Welcome to The Dish, the only newsletter that simplifies finance for CPG people.

This time, we’ve got our sights set on the behemoth that is Walmart.

The Main Course

Unlocking Walmart’s Potential: The Good and the Not-So-Good

Positive Attributes

Lower Margins – Walmart’s margin is slightly lower than mainstream retail.

Selling Direct – Selling directly to Walmart offers advantages. Consider leveraging consolidators like RJW for efficient full truckload shipping and a robust data analytics platform.

Everyday Low Price (EDLP)  No regular promos mean no headaches with chargebacks. Walmart’s EDLP approach simplifies the pricing game.

Payment Terms – Negotiate faster payment terms for a smoother cash flow. Walmart is open to discussions on this front.

Negative Attributes

National Presence Walmart often spreads your brand across 1,000 to 2,000 doors nationwide. For early-stage brands, this can mean a hefty marketing investment to build consumer awareness.

EDLP Dilemma EDLP isn’t always the best for brands. Promos and sticker discounts often attract consumers to pull off the shelf as the product stands out more, presenting more opportunity for trial

Production Timing  Purchase orders’ size and frequency remain uncertain, challenging production planning. Brands need substantial inventory on hand to meet Walmart’s demands.

OTIF Scores Walmart’s stringent scoring system can affect your standing. Maintaining a high score is crucial to staying in the game.

Crunching the Numbers: Economic Insights

Early-Stage Margin Profile:

30-35% product margin

10% Freight Out, 3PL, Warehousing

5% Broker

5% Freight Into Consolidator + Other

Total: 10-15% profit

A 10-15% contribution margin is a strong start, but the real challenge lies in marketing expenses and inventory management. How much do you need to spend to create the necessary pull, and how do you balance the cash drain?

Survival Tips for Walmart Success:

Supply Chain Readiness Ensure your supply chain is agile and ready to meet Walmart’s demands.

Financial Strategies Consider AR factoring or a line of credit to manage cash flow effectively.

Creative Marketing Be thoughtful and creative in your marketing approach to stand out and build brand recognition.

Walmart is a retail giant that can catapult your revenue, but calculating the costs and understanding the risks is essential. As your brand scales, imagine the possibilities with a robust 50-point margin.

Share your experiences and tips on navigating the Walmart terrain in “The Dish.” Let’s dish out wisdom and elevate the CPG game together!

Desserts

How X company successfully implemented the strategy above [link]

Two ways strikes are affecting CPG brands [link]

How to avoid common shipping dilemmas [link]

Thanks for reading through today’s Dish.

Have a great week.

— Adam Siskin