When Walmart started, food and groceries were not a part of their plan. Walmart wanted to be the place to sell all the other everyday items but at a much lower price than its competitors. To do so, the company had to significantly cut their costs.
A funny story talks about how Sam Walton, the frugal founder of Walmart, chose to use the sample lawn chairs instead of spending money on new furniture. The company also decided to make its receipts shorter which helped them save around $7 million a year. As Walmart grew, they got really good at these ways of reducing their costs which in turn helped them sell products at a significantly low price.
After a few years, Sam Walton realized that to propel Walmart to the next level, the company had to venture into groceries. Walmart opened “Super Centres” which were regular Walmart stores with an enormous grocery aisle attached. With the low pricing strategy that Walmart had perfected over the years, the company easily managed to outclass and overshadow all its competitors. It was observed that each time a “Super Centre” opened near another grocery store, this store lost what was equivalent to a whole day's sale each week.
Meanwhile, Amazon, a giant from Seattle, wanted to be the one-stop shop for everyone. Jeff Bezos, CEO of Amazon, quickly realized that in order to sell everything to everyone you have to jump into selling food. To achieve this goal, Amazon acquired Whole Foods and launched the grocery delivery service “Amazon Fresh”.
Amazon now quickly started driving in customers. A survey showed that 1/4th of the new shoppers at Whole Foods came over from Walmart.
Walmart and Amazon are now locked in a fierce battle to be the store where customers can buy everything.
Walmart needs to find a way to get their customers back. The best way to accomplish this would be to sell foods that cannot be found on Amazon’s e-commerce platform.
To pull this off Walmart has set up a “Culinary & Innovation Centre” where Walmart’s private brands team up to invent new kinds of food and test them to ensure they meet the customer’s needs.
A yellow-skinned watermelon with a juicy red centre, a new kind of tomato that Walmart can ship long distances but which still holds its taste and the "Tropickels" are just some of the creations of the “Culinary & Innovation Centre”.
These inventions are the perfect weapons for Walmart in its food battle with Amazon since these foods will be found exclusively at Walmart.
Think about it this way – What if you could buy carrots only from Walmart?
If you can get your carrots only at Walmart you might as well buy your detergent, your toothpaste and everything else from there. People would do their weekly or monthly shopping from just one place since it has those special items that cannot be found anywhere else.
This is exactly Walmart’s intention behind setting up the “Culinary & Innovation Centre” - to drive in customers by creating exclusive products that will result in the customers choosing Walmart as their everything store.