Wal-Mart puts pressure on brand owners

21 July 2009

BENTONVILLE, Arkansas: Wal-Mart, the US retail giant, is exerting increasing pressure on brand owners to divert more of their budgets into promotions and marketing in its stores, and to help fund "co-branded" TV ads, according to reports.

As one of the few companies to have benefitted from the economic downturn, Wal-Mart is responsible for delivering up to 30% of sales for some FMCG brands in the US, Ad Age estimates.

The company is now argued to be taking advantage of its current programme to remove products with poor sales figures from its shelves – named "Project Impact" – to leverage its position with manufacturers.

In particular, the world's biggest retailer is hoping to encourage FMCG firms to finance more promotions, as well as to invest in TV spots, in-store TV executions and banner ads on its website.

One example of this trend is Arm & Hammer's Liquid Laundry Detergent, owned by Church & Dwight, which was delisted from 90% of Wal-Mart's stores despite the fact it received a record amount of marketing support last year.

It is thought that Wal-Mart decided to cut this brand as it had a lower market share than its main rival, Purex, owned by Henkel.

However, this decision has now apparently been reversed, with the product back on shelves across its network, at the same time as it began to be promoted in Wal-Mart's circular and TV ads, which brand owners are thought to pay to feature in.

Leon Nicholas, director of retail insights at Management Ventures, said this approach was effectively a "way for suppliers to pony up marketing dollars in order to get more favourable treatment and placement" in Wal-Mart's marketing material.

This means brands are "advertising through Wal-Mart, almost as if Wal-Mart were an ad agency now. And as that happens, yes, decisions have been reversed" about what the company chooses to stock.

However, Nichols added that the retail giant does seem "amenable to listening to supplier arguments that they may have cut too far in their mix."

As such, it could be that brands' marketing strategy may now serve as a key variable in informing its decision-making process.

Data sourced from AdAge; additional content by WARC staff