Continuing the Wal-Mart|P&G|Gillette conversation ... today’s Wall Street Journal front page story (sub. req’d) focused on the role Wal-Mart may have played in the P&G/Gillette merger. Snippets from the story include:
For P&G and Wal-Mart, "it's a lot like a marriage," says Lou Pritchett, who, as P&G vice president of sales, met with Wal-Mart founder Sam Walton to establish the companies' relationship in 1987. "Sometimes you want to slice each other's throats, and there are other times when it's a love-in."Fully 17%, or $8.7 billion, of P&G's $51.4 billion in sales come from Wal-Mart's 5,100 stores world-wide. The companies link their computer systems and share sales data and marketing plans. One of P&G's largest offices outside its Cincinnati headquarters is in Fayetteville, Ark., down the road from Wal-Mart headquarters. The two companies cozy up to each other, only at times to pull back and compete fiercely.
Being the best-selling brand is always a goal for consumer-products companies. But it has become a matter of survival as Wal-Mart has become a bigger player in the world of retail. Wal-Mart is brutally focused on stocking only a few brands on its shelves. Moving products quickly through its stores is crucial to the company's profitability, so Wal-Mart swiftly abandons products that aren't selling well.
For both P&G and Gillette, Wal-Mart is the largest single seller of their products. It accounts for 13% of Gillette's $9.25 billion in annual sales. P&G's sales at Wal-Mart traditionally have grown faster than its total company growth rate, which was 19% in its last fiscal year, ended June 30.
P&G's acquisition was not driven by a desire to have greater leverage with Wal-Mart, Mr. Lafley said in an interview Friday. Asked if the balance of power has shifted to suppliers, he likes to reply, "The power has shifted to the consumer." P&G says it offers the same programs to all its suppliers and doesn't give any special treatment to Wal-Mart.
Wal-Mart has even lately worried about suppliers becoming too reliant on it, noting that any time companies rely too much on each other, they inherit all the risks of the other.
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