The Supply Side: Walmart’s fresh game plan to include ‘Produce 2.0’ update

Fresh is the name of the retail game for brick-and-mortar players like Walmart. It’s one area Walmart U.S. CEO Greg Foran has focused for the past three years. But there is still work to do, he said, during the retailer’s second-quarter earnings call.

Walmart U.S. Chief Merchandising Officer Steve Bratspies recently told the investment community that store managers will get a glimpse of the “Produce 2.0” update at the company’s national managers’ meeting held in Indianapolis in mid-September.

“You know, we’ve spent a lot of time on produce,” Bratspies said at the Barclays Global Consumer Staples Conference on Sept. 4. “We have a different set today. … We have all the store managers at the meeting in Indianapolis, and we’re going to show them Produce 2.0, which is the next set to be taken further. We’re looking at the entire store to make it better and more convenient for customers over time.”

Karen Short, a retail analyst at Barclays, said Walmart has made strides in the fresh area since 2016. She asked Bratspies to explain why it’s taking so long to get the fresh category right.

“Fresh is just hard. It’s really hard, and it’s taking a while,” he said. “All the initiatives [are] coming together at one time, and we really thought about this holistically, about how do we start sourcing [the products from the farms] all the way through the register in our store and, quite frankly, into the customer’s home.”

Bratspies said the mission is to give customers the freshest products that last longer once they get it home. He said Walmart is working with produce suppliers, shortening its supply chain and moving product faster and more efficiently so it stays fresher. He said store processes have also been changed from the time the product enters the back room. Bratspies said the way produce is culled and stocked is different. He said product layouts have also changed in the retailer’s stores, and now it’s more about getting all those initiatives to sync up to continuous improvement in the fresh business.

“We think there’s a lot of opportunity in front of us,” he said. “And we don’t think we’re as good as we need to be. … It’s a journey, not a destination. You never actually get there, and there are always things you can do to improve. We’re continuing to work on all of those things, but we’re starting to see some momentum in the business. We like where we are. And with Produce 2.0, we’re going to go even further.”

When pressed for details on Produce 2.0, Bratspies said the changes will involve visuals and should improve shopper experiences in the stores.

During another investor conference in early September, Bratspies said overall grocery is one part of the business Walmart is most pleased with performance-wise. He said fresh is at the core of Walmart’s grocery business. Fresh departments, Bratspies said, are what customers see when they first walk into the store. Bratspies said Walmart has actively worked to keep prices low in fresh departments like produce and bakery, where the retailer has gained share from competitors.

“We feel good about the momentum we have in produce. … The other parts of fresh, bakery and meat, have really improved as well,” he said.

Bratspies said bakery is a business that’s been growing well for Walmart the last couple of years, achieving double-digit comps. He said the approach in bakery was a bit different.

“We were over-assorted in bakery and the shopping experience was just a little too complicated,” he said. “So we reduced the assortment. The team dramatically improved the quality, got back to item-price merchandising because it’s ultimately what we do best. We’re an item-price merchandising company. We made that clear, and bakery has improved dramatically,” he said.

Walmart continues to revamp store layouts and product displays in the grocery side of the business. For instance, consumers will find bacon, sausage biscuits and eggs in the same dairy cases to drive efficiency for the shopper who runs in to pick up breakfast items. The same is true for hamburger patties, brats and frozen french fries, with buns sitting adjacent next to the low-profile open freezer case.

Bratspies said as Walmart continues to add more stores for pickup grocery the fresh inventory control will become more crucial. With 3,100 stores having pickup by the end of the year, hundreds of personal shoppers will pick orders for curbside pickup at the same time other consumers are in the store. He said keeping fresh items in-stock takes good planning all the way upstream.

Private label is another area of the business Walmart has improved upon in recent years, Bratspies said.

“In the past, in my opinion, we didn’t do a particularly good job of running what was then private label,” Bratspies said.

However, the company is now “running our brands with the same discipline that a branded manufacturer would run, “including quality, pricing, packaging and promotion,” he said.

“All the things that a traditional branded manufacturer does, we built that capability in-house, and it’s made a huge difference in our ability to go to market, and the customers are responding to it,” Bratspies said. “They’re choosing it more and more.”

Walmart is starting to see progress against hard discounters like Aldi and Trader Joe’s. Because of improved fresh departments, a broader assortment and competitive prices and better private brands. Bratspies said Walmart is a one-stop shopping experience and will also continue to offer customers good, better and best choices across the food and general merchandise categories, which is something hard discounters’ limited assortments cannot do.

“We’re very focused on making sure that we’re sitting right with [hard discounters] on price and taking away the reason for a customer to choose a discounter or a hard discounter versus Walmart,” he said. “So we’ve negated the price gap and then we offer a much broader assortment of fresh produce land all the different services we have in our store. We like that model matched up against a hard discounter. But you have to have that price right on private brands to do it, and you have to have a really good fresh produce department.”

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.