Walmart is notorious for undercutting the profit margins of competing retailers by slashing its prices. So while they are not surprising, the company’s efforts to sell cheap beer have got to be pretty unsettling for other businesses.
As Bloomberg reports, the country’s largest retailer is now selling America’s favorite beers, including 36-packs of Budweiser and Coors, at close to zero profit margin–all part of a plan to double its alcohol sales in the next two years as well as lure shoppers into the door so they make higher-margin purchases.
Bloomberg obtained internal documents that offer a rare, transparent look at Walmart’s strategy :
The markup on a 36-pack of Coors Light cans at a Los-Angeles-area store was 0.6 percent, compared with 16.2 percent for a package of Flaming Hot Cheetos, according to internal documents reviewed by Bloomberg.
Or, if you prefer Tecate:
The markups on 36-packs of Tecate cans and 24-packs of Corona Extra bottles at the Los-Angeles-area store, were 0.6 percent and 1 percent, respectively. By contrast, Wal-Mart sold Coca-Cola 20-ounce bottles for 29.9 percent above cost, according to the data. Cereals such as Quaker Quick Oats and Honey Nut Cheerios were marked up 32.5 percent and 16.6 percent, respectively.
Numerous studies have documented the retailer’s painful effects on nearby businesses, including clothing, hardware, convenience, and grocery stores.
It’s not clear how long Walmart has been pursuing this strategy, but it is bound to be worrisome to neighborhood marts and groceries that must compete. Walmart has lately been opening dedicated “Neighborhood Markets” of its own around the country, and, of course, beer is a huge driver of, well, beer runs to the store.