Last month Walmart announced plans to open a plant in Olathe, Kansas, that will turn large cuts of beef into meatcase-ready steaks, filets, and more for its Midwest stores. This $257 million investment is the latest in Walmart’s efforts to build its own Angus beef supply chain, which began in 2019 when it partnered with processors and a ranching company to open its first case-ready beef plant in Georgia and launch an in-house Angus brand across the Southeast.
Walmart’s new Kansas plant will buy its beef from a soon-to-open Nebraska-based meatpacker called Sustainable Beef. Several ranchers formed Sustainable Beef to create a new outlet for processing and selling their cattle in an increasingly consolidated market controlled by four major meatpackers. By giving ranchers a stake in a packing plant and focusing on premium products, Sustainable Beef wants to generate better prices for its suppliers and higher wages for plant workers.
Last year, Walmart acquired a minority stake in Sustainable Beef for an undisclosed sum and promised to buy most of the beef it produces. Sustainable Beef’s founding ranchers still believe their business model will improve the cattle industry for future generations. Others believe the opposite. Some ranchers argue that vertically integrating with America’s largest and most powerful grocer will diminish competitive pricing for those outside the integrated supply chain and make producers within it vulnerable to Walmart’s squeeze.
“They are creating a temporary new marketing outlet for their animals, but if the whole industry follows this model, it will reduce options for themselves and other producers,” says Bill Bullard, CEO of R-CALF, a cattle producers’ advocacy group.
Walmart’s beef investments follow a recent trend of large grocers vertically integrating into food processing. Costco brought the chicken industry to Nebraska by opening a plant to supply its $4.99 rotisserie chickens. Walmart opened a milk bottling plant after pricing squabbles with dominant dairy processor Dean Foods, which contributed, in part, to Dean’s bankruptcy and several plant closures that stranded dairy farmers without a contract or milk buyer. Kroger and Albertsons also run milk plants.
Grocers say they’re investing in processing to lower prices on popular staples and gain more leverage over consolidated food companies. The largest meat companies made such handsome margins in recent years that grocers, distributors, and even the Justice Department sued them for allegedly conspiring to fix prices. Packers have paid millions to settle these suits.
“Walmart sees opportunity and is moving up the supply chain at a time of historically high margins for beef processors,” wrote an economist for CoBank in 2020, when Walmart opened their Georgia plant. (That said, today packers’ profits aren’t as high due to drought and a tight beef supply that’s raised cattle prices.) Notably, Walmart isn’t trying to compete on the lowest-cost beef, it’s focusing on products that can demand a premium by sourcing traceable, Black Angus cattle that meet certain feed and antibiotic use standards. Walmart will still buy a lot of beef from Tyson and Cargill. In 2022 Tyson relied on Walmart for nearly 18% of its sales in 2022.
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