Walmart entered the beef business when it opened a processing plant in Georgia that will cut and prepare steaks and roasts for sale in 500 of its stores in the U.S. Southeast. While the plant won’t change the dynamics of the beef industry — it will handle less than 0.5 percent of U.S. beef production, says a CoBank analyst — if it’s successful, “it could mean Walmart takes another step up the supply chain towards the producer.”
“We think Walmart’s current beef strategy is more of a test — not only for Walmart and its suppliers but also its customers — that could lead to much larger and more significant investments in the future,” wrote economist Will Sawyer for CoBank, a large agricultural lender. The Georgia plant is part of a supply chain that includes a company that selects for genetics to produce higher-graded cattle, a feeder calf operation, a cattle feeder, and a cattle processor. Walmart says the beef will be hormone-free and can be traced from farm to the store.
“Walmart’s stated goal for the Angus supply chain is to ‘improve the quality of its food offering.’ To offset the additional cost of production, these Walmart-produced steaks and roasts will need to carry a premium price,” said Sawyer. “Grocery accounts for over half of Walmart’s U.S. revenue, so it makes sense for Walmart to look to food as a way to increase the share of its current customer’s food budget and possibly attract new customers.”
The CoBank report, “Walmart’s new beef plant is more sizzle than steak, for now,” is available here.