Big Muddy rancher
Well-known member
ocm said:
Strange we bought Vlasic pickles today.
ocm said:pointrider said:Econ, can you give me the name of one company that is forced to sell to Wal-Mart against their will?
Have you heard the Vlasic story? Vlasic sold pickles (and a lot of other stuff) to Sam's and Wal-Mart. They normally ran on annual contracts. One time during the renegotiation process the Sam's/Wal-Mart buyer discovered that Vlasic made dill pickles in a gallon jar. He proposed a contract for purchase of gallon jars of pickles. Vlasic agreed to sell them the gallon jars of pickles. The contract had a set price but no mazimum quantity. The margin for Vlasic was lower on the gallons than on the other sizes. Sam's used the pickles as a loss leader. People bought the gallons in large quantities. They were almost as cheap as the quarts. So Sam's bought fewer quarts from Vlasic and Vlasic's overall margin went down.
After a year, when it was time to renegotiate supply contracts, Vlasic asked for a price increase on the gallons of $.05. Sam's said they wanted a price decrease of $.05. Vlasic bristled. Sam's said, "If you won't sell us your gallons for $.05 less then we won't buy anything from you." Sam's/Wal-Mart was such a large percentage of Vlasics business that they could not afford to lose them as a customer. They relented. Margins continued to drop and Vlasic ended up in Chapter 11.
A similar thing happened with Rubbermaid. The difference was that Wal-Mart wanted Rubbermaid to lower the quality in order to lower the price. Rubbermaid refused. Wal-Mart cut them off completely. Rubbermaid went into Chapter 11. They were bought out by someone else. The new owner lowered the quality of the product and now sells to Wal-Mart.
Market Power. The Big Gorilla has the power to set quality and price and present an ultimatum and get it one way or another.
There are better free market alternative than this.
Jason said:So go and correct those that claimed Wal-mart forced Vlasic out of business.
Looks like Vlasic didn't know their costs and made a mistake, but learned it in time to stay afloat.
Vlasic, the pickle maker, which was maneuvered into taking such low margins on one particular product that their financial position led to bankruptcy even while their growth in sales skyrocketed.
Huffy, the third largest bicycle brand in the US, was forced to outsource its manufacturing abroad to keep up with Wal-Mart demand, eventually closing its three US plants. But all this hadn't been a bonanza for the company, which sells lots of bikes but at such low margins that it has more down years than up ones.
Lovable, an intimate apparel maker, was taken up by Wal-Mart, expanding its business enormously and becoming Lovable's biggest customer. Then in 1995, Wal-Mart wanted to rewrite its contracts to get even lower prices. When Lovable said no, Wal-Mart simply went elsewhere. The company, by now so dependent on Wal-Mart, took a crippling blow.
Jeans maker Levi Strauss, which already had declining sales, hooked up with Wal-Mart to produce a low cost line. The price pressures meant that Levi Strauss has ceased all manufacturing operations, and just resells Asian-made jeans under its trademark. The jeans are far inferior to traditional Levis and they're cannibalizing sales of Levis top brands. But the new jeans are cheap.
Master Brands has had to move its manufacturing to Mexico to cut costs to the bone on its Master Lock padlocks. They all but shut down their Milwaukee plant.
the chief said:Read this for your answer, Point rider
The Walmart you DON'T know!
http://www.fastcompany.com/magazine/77/walmart.html
And then this article:
Vlasic, the pickle maker, which was maneuvered into taking such low margins on one particular product that their financial position led to bankruptcy even while their growth in sales skyrocketed.
Huffy, the third largest bicycle brand in the US, was forced to outsource its manufacturing abroad to keep up with Wal-Mart demand, eventually closing its three US plants. But all this hadn't been a bonanza for the company, which sells lots of bikes but at such low margins that it has more down years than up ones.
Lovable, an intimate apparel maker, was taken up by Wal-Mart, expanding its business enormously and becoming Lovable's biggest customer. Then in 1995, Wal-Mart wanted to rewrite its contracts to get even lower prices. When Lovable said no, Wal-Mart simply went elsewhere. The company, by now so dependent on Wal-Mart, took a crippling blow.
Jeans maker Levi Strauss, which already had declining sales, hooked up with Wal-Mart to produce a low cost line. The price pressures meant that Levi Strauss has ceased all manufacturing operations, and just resells Asian-made jeans under its trademark. The jeans are far inferior to traditional Levis and they're cannibalizing sales of Levis top brands. But the new jeans are cheap.
