Yesterday, Tuesday March 12, 2013 Bentonville, Arkansas big box giant Walmart presented at the Bank of America Merrill Lynch 2013 Consumer & Retail Conference, held in New York. Chief Financial Officer Charles Holley presented an update on the company’s financial priorities as the keynote speaker at the conference.
According to the Seeking Alpha transcript, during the question and answer session of the presentation Holley was asked by one of the analysts about Private Brand in grocery.
“All right, Charles a couple of grocery questions, one would be, how are you guys currently viewing private label, any reason to be pushing private label and why or why not?”
“We don’t view private label maybe like some other retailers. We are a brand retailer, we like to sell brands. We use private label to fill in gaps where we see there is a value gap for our customers. So, it’s really very depended on a category or subcategory. Now, having said that, we are improving our private label, you will – at the quality even the packaging is changing. You will see more, I think private label in certain categories later in this year. But it’s not a strategy to replace or pump up profit; it’s really a strategy to have an offering of value that’s just not there right now for the customer.”
Asked whether the retailer is changing its merchandising mix in grocery to respond to changes in consumer behavior such as demand for “real food and food with authenticity,” Mr. Holley replied:
“If you have watched us over the years, you know that we have put more organic in our assortment,” he said. “You have also known that we are partnering with a number of vendors and universities looking at sustainability type indexes that consumers can rely on to understand the food that they are eating.”
“We are not trying to tell consumers what to eat, but … we want to work with our vendor partners and others in the government to educate consumers about what they should eat, what is good for them. We think that is very important.”
Although it is certainly an interesting answer to a relevant question, the question narrowly addresses only grocery and ignores two-thirds of the store.
A few potential questions the analysts should be asking:
- How does Walmart plan to differentiate beyond price?
- What is the overarching private label portfolio strategy?
- What role does the customer play in the private label strategy?
- What labels in the Walmart portfolio are assets that contribute to the value of Walmart?
- How is private label defined by Walmart?
- What is the total private label penetration in the store?
- What is the private label penetration by department?
- What is the total penetration and margin contribution of generic or unbranded products in the store?
- What is the penetration of products that carry a Walmart distribution clause?
- What is the penetration of products that are global sourced by Walmart?
- What role does licensed and exclusive brands play in the Walmart strategy and what is their penetration and margin contribution?
- If Brands are important why doesn’t Walmart manage its labels as Brands?
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