Walmart’s Super-Sized Impact on the Food System | Civil Eats

Walmart’s Super-Sized Impact on the Food System

A new report details how the largest U.S. food retailer leverages its unprecedented size to force lower prices, short-change workers and farmers, and create fewer food choices.

the front of a walmart supercenter

Walmart sells 50 percent or more of all groceries in one in every 10 metropolitan areas and nearly one in three “micropolitan” areas across the country, according to a report by the Institute for Local Self-Reliance, out last week. In 38 of these regions, Walmart sells 70 percent or more of all groceries.

“It’s a sizable subset of American communities in which Walmart has this grip on the food system,” says Stacy Mitchell, co-director of the Institute for Local Self-Reliance and the report’s author. This grip spells fewer food choices for these communities and less opportunity for local businesses.

Walmart drives out local competitors by selling goods at a loss, relying on Wall Street backing and revenue from other stores to make up the difference. As the largest U.S. food retailer in history, Walmart also leverages its unprecedented size to force suppliers to accept lower prices and pay extra fees, short-changing workers and farmers along the supply chain.

The U.S. has laws on the books that prohibit this type of supplier intimidation and predatory pricing. But over the past 40 years, federal agencies simply stopped enforcing them, allowing Walmart and other retailers like Amazon to crush their competition, bully suppliers, and further expand.

Today, Walmart captures one in every $4 spent on groceries in the U.S., and its market share can be much higher in regional markets, as ILSR’s report illustrates.

Walmart has a particularly strong grip over grocery markets in the Great Plains and Southeast, as the corporation expanded around its Arkansas headquarters. In 2018, Walmart sold 71 percent of all groceries in Joplin, Missouri, 69 percent in Fayetteville, Arkansas, and 83 percent in Bismarck, North Dakota, to highlight a few cases.

A map of Walmart’s regional grocery market share by the Institute for Local Self-Reliance.

A map of Walmart’s regional grocery market share by the Institute for Local Self-Reliance. (Click image for larger version.)

The chain often amasses such local control by selling goods at a loss to drive out local businesses. “Walmart can come into a community, sell below cost, and lose money at that location indefinitely,” explains Mitchell. “A competing independent business can’t lose money, they can only go so long … and they lose that fight every single time no matter how good they are or how competitive they are. They lose solely because they’re small.”

Fewer competing grocery stores means Walmart has an enormous amount of power to dictate what foods are available in these communities, shaping what people eat but also what food is produced, how, and by whom. It also means communities may be paying more for groceries in the long run, as several lawsuits have alleged that Walmart increased prices once it was the only game in town.

Walmart’s growing size also gives the chain incredible buyer power to hoard more of the food dollar at the expense of workers and producers. In 1990, when Walmart barely sold any groceries, ranchers received nearly 60 cents of every dollar spent on beef, while retailers received 33 cents. By 2009, Walmart had come to sell 23 percent of groceries, and ranchers’ share of the beef dollar shrunk to 42 cents while retailers’ share grew to 49 cents.

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Workers wages also take a hit when supplying companies have fewer buyers. A study by Nathan Wilmers found that companies that primarily sell to one or two large buyers paid their workers less over time, as these dominant buyers can demand lower and lower prices.

Despite Walmart’s historic market share and economic harms, Congress and federal antitrust agencies have not stepped up to curb the chain’s power.

As Mitchell notes, Walmart is not the first grocery chain to squeeze suppliers or sell goods at a loss. In the 1920s, dominant supermarket A&P used a similar playbook to claim 16 percent of U.S. grocery sales. Lawmakers attempted to check the chain’s power with the Robinson-Patman Act, which prohibited stores from selling goods below-cost in one location and at a premium in another. It also required sellers to offer the same price to all buyers, regardless of size.

Under this statute, the Federal Trade Commission successfully sued the chain on two separate accounts, though A&P remained dominant into the 1950s, before losing steam in the shift to suburban supermarkets.

In recent years, the Justice Department and Federal Trade Commission have shelved the Robinson-Patman Act because it does not fit into current antitrust doctrine, which prioritizes low consumer prices above all other outcomes. “We have a law on the books that isn’t enforced,” says Mitchell. “We have agencies that have made a policy decision and they need to be held accountable for that.”

Supreme Court rulings have also made it very difficult to prosecute predatory pricing by large, well-capitalized corporations, making it far easier for dominant sellers like Walmart to undercut their competitors. Mitchell argues that policymakers and federal agencies need to crack down on these anticompetitive tactics that create an unequal playing field for smaller businesses.

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“Our policy now as it’s been carried out for the last 40 years favors the big guys solely because they’re large and have financial resources, not because they’re better competitors, and I think that’s the fundamental issue,” Mitchell says.

This article originally appeared in Food and Power, and is reprinted with permission.

Claire Kelloway is the primary reporter for Food and PowerFood & Power and a senior food and farming researcher at the Open Markets Institute, an anti-monopoly think tank based in Washington, D.C. Read more >

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Join the conversation.

  1. We can take a new food brand to empower communities with public funding, employee ownership
  2. The local Walmart where I live gouges the poor people of this county. With a large portion of the population on food stamps and living below federal poverty guidelines. Their prices are outrageous. Instead of buying local produce it is shipped thousands of miles away and sold at high prices.
  3. Joyce kohn
    They save me a lot of money by charging less for the same product sold by other supermarkets. Unfortunately, some of us must shop with a limited pocketbook.

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