In a report from analysts at UBS titled “Bentonville Moving Fast” the analysts make some bold predictions about the impact of high-level changes at Walmart. I love a bold prediction but I have a tendency to believe that the impact of the changes will be much more far-reaching and unpredictable than the report anticipates. Walmart has made a tremendous investment in Private Brand over the last few years however it has potentially narrowed its Private Brand portfolio to its detriment. Adding in new exciting and relevant Private Brands could solve for some of the selection perception problems that have been aggressively reported, the problem is not necessarily Private Brand penetration but instead Great Value penetration.
Change at Walmart = Positive for Consumer Staples Vendors
As we indicated in our inaugural report on the implications of recent management changes at Walmart for consumer staples companies, we believe the mega retailer is likely to pursue a more vendor-friendly philosophy going forward. This will mean:
- rapid re-implementation of action alley (key for the many impulse categories in CPG),
- no more surprise/deep rollbacks, and
- more collaboration between Walmart’s buyers and the vendor community. This should lead to better visibility/profitability for CPG vendors.
Field Work Uncovering Confirming Data Points By the Day
Walmart is moving fast. We have picked up 3 incremental data points since our last report:
- the rollbacks did not meet Walmart’s internal return thresholds,
- Walmart seems focused on moving back to a pre-Project Impact merchandising philosophy in very short order and
- Walmart’s buyer community has been directed to “collaborate/listen/partner” with the vendor community—a reversal of the adversarial relationship that become the norm over the past 2 years.
Uniform Positive for Staples…with a Few Real Stand Outs
We believe all staples companies will benefit from these changes, with a few companies poised to experience material, “needle moving” impact. We believe affected companies fall into one or more of the following categories: Companies that
- were affected by the roll back initiative,
- will benefit from SKU restocking, and/or
- have significant leverage to Walmart (% of sales). These companies, in order of importance, are: 1. Energizer, 2. Clorox, 3. Cott, 4. ConAgra, and 5. PepsiCo. Details by company are in the body of this report.
Read the entire report.