Saturday, May 26, 2007

Walmart has another problem..

I like to watch issues that fall off the radar but still reverberate in the marketplace. One of these could be the melamine-laced pet food debacle that featured the source - China - prominently over and over.
Following recent scares over food contaminated with the banned substance melamine, a number of processors - including Nutracea, Mission Foods and Tyson Foods - have announced that their ingredients are not, or will no longer be, sourced from China. [More]

While we in agriculture observe this sputter of outrage by consumers with mild interest, you can bet your stock option boards of directors are asking where ingredients are coming from. And not just ingredients, perhaps.
This sorry episode illustrates that a global food supply requires honesty and integrity. If China or any other country wants to sell its products on the international market, it needs to make sure that its products are top-of-the-line. Arresting a company manager is not an acceptable long-term solution. [More]
Meanwhile, America's top retailer is so deeply invested in Chinese sources that the cloud over imports could impact sales of all kinds of retail goods.
Most people are not aware of the massive effect that the world’s largest company has on the American food supply. As noted by Charles Fishman in his book “The Wal-Mart Effect,” Wal-Mart is China’s eighth-largest trading partner. In 2004, almost 10 percent of everything imported to the United States from China was imported by Wal-Mart. With the way Wal-Mart pushes its suppliers to do business at the lowest possible cost, systems are poorly regulated and done on the cheap.

The role of China in American products extends beyond pet food and nonperishable goods. The precedent that such imports set can be felt system-wide. According to the Washington Post, “China’s agriculture exports to the United States surged to $2.26 billion last year, according to U.S. figures — more than 20 times the $133 million of 1980,” “China Food Fears go from Pets to People,” Washington Post, April 25. [More]
The impact on Walmart comes at an inconvenient time. As has been pointed out by numerous analysts, Walmart's primary consumer market is the lower 50% of earners, and those are exactly the citizens who have been left out of the prosperity growth in America.
Analysts believe that Wal-Mart has a ready-made market
at hand as 20% of its 100 million customers don't have
bank accounts. The chain already offers financial services
such as check cashing, bill payment and money orders,
and it has 28 Wal-Mart Money Centers, which are
operated by SunTrust Banks, as well as hundreds of other
in-store bank branches. [More]
The persistent reminders of wildly unequal economic progress in the US and the world remind us how national statistics can be a cold comfort, regardless of their positive nature.

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