(CNN) — America’s biggest retailers are pushing back against this country’s largest meat processors. The future of the nation’s food chain is on the line.
Walmart last week opened a meatpacking plant in south Georgia that will cut, package and label its own brand of steaks and roasts to deliver to meat cases at 500 stores in the region. It is Walmart’s first meatpacking plant. Costco has also developed its own farm-to-store poultry production operation in Nebraska to control some of its chicken production.
Although Walmart’s plant is a step toward a farm-to-shelf meat production, Walmart doesn’t actually operate the facility, nor does it own any cows or butcher the meat. An outside processor will operate the plant in Thomasville, Georgia, 20 miles from the Florida border and a little bigger than the size of a Walmart supercenter.
The plant’s opening is the latest move in top US retailers’ attempts to muscle into the food supply chain, an area traditionally dominated by food processors. Four companies control around 85% of the US cattle market, according to the Department of Agriculture. Walmart buys its beef from Tyson and Cargill, and it’s Tyson’s largest customer.
“I think the broader implications are more big retailers exploring expanding into processing themselves versus buying the product from a current packer or processor,” said David Anderson, agricultural economist at Texas A&M University.
Whenever we purchase a product from a grocery, food delivery service, or restaurant, especially one not directly connected with its suppliers, we have to assume that there is an entire opaque supply chain behind it all. The opacity isn’t just a consequence of the complexity. It is also a design choice. We aren’t meant to see behind the curtain. They’d rather we didn’t trouble ourselves about it.
Despite the appearance that we have a variety of choices and brands, it’s all an fabrication. The food industry is steadily shrinking under the gravitational pull of consolidation. Independent-sounding labels persist long after the smaller companies have been gobbled up by that conglomerates, like Pasturebird now being part of Perdue or Grass Run Farms being part of the world’s largest meatpacker JBS. There is very little choice left, and these choices constrain us to choose among the largest industrial players.
Our system of commerce worships at the altar of scale. Nothing is fundable in our capital markets unless it is scalable. And nothing is scalable unless it is commoditized and interchangeable. Once something is interchangeable, then the same factory can produce the same widget for Trader Joe’s, Walmart, Whole Foods, Kroger, and ButcherBox. The consumer can’t tell the difference, because there is no difference. The only perceived difference is in the marketing hype and the design of the label.
The ProPublica research found that poultry products are all being processed by the same group of industrial chicken slaughterhouses and packaging facilities. For instance, one Perdue factory in Delaware is producing chicken under different labels for Trader Joe’s, Walmart, Whole Foods, Kroger, and ButcherBox. The same few corporations and the same few mega-scale slaughter and meatpacking facilities are processing almost all our chicken and turkey.
We could imagine a naïve customer entering a Trader Joe’s or Whole Foods, or buying online at ButcherBox, thinking that it would be good to buy a premium chicken because they don’t trust the low-brow grocery store brands from Walmart or Kroger, not knowing that they’re all sourced from the same place under a different label.
Pushing into beef and milk
Walmart is trying to break big processors’ stranglehold over the beef industry, drive down costs and sell a higher-end line of beef at some stores.
Bob McClaren, a Texas rancher who is helping lead Walmart’s effort to source its cattle, said in an interview that the new supply chain will be able to “pull some of those costs out of all these other middlemen along the way,” allowing the more than 600 ranchers Walmart has partnered with so far to receive a premium on their cattle.
“One of the things that has always hindered the cattle industry is the multiple, multiple hands that are involved in the supply chain,” McClaren said. “We’re reducing some of that work.”
Walmart is also trying to gain an upper hand on its current suppliers. Working directly with ranchers to produce some of its beef supply may put Walmart in a stronger position when it negotiates contracts with processors in this consolidated market.
“There are two key players out there that we do business with,” former Walmart US CEO Greg Foran said in June. “I think we all know the market dynamics of what happens when you generally operate in a duopoly. It’s not all that good for the customer.”
Additionally, Walmart leaders say moving into the beef chain will help it attract customers with its own brand of premium steaks.
“Meat is center of the plate” and “drives the customer to the store,” Scott Neal, Walmart’s senior vice president of meat, said in a CNN Business interview last year. Walmart has not announced a name for the brand yet.
Walmart also entered the milk supply chain recently. The company built a milk processing plant in Indiana to supply milk to 500 stores.
