Walmart Threatens Restaurant Chains With Prepared Meals

Walmart Inc. will start offering prepared meals at its stores for the first time, a move that could help the nation’s biggest grocer sell more food while siphoning customers from restaurant chains.
Ten different meals are now available in 250 stores, and the program will expand to 2,000 locations by year’s end, Walmart executives said in an interview. The company also is introducing four $15 meal-kit options in stores, expanding a business that had previously only been offered online through outside vendors.
“More than 80 percent of Americans don’t know what they will have for dinner tonight,” said Tyler Lehr, a Walmart senior vice president. Scrambling to find a meal “puts pressure on a family,” he said.
The move is the latest step to improve Walmart’s grocery business, the chain’s biggest source of revenue. It has upgraded its beef to certified Angus, cultivated a sweeter variety of cantaloupe that can be sold year-round, and recently developed a better way to track the freshness of fruits and vegetables as they travel from farms to its shelves.
The company also is looking to ward off competitors on multiple fronts, including Inc., German discounter Aldi and meal-kit purveyor Blue Apron Holdings Inc.
The move sent shares of Blue Apron down as much as 5.8 percent on Monday. That company, which has struggled to convince investors it can withstand growing competition, has lost about a third of its value this year.
Prices of Walmart’s new prepared meals will range from $8 to $10, and varieties include pot roast with mashed potatoes and chicken enchiladas.

Restaurant Threat

Given the massive scope of Walmart’s grocery business, the meals could depress sales at restaurant chains. Shoppers may choose to grab a quick and cheap dinner from Walmart instead of dining out.
It’s not good timing for the dining industry. Sales growth at the nation’s top 500 restaurants has slowed for two straight years, according to research firm Technomic, while growth at full-service chains like Olive Garden and Chili’s went from 4.7 percent in 2015 to flat last year.
For Walmart, the meal push also may let it get more out of its deli section. Nearly all supermarket chains have such departments, yet only 12 percent of shoppers regularly visit that part of the store, according to data tracker Nielsen Homescan. Higher-income households are 20 percent more likely to purchase deli items, Nielsen and the Food Marketing Institute found.
It’s increasingly common practice for supermarkets to offer prepared meals, but Walmart held off until it could find the right approach, Lehr said. The meals, which were developed internally in about two months at the company’s culinary innovation center, have a shelf life of three days.
“It’s no big secret that they are offered in other retailers, and we have looked at them previously, but we were not thrilled with quality levels,” he said. “We were not going to make a move in this space until we were comfortable.”

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