Wal-Mart Stores (WMT) purchasing chief Hernan Muntaner has a dream: teaming the giant retailer with soda and snack maker PepsiCo (PEP) to buy potatoes jointly for a lower price than either company can get on its own. That would allow both to earn more money on the chips and spuds they sell in Wal-Mart's supermarkets. So far, Pepsi isn't playing along. But with sales slowing in the U.S. and the price of sugar, meat, and wheat on the rise, the world's largest retailer is jointly purchasing a growing share of raw ingredients with manufacturers of food and household products sold in its stores. Products already being purchased with suppliers include sugar, which goes into the company's store-brand soda and five-pound bags, and paper, used in Wal-Mart's back-office printers. Muntaner envisions a day when his company will do it with most goods it sells.
"Around the world, we found we were buying the same raw materials" that Wal-Mart suppliers buy, says Muntaner, whose official title is vice-president for international purchase leverage. "When you put the volume together of what we bought and what [suppliers] bought, and buy from just one supplier, you can reduce the cost."
It's all about the retailing giant doing what it's become famous for: squeezing costs out of its supply chain. And although Wal-Mart is already feared by many suppliers for its enormous buying clout, it's convinced it can cut even better deals by consolidating its purchasing with partners. Currently, only makers of private label goods sold under Wal-Mart's house brands have joined in its so-called collaborative sourcing program. Manufacturers of branded products have taken a pass because they're loath to share pricing data and product formulas, say executives at three companies approached by Wal-Mart. Pepsi declined to comment.
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