It's tough losing your biggest customer and many brands today are finding that out firsthand as Wal-Mart Stores is aggressively pursuing SKU reduction in its stores.
Advertising Age reported last week that Wal-Mart has decided to go from four plastic food storage bag brands in its stores to two. Pactiv Corp.'s Hefty and Clorox's Glad brand products have been removed from the retailer's store shelves, leaving all the space for SC Johnson's Ziploc and Wal-Mart's own Great Value private label. Wal-Mart's business likely represents a third or more of the individual brands' food bag sales.
The news isn't all bad for Pactiv, however, as the company is manufacturing Wal-Mart's Great Value bags. A spokesperson for the company told Ad Age, "We are currently off the shelf on the food bag business, but we expect to be back on the shelf in that category sometime in the future."
Bill Pecoriello, an analyst with Consumer Edge Research, said Wal-Mart's cuts in plastic food bags is likely to expand to other categories.
"If you look at the trash-bag category, you really have to ask yourself, 'Is there really a need to have more than one brand and private label?'" he told Ad Age. "I think Wal-Mart is going to make similar moves in some of the cleaning areas and then across the portfolio."
In a separate but related story, Wal-Mart has been testing an expanded selection of spices in stores, taking space from McCormick products. The chain currently represents about 11 percent of McCormick's sales.
Robert Moskow of Credit Suisse told The Wall Street Journal that private label spice sales grew from 13.5 percent in 2008 to 14.5 percent last year.
Discussion Questions: What are the implications for manufacturers in light of significant delisting activity by Wal-Mart and others around the country? Will this situation, for example, hasten manufacturers' move into direct to consumer sales?