Walmart in SA: undercutting through imports
From Business Day (link). Although the article focuses on Batteries, it speaks to the broader stocking and provenance economies
“THE first of many Walmart-branded products has hit the shelves of Massmart stores, signalling the beginning of a price war which analysts say Walmart will win.
The US retail giant is flexing its global buying muscle, importing Great Value alkaline batteries from China. It is a private label product that will retail at 35% less than locally produced battery brands.
“Walmart has unrivalled scale and buying power; there is no organisation on Earth that can compete. Walmart will win this battle over time,” Bryan Roberts, director of retail research at Kantar Retail, said on Tuesday.
Although Walmart’s Great Value brand is distributed in seven countries and includes products such as frozen foods, baked goods, soups and juices, most of its grocery sourcing would remain local, he said.
Last year, before the R16.5bn merger between Massmart and Walmart was approved by the Competition Tribunal, Shoprite CEO Whitey Basson said Africa’s largest supermarket chain was prepared to “go to war” over prices.
Massmart at the time rejected claims by the government and unions that its procurement policies would kill local manufacturing.
The company said on Tuesday there were no alkaline battery manufacturers in South Africa. A pack of four locally produced AAA batteries costs about R39, and the Great Value batteries will cost R25.
“The offer from Walmart was very compelling, especially as batteries in South Africa are priced at a premium thanks to many factors such as pilferage,” said Ray Abraham, Massbuild private label executive.
Massmart has private label brands, some of which are procured to ensure lower prices.
Shoprite and Pick n Pay also stock private label products. Last week, Shoprite said these goods had outstripped other grocery sales.
Nedbank Securities analyst Syd Vianello said Massmart would import other products. “Some categories where they could be competitive would be breakfast cereals, coffee, biscuits, condiments and other high-value products.
“Food manufacturers could be concerned if the company finds food products to import, but many of Massmart’s competitors already import many types of goods.”“
University of Cape Town