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Walmart Steps Up Healthy Food Commitment in Response to Michelle Obama

Posted by Sheila Shayon on January 20, 2011 11:00 AM

Americans shop, on average, 2.5 times weekly for groceries and once a month for drug items. Naturally, drugstores and big-box outlets, ever savvy to shifting consumer habits, are adding more groceries to their shelves.

Target, Walmart, Walgreens and CVS are leading the charge. Walmart has 33% of the market, Target has about 3%, and Kroger, Safeway and Supervalu range from 4-9%, according to Janney Capital Markets. That makes Walmart not only the nation's biggest retailer, but America's biggest grocer, too.

Wal-Mart corporate is determined to get even more of the market, with a five-year commitment unveiled today to make its own-brand food healthier, and pressure its suppliers to follow suit.

In addition to releasing a video, above, featuring "Walmart moms" (execs Andrea Thomas, SVP of sustainability, and corporate nutritionist Megan Diaz), the announcement won the support of one high-profile mom: the first lady of the United States, Michelle Obama, who co-presented the news at a press conference in Washington, D.C.

Wal-Mart said it will make thousands of its packaged foods lower in unhealthy salts, fats and sugars, and drop prices on fruits and vegetables. According to the New York Times,

"the initiative came out of discussions the company has been having with Michelle Obama, the first lady, who will attend the announcement in Washington and has made healthy eating and reducing childhood obesity the centerpiece of her agenda. Aides say it is the first time Mrs. Obama has thrown her support behind the work of a single company.

The plan, similar to efforts by other companies and to public health initiatives by New York City, sets specific targets for lowering sodium, trans fats and added sugars in a broad array of foods — including rice, soups, canned beans, salad dressings and snacks like potato chips — packaged under the company’s house brand, Great Value."

Wal-Mart's press release outlines its corporate action plan on healthier food and nutrition:

1) Reformulating thousands of everyday packaged food items by 2015 by reducing sodium 25 percent and added sugars 10 percent, and by removing all remaining industrially produced trans fats. The company will work with suppliers to improve the nutritional quality of national food brands and its Great Value private brand in key product categories to complete the reformulations;

2) Making healthier choices more affordable, saving customers approximately $1 billion per year on fresh fruits and vegetables through a variety of sourcing, pricing, and transportation and logistics initiatives that will drive unnecessary costs out of the supply chain. Walmart will also dramatically reduce or eliminate the price premium on key “better-for-you” items, such as reduced sodium, sugar or fat products;

3) Developing strong criteria for a simple front-of-package seal that will help consumers instantly identify truly healthier food options such as whole grain cereal, whole wheat pasta or unsweetened canned fruit;

4) Providing solutions to address food deserts by building stores in underserved communities that are in need of fresh and affordable groceries; and

5) Increasing charitable support for nutrition programs that help educate consumers about healthier food solutions and choices.

Further to that last point, Walmart is using corporate citizenship to brand itself as America's top purveyor of healthy, sustainable food. In addition to continuing its Feeding America support (above) and last week's $3 million commitment to school breakfasts, Wal-Mart today announced a $2 million commitment to help make US food banks more "green."

According to the New York Times, "Mrs. Obama pushed the company to hold itself accountable by issuing public progress reports. The Partnership for a Healthier America, a nonprofit organization that works with the first lady on her Let’s Move initiative to reduce childhood obesity, will monitor the company’s progress" on today's commitment.

As Walmart further establishes itself as America's grocer, its competitors are stepping up. “It’s going to be a big food fight in the sense that you’re going to have so many people going after this sector,” commented Bill Dreher with Deutsche Bank, to the New York Times.

Target plans to add its own PFresh (Prototype Fresh) branded grocery sections to more than half of its 1,500 U.S. stores by year-end in a targeted assault on Wal-Mart. Target now sells beer and hard liquor, ground beef, steak and salmon, and organic eggs and ketchup.

"It's low risk because it establishes a food department, which drives repeat visits, and because it doesn't cost very much capital to build them," says analyst Brian Sozzi. 

Upscale grocers like Whole Foods are saying that consumers don’t mind the 2-3% raise predicted by the U.S. Department of Agriculture for 2011. In fact, Whole Foods' stock is up 88% since this time last year.  

"If you are an upscale operator your ability to pass on inflation is much greater, but the middle-income stores are up against tough competition. The high-end consumer is feeling better, but the middle- and lower-income levels are feeling much worse," says Karen Short, an analyst at BMO Capital Markets. 

With forty million Americans now on food stamps, middle and low income consumers are shopping at supercenters that offer lower prices and better deals than traditional grocery chains. About 10% of sales at Walmart, Target, and Costco came from groceries last year, according to Packaged Facts, which stands to reason — big-box stores have the bulk buying power to out-compete smaller stores on price and variety.

“They are super giants. They have the supply chain to allow them to bring the supplies into the store. It’s a way to build up traffic and expand their market,” says Olivier Rubel, assistant professor, UC Davis Graduate School of Management. 

And with the uber-grocer that is Wal-Mart now getting into Whole Foods' territory with its healthy grocery push, that food fight is going to get even more heated.

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