WAL-MART'S ARGENTINE RIVALS CRY FOUL

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BUENOS AIRES-The competition is fuming over claims by Wal-Mart Stores that a handful of suppliers here have stopped selling it merchandise due to pressure from other large retail chains.

The problems in Wal-Mart's first South American market began Aug. 4, said Wal-Mart Public Relations Coordinator Gerardo Ruiz, just three days after the grand opening of a Sam's Club wholesale center in Avellaneda. The store in suburban Buenos Aires represents the first stage of a $118 million investment that calls for six stores by the end of 1996.

Wal-Mart ran an ad from Capurro & Asociados in Buenos Aires' two largest circulation daily newspapers on Aug. 13, and the next day in the largest working-class newspaper. The ad was titled "The cost of living in Avellaneda has gone down."

"Sam's Club helps lower prices," the ad begins. "Since Sam's Club arrived in Argentina prices have started falling. Ours as well as those of the competition. And just for this, it is necessary to clarify something.

"In the supposed price war we do not have enemies, we have competitors ..... We want to invite you to Sam's Club. So you meet us personally, without being guided by promises or opinions of others," the ad continues. "We want you to see with your own eyes that our prices are the lowest."

Wal-Mart says "There were 11 vendors who refused to sell to us citing strong pressure from other retailers," Mr. Ruiz told Advertising Age in a telephone interview from the retailer's Bentonville, Ark., headquarters.

Mr. Ruiz wouldn't name any of the suppliers, saying only that they are in the health and beauty aids, food and paper products sectors.

Wal-Mart is "currently negotiating with them to correct the situation," he said.

Mr. Ruiz said he didn't know if the suppliers are strictly local or multinational marketers. About 600 companies, local and multinational, supply Wal-Mart here.

The competition denies having exerted any pressure.

"Absolutely not!" said Oscar Guil, director of Supermercados Norte, Argentina's third-largest retail chain with 22 stores and 1994 sales of $745.2 million. "We've been here for 30 years and consider ourselves competitive, but ethical. If Wal-Mart is going to make accusations, then they should mention names."

"These accusations aren't enough for me," said Carlos Paciarotti, director of Disco SA. "They're saying `some suppliers' and `some competitors."'

Disco is the country's No. 2 retail chain with 59 stores and 1994 sales of $755.4 million.

Mr. Paciarotti also denied Disco pressured Wal-Mart suppliers.

French-owned Carrefour, Argentina's largest retailer with 11 stores and 1994 sales of $1.5 billion, refused to speak with Advertising Age.

No retailer has run ads in response to the claims by Wal-Mart.

Though Wal-Mart blames the supplier stoppage on its competition, some see it differently.

"Wal-Mart thought it was going to have strong negotiating power [with suppliers] as soon as it entered Argentina," said one retail analyst who asked not to be named. "That was a mistake. Wal-Mart won't be able to have considerable weight [to make it worth suppliers' while to do business with the retailer] until it has at least three or four stores."

The analyst also cited a general downturn in the Argentine economy, which had grown by more than a third since 1990.

The country is currently well into a recession with unemployment at a rec ord 18.6%.

"This is the worst moment in the last five years," the analyst said. "When Wal-Mart announced it was coming here [in August 1994], things were fine and retailers were constantly announcing new store openings. Now they're putting them off."

Suppliers have remained tightlipped.

Mastellone Hermanos, Argentina's top dairy products marketer; Molinos Rio de la Plata, the country's No. 2 food marketer; and Unilever de Argentina all declined to comment about the accusations.

Despite the current problems and "tremendous competitors," Mr. Ruiz said expansion plans remain unchanged.

A Wal-Mart Supercenter is scheduled to open next door to the current Sam's Club by yearend.

"We continue to see Argentina as an attractive market," he said. "We will compete and bring our kind of retailing to Argentina."

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