Goal of Walmart’s new culinary innovation center is to help lower food costs, expand private label

Walmart’s new 12,000-square-foot culinary and innovation center attached to the retail giant’s home office in Bentonville will help Walmart win on price and deliver higher quality food items than it’s already doing, according to Charles Redfield, head of Walmart’s U.S. food division.

The center was unveiled for the media on June 2 as part of shareholder week activities, and will open officially in the next week.

Redfield said there could be products that need reformulated to help them better perform and the new culinary center is where the retailer and supplier can work together on existing and new product formulations. It also includes a sensory lab, where Walmart tests food items before they go to market. Walmart has been doing this kind of work on a limited basis and Redfield said the new facility will allow for a more seamless process as it can be done in one place.

“On our own turf, we can go deep down into the product ingredients and better control the process of dead net cost and the result of that is that we can become better food experts. It’s an education facility for us and our suppliers. As we can go through the process, we will be able to give our suppliers specific feedback about how the products are liked and disliked by customers. It could be intense for suppliers but in the end they will like it because it addresses issues they might not otherwise know about,” Redfield told Talk Business & Politics.

Redfield said the food invocation center brings a number of operations under one roof that were conducted in separate facilities. He said Walmart looked at the Sam’s Club sensory food lab, the Tyson Foods Innovation Center in Springdale, and other similar centers of its suppliers to develop a plan for the one that will best help it take costs of out of the foods to keep prices low and quality high for its 140 million U.S. customers shopping its stores each week.

He said the facility will be a huge benefit for expanding private label products which is a focus of the U.S. business. Greg Foran, CEO of Walmart U.S. told the media (June 2) that Walmart is taking the position that is the best proposition for customers when it comes to private label. He said strong brands are important but where gaps exist in quality and price Walmart will look to insert private label. He said customers want brands but there is room to grow in private label.

“We will gain some momentum, but don’t expect a major pendulum swing,” Foran said.

Jack Pestello runs private brands for Walmart U.S., and will manage the new culinary innovation center. He said Walmart knows its private label customers spend more and are among the most loyal of all customers. The facility includes 6 test kitchens, a sensory lab and a consumable center. It is also a training ground for best practices in the retailer’s deli and bakery operations which are largely private label businesses.

“This facility will also help us continue our passion for food from healthy, organic, private label and indulgences. We have been doing this work in different locations and now we are bringing it under one roof,” Pestello said.

Walmart U.S. also is working closer with its international division in private label and food procurement. David Cheesewright, CEO of Walmart International, told the media on June 2 that when the model is to sell for less, a company has to grow sales or life is pretty miserable. He said while the ASDA grocery business in the United Kingdom has been dismal of late – running negative 4% comp sales in the first quarter – he’s proud of some of the work being done there to reduce food costs. The process he calls “factual dead net costing” is having some strong results.

“Dead net costing involves drilling down into the product formulations and being able to have fact-based dialogue with our suppliers about what is actually going on and how much is that product physically delivering the store. What is the direct profitability of that product. Where are the issues around its rate of sale. We are seeing that it’s better for the vendor because it’s fact based and not the usual negotiation tactics. It gets down to detail and we’re seeing great results from this program that began in Canada and is now being rolled out elsewhere,” Cheesewright said.

He said Walmart U.S and International are working on private label, product formulations and consolidated procurement offices from around the world.