Exclusive: Wal-Mart launches new front in U.S. price war, targets Aldi in grocery aisle

Mon Feb 27, 2017 5:55am EST
 
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By Nandita Bose

(Reuters) - Wal-Mart Stores Inc WMT.N is running a new price-comparison test in at least 1,200 U.S. stores and squeezing packaged goods suppliers in a bid to close a pricing gap with German-based discount grocery chain Aldi ALDIEI.UL and other U.S. rivals like Kroger Co KR.N, according to four sources familiar with the moves.

Wal-Mart launched the price test across 11 Midwest and Southeastern states such as Iowa, Illinois and Florida, focusing on price competition in the grocery business that accounts for 56 percent of the company's revenue, said vendor sources with direct knowledge of the matter who did not wish to be identified for fear of disrupting business relations with Wal-Mart.

Wal-Mart's tests are aimed at finding the right price point across a range of products that will attract more shoppers, and then adjusting prices as needed.

Spot checks by Reuters on a basket of grocery items sold by competing Aldi and Wal-Mart stores in five Iowa and Illinois cities showed Wal-Mart's bid to lower prices is already taking hold. Wal-Mart consistently offered lower prices versus Aldi, an improvement over recent analyst estimates that Wal-Mart's prices have been as much as 20 percent higher than Aldi on many grocery staples.

The competition at these stores is intense, with both competitors selling a dozen large eggs for less than a dollar. A gallon of milk at some stores was priced at around $1. For a graphic, click: tmsnrt.rs/2le6v0Y

The big box retailer also held meetings last week in Bentonville, Arkansas with food and consumer products vendors, including Procter & Gamble PG.N, Unilever PLC ULVR.L, Conagra Brands Inc CAG.N, and demanded they reduce the cost they charge the retailer by 15 percent, sources said.

Wal-Mart also said it expects suppliers to help the company beat rivals on head-to-head pricing 80 percent of the time, these vendor sources said. The wide-ranging meeting with suppliers - where Wal-Mart discussed other topics - was also attended by Johnson & Johnson JNJ.N and Kraft Heinz Co KHC.O, among others, sources told Reuters. The consumer goods companies did not respond to Reuters requests seeking comment.

These Wal-Mart moves signal a new front in the price war for U.S. shoppers, as the pioneer of everyday low pricing seeks to regain its competitive pricing advantage in traditional retailing.   Continued...

 
FILE PHOTO --  Shopping carts are seen outside a new Wal-Mart Express store in Chicago July 26, 2011. REUTERS/John Gress/File Photo