(CNN) – Walmart wants to attract customers to its stores by offering high quality steaks. He also wants to keep prices low.
So, for the first time, Walmart is working directly with livestock producers to create its own Angus beef supply chain.
L & # 39; Company announced in April that it would work with ranchers, a beef processor and a cattle operation to supply steaks and roasts to 500 of its southeast stores. Walmart has not revealed any name for its new range of steaks, which will start coming out of stores this fall.
At the Walmart shareholders meeting last week, leaders said that entering the meat supply chain would strengthen its credibility with customers on a key part of the company's driveway. # 39; groceries.
"This has become a very important priority for the company," said Scott Neal, senior vice president of meat at Walmart, in an interview with CNN Business. "The meat is the center of the plate" and "leads the customer to the store", he added.
Customers demand transparency in the way their food is produced. Neal said, "Trust in our food system is becoming more and more important." Working directly with ranchers and feeders will give Walmart greater visibility in the meat supply chain.
Walmart is also seeking to control some of the beef production in order to take over its suppliers. Possessing one's own beef stock could strengthen Walmart's position when negotiating prices with companies.
The beef industry has been consolidating in recent years and Walmart's main focus is beef production from Tyson Foods and Cargill, according to Walmart's American chef, Greg Foran.
"I think we all know the market dynamics of what happens when you generally operate in duopoly.This is not so good for the customer," Foran told analysts Friday.
The entry of Walmart into the industry poses a threat to Tyson, which depends on the company. Walmart is Tyson's biggest customer, accounting for over 17% of the meat company's sales, according to the filed documents.
Tyson, however, dispelled fears that Walmart's move would hurt his business.
"Our business is strong with Walmart and they have been an excellent partner for many years," Tyson chief executive Noel White told analysts last month.
Walmart recently made a similar move with milk. The company has built a milk processing plant in Indiana to supply milk to 500 stores.
"What motivates such a decision is if we see a consolidation of supply," Foran said. Prices for Walmart's milk suppliers have increased, leading the company to explore other options.
Walmart does not want to provide each of its more than 4,700 stores with his own milk, but "that gives us some weight" when negotiating contracts with his distributors, he added.
Other retailers are also taking control of their food supply chains in order to control costs.
Costco has built a $ 300 million chicken farm in Nebraska that will soon produce about 100 million roast chickens a year for its food courts and poultry shelves. Costco thinks that the introduction of poultry production internally will reduce its costs by 10 to 35 cents per bird.