Editorial: Wal-Mart wins food fight edge

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Wal-Mart Stores is often cast as the giant that crushes mom-and-pop stores by utilizing deadly accurate inventory control, rock-bottom prices and enormous scale. But it's also proving itself a friend to food marketers by opening up the playing field and allowing them to compete against deeper-pocketed rivals.

As the Food Marketing Institute's annual supermarket show opens this week, Wal-Mart commands $80 billion in supermarket sales and has no fewer than 185 new grocery stores on the drawing board. Unlike most major grocery chains, Wal-Mart shuns expensive shelving, or slotting, fees. The fees can take two to three years for marketers to recoup, retail consultants say, and the high cost of entry often shuts out small-to-mid-size marketers unable to pay the freight.

Wal-Mart's policy, however, opens up opportunities for innovative startups such as Krave's Candy Co., and for established forces such as ConAgra Foods-turning the house that Sam built into a favored proving ground among vendors. "Wal-Mart is the first one to get our products because we don't have to pay slotting fees, and if the product is a homerun there, other retailers may be willing to bypass slotting fees," said ConAgra Senior VP-Marketing and Communications Tim McMahon.

But the lack of fees isn't the only factor. Wal-Mart distribution and inventory control systems are easy to navigate. Its scanner data is kept proprietary, allowing a food marketer to monitor results without sharing the data with competitors. It's also easier to later sell a new product that's a proven performer to Kroger or Shop-Rite.

There's still risk for marketers that rely too heavily on Wal-Mart. Its sheer scale makes it the largest and most powerful retail customer for marketers such as Aurora Foods, which traces 14% of its sales to the chain. But for marketers that go into Wal-Mart with eyes open, the rewards can be great.

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