Jack in 2005 The Food Insider did a story on impact Wal Mart would have on several different sectors.  There were some interesting highlights.  Please stroll with me down memory-lane:

Issue Date: July 2005, Posted On: 7/1/2005

Operating the Wal-mart way
Kristal Arnold
karnold@vancepublishing.com
Corporate Goliath or consumer-friendly retail outlet? Always low prices, or always low wages? When it comes to Wal-Mart, there seems to be no middle ground. The world’s largest retailer, with $258 billion in sales last year, also became America’s largest food retailer in 2002. Nearly 40 percent of the company’s sales are now grocery sales, and that means Wal-Mart’s influence — good -or bad, depending on your view — will have a dramatic effect on how you raise pigs, make cheese or process beef.

[...] But Wal-Mart also sells $5.3 billion in fresh meats each year, Ken Stettmeier, head of Wal-Mart’s fresh-meats department, told a group of Kansas cattlemen earlier this year. (Wal-Mart declined to be interviewed.)

[...]

Retail Forward also predicts Wal-Mart to control 35 percent of food-store-industry sales by 2007.

With that kind of buying power, Wal-Mart’s influence on the food-supply chain is undeniable.

(Interesting that this reporter mentions below animal-protein, a topic which rabid animal activists such as PETA and the United Nations tend to eliminate from the American dinner plate.)
How does Wal-Mart’s low-price business model affect the rest of the animal-protein food industry?

(Here is a priceless quote):  Brian Buhr, a professor in the department of applied economics at the University of Minnesota, believes the consumer owes a debt of gratitude to Wal-Mart for its everyday low pricing, which he believes keeps inflation down.

(Well Mr. Buhr now that American jobs have been out-sourced and contaminated Chinese products fill our homes are so sure that low prices are a good thing?  Buying American did cost more but one wasn’t playing Russian roulette when he spent his pay check.

“How often have you heard it said that manufacturers just haven’t been able to pass on costs to consumers?” he asks. “Wal-Mart has put a lot of pressure on manufacturers and suppliers of all industries to squeeze out supply-chain costs, and all in all, that has been very good.” (not for farmers and ranchers)

The Wal Mart New Customer Rules the Agricultural Roost

Vern Pierce, a beef economist with the University of Missouri Commercial Agriculture Program, agrees and has a message for the industry: “The old paradigm is one which you could send products to market with whatever quality you desired and get paid an amount of money that would provide you a profit — that system is over.” The food industry is learning that it is no longer part of the historic agriculture paradigm and is recognizing that it’s part of a new consumer culture run by people in the retail world, being driven by consumer demand, he says.

Wal Mart’s Kill Policy

[...] Says Chuck Jolley, president of Jolley & Associates. “Wal-Mart’s pricing strategy has the potential to kill the mid-priced, mid-quality range of products,” he says.

Impacting the chain

Wal-Mart has far-reaching influence throughout the chain, but most agree that its biggest impact is at the retail level. “Wal-Mart is teaching other retailers how to deliver the products that are needed by consumers, to the consumers that want them, in the shape and format that they want them,” Pierce says. “That first step has to be at the retail level, in partnership with the consumers to start to send back that signal, and that’s a signal we’ve never had in the beef industry.”

Passing the Buck of Bad Products

Unlike at restaurants, where consumers associate the product with the restaurant (“I bought this hamburger at McDonald’s, and they’re responsible”), at retail, consumers view the manufacturer as the source of the product (“I bought Tyson pork chops at Wal-Mart, but Tyson’s responsible”), Buhr explains. “So, restaurants will hammer production/processing because it directly affects their viability as a brand and they will protect that at all costs. Wal-Mart can find it much easier and more likely to pass the buck — ‘hey, we just stock the shelves’ — so the incentives to drive production in meats will come, and has come, more directly from the restaurant side of the business.” An example of this is the pressure on methods of animal rearing being requested of suppliers by McDonald’s, he adds.

Quality Product Termination

That “hey, we just stock the shelves” position has taken some sectors out of the mix entirely, Jolley says. “Wal-Mart is really in the distribution business, looking for the absolute-lowest-cost producers of a product, then moving it as quickly as possible through the marketing chain,” he says.

This search for the lowest-cost producer will continue to change the face of Wal-Mart’s product offerings, as the retailer has already shown a willingness to find cheaper resources overseas. Wal-Mart estimates that it bought about $18 billion in product from China last year. “With the major disruptions in the North American cattle market caused by the closure of the Canadian border, it doesn’t take a big leap of faith to believe Asia will become their major supplier of meat and poultry within the next 10-20 years,” Jolley says.

Radio-frequency identification (RFID)

Although Wal-Mart’s greatest impact in the chain has been at retail, Wal-Mart has changed the face of its suppliers, too. Wal-Mart required its top 100 suppliers be RFID-compliant by the first of this year, and suppliers have collectively spent $250 million to implement the technology, according to AMR Research released this past winter. Wal-Mart suppliers spent about $1 million to $3 million each to meet Wal-Mart’s minimum requirements, i.e. to purchase tags, readers and minimal software, according to AMR. In order to see any significant benefit, suppliers will need to spend about $13 million to $23 million more.

Wal-Mart’s RFID mandate affects not only suppliers, but also other members of the chain, as eventually the hope with RFID is that the meat will be traceable to the farm.

Joking to Bankupt “Everyone Else”

“My standard joke has been that RFID really is a Wal-Mart plot to bankrupt everybody else,” Coupe jokes. “It creates tremendous pressure on everybody to get into the game.”

Even though Wal-Mart’s top- 100-supplier RFID mandate affects only a few meat-industry-related suppliers, it’s still an area to watch, since as with any technology that a retailer of Wal-Mart’s size requires of its suppliers, RFID is becoming the standard, Pierce says. When a supplier must modify its operations to comply with one retailer, in order to pay for that equipment, the company must do all of its business using that equipment, thus it becomes the standard, he explains, as was the circumstance with case-ready meats.

[...]

Consolidation

Wal-Mart played an unquestionable role in the industry-wide shift to case-ready, but what role has the retailer played in the consolidation of the various meat industries?

“The consolidation of the pork and poultry industries was under way before Wal-Mart was a factor,” Jolley says. However, he believes Wal-Mart’s presence will speed beef- industry consolidation.

Buhr agrees that Wal-Mart will likely play an increasing role, but he differentiates two consolidations, both driven by desire for increased efficiencies. One is vertical consolidation, which is the desire for increased quality and supply control through the chain. The other is horizontal marketing consolidation driven by efficiencies to bundle meat categories into a one-stop supplier for the meat case. He notes that recent cross-sector consolidation, like Tyson pork, beef and poultry and Hormel pork, turkey and beef, is an example of the desire by Wal-Mart and others to have a single solution for the meat case. The industry hasn’t yet hit the third stage, which is a continued combination of vertical and horizontal consolidation, in which Buhr says the demands of retail will directly affect the production sector.  (That loss of access for Americans to quality, local products which are untampered by multi-national interests)