Master Brands has had to move its manufacturing to Mexico to cut costs to the bone on its Master Lock padlocks. They all but shut down their Milwaukee plant.
Big Muddy rancher said:ocm said:pointrider said:Econ, can you give me the name of one company that is forced to sell to Wal-Mart against their will?
Have you heard the Vlasic story? Vlasic sold pickles (and a lot of other stuff) to Sam's and Wal-Mart. They normally ran on annual contracts. One time during the renegotiation process the Sam's/Wal-Mart buyer discovered that Vlasic made dill pickles in a gallon jar. He proposed a contract for purchase of gallon jars of pickles. Vlasic agreed to sell them the gallon jars of pickles. The contract had a set price but no mazimum quantity. The margin for Vlasic was lower on the gallons than on the other sizes. Sam's used the pickles as a loss leader. People bought the gallons in large quantities. They were almost as cheap as the quarts. So Sam's bought fewer quarts from Vlasic and Vlasic's overall margin went down.
After a year, when it was time to renegotiate supply contracts, Vlasic asked for a price increase on the gallons of $.05. Sam's said they wanted a price decrease of $.05. Vlasic bristled. Sam's said, "If you won't sell us your gallons for $.05 less then we won't buy anything from you." Sam's/Wal-Mart was such a large percentage of Vlasics business that they could not afford to lose them as a customer. They relented. Margins continued to drop and Vlasic ended up in Chapter 11.
A similar thing happened with Rubbermaid. The difference was that Wal-Mart wanted Rubbermaid to lower the quality in order to lower the price. Rubbermaid refused. Wal-Mart cut them off completely. Rubbermaid went into Chapter 11. They were bought out by someone else. The new owner lowered the quality of the product and now sells to Wal-Mart.
Market Power. The Big Gorilla has the power to set quality and price and present an ultimatum and get it one way or another.
There are better free market alternative than this.
Strange we bought Vlasic pickles today.
ocm said:Big Muddy rancher said:ocm said:Have you heard the Vlasic story? Vlasic sold pickles (and a lot of other stuff) to Sam's and Wal-Mart. They normally ran on annual contracts. One time during the renegotiation process the Sam's/Wal-Mart buyer discovered that Vlasic made dill pickles in a gallon jar. He proposed a contract for purchase of gallon jars of pickles. Vlasic agreed to sell them the gallon jars of pickles. The contract had a set price but no mazimum quantity. The margin for Vlasic was lower on the gallons than on the other sizes. Sam's used the pickles as a loss leader. People bought the gallons in large quantities. They were almost as cheap as the quarts. So Sam's bought fewer quarts from Vlasic and Vlasic's overall margin went down.
After a year, when it was time to renegotiate supply contracts, Vlasic asked for a price increase on the gallons of $.05. Sam's said they wanted a price decrease of $.05. Vlasic bristled. Sam's said, "If you won't sell us your gallons for $.05 less then we won't buy anything from you." Sam's/Wal-Mart was such a large percentage of Vlasics business that they could not afford to lose them as a customer. They relented. Margins continued to drop and Vlasic ended up in Chapter 11.
A similar thing happened with Rubbermaid. The difference was that Wal-Mart wanted Rubbermaid to lower the quality in order to lower the price. Rubbermaid refused. Wal-Mart cut them off completely. Rubbermaid went into Chapter 11. They were bought out by someone else. The new owner lowered the quality of the product and now sells to Wal-Mart.
Market Power. The Big Gorilla has the power to set quality and price and present an ultimatum and get it one way or another.
There are better free market alternative than this.
Strange we bought Vlasic pickles today.
I wouldn't expect Canadians to know what "chapter 11" is.
It doesn't mean "out of business". It frequently ends up with someone else buying the business from current owners who get out with little or nothing left over.
Were any of these companies unionized? Did workers want to become more competetive?
the chief said:Were any of these companies unionized? Did workers want to become more competetive?
DEFINITION: Naivete'--when someone is either so gullible or so incredibly defiant to admit they are wrong that they will say something incredibly stupid and try to make it sound like an effective argument.
Big Muddy rancher said:Vlasic must not have learned their lessnon very well because we just bought Vlasic pickles at Walmart yesterday.
Submit to Wal-Mart and lose margin, or don't submit and lose more margin.
Murgen said:Submit to Wal-Mart and lose margin, or don't submit and lose more margin.
So, submitting and losing less margin is a "bad' thing? Increased Volume with less margin can be the best thing!
I'd rather make $1/unit, and sell 100 units, than sell 20 units at $3 margin per unit.