“What drives a decision like that is if we start to see a consolidation in supply,” former Walmart leader Foran said in June of Walmart’s move into diary.
Walmart’s milk suppliers’ prices had gone up, leading the company to explore other options. Walmart does not want to supply all of its more than 4,700 US stores with its own milk brand. But “it gives us some leverage” when negotiating contracts with its distributors, he added.
Other retailers are seizing control of segments of their food supply chains to drive down costs and produce their own food as well.
Costco in October opened a $450 million chicken plant in Nebraska that will soon produce roughly 100 million rotisserie chickens a year— 40% of its annual chicken needs-— to sell at the retailer’s food courts and poultry aisles.
Costco was having trouble finding the size of birds it needs for its rotisserie chickens. So the retailer decided to integrate the production process from farm to store, making key decisions down to the grain the chickens eat and the type of eggs hatched. Costco hopes that bringing poultry production in house will reduce its costs by 10 to 35 cents per bird.
Will Sawyer, animal protein economist at agricultural lender CoBank, said that the Walmart plant will only represent a small fraction of the company’s overall beef business. He views Walmart’s entrance into the beef industry as a small-scale test to asses whether it can grow profit by pushing deeper into the supply chain.
“Their ownership level is very different than Costco’s,” Sawyer said. “It’s not like Costco where Costco is owning these chickens from egg to grocery stores.”
But despite key differences between Walmart’s beef and Costco’s chicken operations, agricultural experts predict the trend of retailers playing a larger role in supplying food for their own stores to expand.
Local and state officials are pleased about the Walmart plant because it will deliver hundreds of jobs and investment in the area. Georgia Governor Brian Kemp was on hand for a ribbon-cutting ceremony last week.
“The Thomasville community is very excited,” Mayor Greg Hobbs said in an interview.
However, Walmart and other retailers gaining more power in the food industry troubles some farmers and ranchers’ advocates.
Walmart’s decision to enter the dairy market pressured Dean Foods and was one of a range of factors that led the company into bankruptcy. Dean missed out on the sale of 55 million gallons of milk in the latter half of 2018 because of the lost Walmart business, it said.
A spokesperson for Walmart said its new cattle program is a “win-win situation” for farmers and will create steady demand for its supply chain partners.
But opponents believe Walmart’s new chain denies most ranchers the opportunity to participate and “does nothing to relieve the pressure on America’s family farmer,” said Joe Maxwell, the former Missouri lieutenant governor and policy director for the Organization for Competitive Markets, an advocacy group for farmers and ranchers that opposes corporate consolidation and is critical of Walmart.
“It only keeps them locked in to a supply chain run by the world’s largest company,” he said. “The farmer is still just trapped.”
Jess Peterson, senior policy adviser at the US Cattleman’s Association, a lobbying group for ranchers, said his group is in a “wait-and-see process” with the Walmart supply chain.
He fears a “singular, vertically-integrated system” that limits access for independent ranchers and reduces competition.
“It does give us pause for concern that we might be moving toward vertical integration,” he said. “Walmart is assuring us that it’s not.”
Everything You Need To Know About Buying Chicken At The Grocery Store
Does Walmart sell chicken?
Here‘s a comparison of average chicken prices at Walmart vs. other major grocery chains: Based on these averages, shopping at Walmart for chicken can save a family of four around $30-40 per month compared to traditional supermarkets! The price advantage makes it easy to see why many shoppers stock up on chicken at Walmart.
Where does Walmart get its chicken from?
You‘ll learn: Let‘s delve in! Walmart gets its chicken from a few dominant meat suppliers: Founded in Arkansas in 1935, Tyson Foods produces 20% of America‘s chicken, beef, and pork. They operate large-scale processing plants and contract with over 6,000 independent farmers to raise chickens.
How much does a pre cooked chicken cost at Walmart?
At just $4.98 per chicken, it breaks down to: Given the national average price of raw chicken breast is currently $3.73/pound, pre-cooked Walmart chickens are a smart buy for budget-conscious shoppers. Even comparing to other pre-cooked chickens, Walmart comes out on top value-wise:
Should you buy fresh chicken breast from Walmart?
Another factor that should deter you from buying fresh chicken breast from Walmart is the fact it may not always be, well, boneless. At least one Twitter user reported finding bones in their package of chicken from Walmart in 2020.