Not too long ago, a colleague wrote a blog post titled “Supermarkets for Majority Markets,” which highlights both domestic and international efforts to create jobs and improve community health by opening supermarkets in low income areas. I was struck once again by the many ways supermarkets can benefit the BOP after reading a recent article about Walmart’s new investment strategy for Latin America.
In February, the company announced plans to open 300 new stores across Mexico. Interestingly, over 50% of the new stores will be in the smaller, lower income-focused Bodega Aurrera Express format. This new line of Bodega stores will be built primarily in underserved areas and will offer commercialized product lines priced between 10 to 20% lower than competing stores.
Walmart’s model of engaging the BOP is a particularly interesting one. Over the past decade, we have often heard of all the work the retailer has been doing in Central America to integrate poor, rural producers into their value chain. Walmart has a strong history of aiding local farmers in increasing their productivity, diversifing crops, and building collective farming mechanisms in order to meet the store’s demand for reliable and high quality produce. Since 1998, Walmart Central America and its local affiliate Hortifruiti have supported the region's social and economic growth by partnering with local farmers to help them increase their yields and competitiveness. The Tierra Fertil program currently aids over 5,000 producers throughout Honduras, El Salvador, Nicaragua, Costa Rica and Guatemala. The program has been successful in reducing foreign agricultural imports and famers in the program now supply fresh fruit, vegetables and cereals to the La Union and Pali supermarkets and are the principal suppliers of vegetables to Walmart.
With the announcement of its plans for Mexico, the company is adding a new link to its engagement chain with majority markets, creating a customized value proposition that targets the BOP as consumers as well as producers. This win-win model is made possible by the chain’s success in implementing a nimble multi-format strategy, which combines stores of different sizes and service offerings (from banking to pharmaceuticals) to accommodating areas with diverse needs and leaving no customer behind.
Walmart’s win-win business model is a great example of how a large international company can capitalize on the wide array of possibilities offered by the BOP, extending a value proposition tailored to serve impoverished communities (demand side) while working with local famers to supply the store’s demand for produce (supply side).
