Big-box retailers are pressing prepackaged food companies to lower their prices in their efforts to lure in more shoppers.
Campbell Soup Co recently announced that its sales would be badly hit this winter following a failed deal with an unnamed retailer over pricing for its most important product, canned soup.
Campbell’s failed negotiations refer to Walmart, which accounts for 20% of the American canned soup producer. Other retailers including Target and Sprouts Farmers Market are also looking for new ways to attract new customers.
Brick-and-mortar retailers are also concerned that Amazon Inc. may become a success in the grocery business after its acquisition of Whole Foods Market.
Packaged-food producers have experienced lower sales in recent years as customers have become more interested in fresher and healthier food options than older brands. Now, retail giants are making things worse for those companies.
Campbell Chief Executive Denise Morrison recently noted that the retail landscape has changed “dramatically”. Morrison made the comment Thursday after the group reported its eleventh quarter of continual sale declines.
Walmart Eyes 15% Lower Prices 80% of the Time
Campbell unveiled that the current negotiations with retailers focus mainly on promotional pricings and product assortment. On Thursday, the company’s stock slipped seven percent.
Walmart is squeezing lower prices in its effort to become more competitive. The company’s executives want prices to be at least 15 percent lower than other retailers’ 80 percent of the time.
Meanwhile, Walmart is investing millions in the price war, which has taken a heavy toll on its own margins. Walmart is reportedly reducing prices without announcing brands beforehand. When one major retailer lowers prices, brands will have to lower prices when dealing with other retailers as those will add pressure on suppliers as well.
If things continue at this pace, experts expect the degradation of some large, more mature brands for especially struggling products like canned soup.
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