Wal-Mart's Case-Ready Meat
Has Huge Growth Potential

AMARILLO – For those who haven’t noticed, Wal-Mart is in the fresh meat business. In fact, effective August 16, all 1000 Wal-Mart Supercenters are carrying case-ready fresh beef, pork and poultry products.

It's a huge step and just one more indication of the convenience-minded society in which we live. There's no mistaking that the move is already having a huge impact on the beef industry because Wal-Mart is the leading grocery retailer in the U.S. with $47.7 billion in annual grocery sales. Another reason is Wal-Mart's growth potential.

For Wal-Mart it offers tremendous opportunity. With that opportunity, however, come tremendous challenges. And some of those challenges can only be overcome with the help of beef producers themselves.

That was part of the message presented by Keith McDowell, Wal-Mart's division 24 meat and seafood development coordinator, at the recent Beef 20-20 meeting here.

Wal-Mart's first Supercenter opened in 1988. In 1992 there were only 10 in the nation and all 10 were supplied by third party distribution centers. Since then, they've experienced phenomenal growth, and last month in Illinois, Wal-Mart opened number 1000. With their current growth rate, Wal-Mart anticipates that by 2005 they will have 1500 stores open. Right now the plan is to build 180 per year.

Neighborhood Markets, he said, are a smaller version of a Supercenter with only 42,000 to 55,000 square feet. These stores, like the Supercenters, carry all the perishable and grocery products and a limited amount of general merchandise products. There are now 20 in operation and McDowell told listeners that they can expect to see more of these as well, particularly in rural areas where the smaller unit is more suitable.

In Oklahoma City, five Neighborhood Markets are up and running. In a relatively short period, their market share went from being in the top 10 in the Oklahoma City area to the number one position.

At one time, Wal-Mart relied on third parties for distribution of their products to the Wal-Mart stores. That too has changed. Today they have 20 grocery distribution centers of their own and by 2005 they anticipate having 21 more up and running.

These distribution centers handle all of Wal-Mart’s dry goods and perishables. They also handle all of Sam’s perishable products. Because they anticipate rapid growth in their perishable products division, Wal-Mart is teaming up with a Houston-based company to develop a totally mechanized distribution center.

Wal-Mart first tested fresh beef and pork products on a limited basis in a few of their stores in Colorado in 1997.

"It wasn’t very successful," McDowell admitted.

Regardless, the company chose to move forward and later that year they introduced pre-packaged or case-ready ground beef in the Winter Haven, Florida area. That turned out to be a positive step for the company and ultimately it led to the roll-out of case-ready ground beef in all Supercenters.

In 1999 Wal-Mart introduced pre-packaged pork into 80 stores. That same year they picked five Supercenter stores in the Bentonville area and converted them to 100 percent pre-packaged fresh meat. It grew from there.

McDowell came on board to monitor the case-ready product roll-out.

"My job is to make sure our processors understand the importance of what they’re doing. The processors have become the meat cutters. When that product leaves our facility it has to be right.

"The second thing I do is make sure the specifications that we give them are 100 percent accurate."

Wal-Mart offers between 90 and 100 individual cuts of beef in their meat case. Their specification handbook outlines in detail how each is to be cut, the thickness, trim, and tray it needs to be in, as well as the number of packages that need to be in the shipping box.

For example, boneless rib-eye steaks must be one inch thick plus or minus one-eighth inch and trimmed to one-eighth inch fat cover.

"We're using fewer knives, less and less all the time," McDowell said. "We use knives for the final processing — for trimming — but we use the automated slicer all other times. Automated slicers give us the ability to be very consistent with our product."

Other specs require that there be two steaks per tray and the package is to weigh between 1.45 and 2.13 pounds, the target being 1.78 pounds. The beef product is enhanced with a 12 percent solution and sold in vacuum packed leak-proof packages.

Each supplier receives a specification handbook. Their product must meet all of the specifications or it is rejected. Five facilities currently supply Wal-Mart with product. IBP is their largest supplier. McDowell works closely with all of his suppliers. He makes visits to their plants on a regular basis to monitor their performance. All of their plants operate under HACCP guidelines.

McDowell also touched on the importance of temperature control, what is known as the "cold chain" process, in delivering a quality product to their consumers. From the time the product leaves the distribution center until it arrives at the store, temperature is closely monitored. Any load that does not meet their temperature criteria is automatically rejected.

Wal-Mart's distribution centers go to a zero balance every day. The product comes in and goes right back out in an effort to deliver to consumers the freshest products possible. There is a 72-hour turn-around period from the time the order is placed until it is in the store.

"Three days after the order is placed, it arrives at the distribution center. By 3 p.m. that same day, the distribution center is selecting product and loading it on trucks so the product arrives at the Supercenter by 6 a.m. the next morning."

Case-ready fresh meat products, McDowell told listeners, offer their customers a host of advantages. One of the biggest advantages is that the product is guaranteed to be in stock.

"Our product is available 24 hours a day, seven days a week."

Other advantages include such things as extended shelf life, consistent finished product and traceability of individual products.

McDowell told producers that they play an important role in the whole case-ready process. They have to deliver an animal to the processor that when fabbed will meet Wal-Mart’s specifications. Developing consistent size cuts with a consistent weight is particularly critical in the case-ready business.

"What is that weight? I can’t tell you," McDowell said, "but I know there is one out there. Price point means a lot to me and to consumers."