entrepreneur in Des Moines that sells locally grown produce or the Top Value
market, a locally owned operation, that also was opened in the past few years.
Those businesses provide outlets for local products and are
aimed at local buyers, Fallon says. They offer Iowa farmers better
opportunities than do Wal-Mart or other large retailers, he adds.
However, the big guys certainly are getting bigger.
Wal-Mart's Web site describes the company as the world's
largest retailer with $244.5 billion in sales for the fiscal year that ended Jan.
31.
The company had 1,489 stores, 1,397 super centers (with
supermarkets) 532 SAM'S Clubs and 56 neighborhood markets in the United States
and another 1,317 stores in other nations.
The top five food retailers in the United States now have at
least 50 percent of the overall supermarket business, says Bill Heffernan, who has
followed such concentration trends at the University of Missouri.
Wal-Mart is the biggest of the big boys in the United States
and internationally.
That trend toward ever larger food retailers both here and internationally
means if farmers or agribusinesses want to get onto more store shelves and sell
to more consumers, they may have to work together to provide the volume
necessary to deal with these large chains, Hendrickson says.
While many smaller supermarket chains offer local store
managers a great deal of freedom to stock some locally produced items, she says
most large chains are less inviting to that idea.
That doesn't mean it can't happen. It just means it may be
more difficult.
Palmquist says while Wal-Mart can be demanding, the absence
of slotting fees and some other items can make it a good place to do business.
Fallon and other advocates of local ownership aren't
convinced, saying although Wal-Mart and other large retailers may end up
charging consumers less for specific products, they also contribute less to the
fabric of the community than locally owned businesses that buy from local
suppliers.
The only way farmers can effectively deal with these large
retailers is often to get bigger themselves through mergers or cooperative
agreements that allow them to supply the volume necessary to deal with a national-chain
store.
They mention one other thing - concentration in any industry
can lead to lower prices in the short run but often can lead to higher prices
for consumers later on.
They point to situations in the Northeast and Chicago (not
involving Wal-Mart but with other supermarket chains) where milk prices have soared
to as much as $1 per gallon above the going rate for other areas.
The reason, they say, is consolidation has meant consumers
in those areas have few options in those areas, and large retailers are
"milking" the consumers on dairy products.
That is the ultimate fear for consumers, Hendrickson says.