Walmart cuts out middlemen with first-ever beef facility as prices soar

Walmart opened its first owned and operated case-ready beef facility in Kansas, eliminating middlemen in its supply chain to help control costs and ensure adequate supply as beef prices remain elevated.

The newly opened, 300,000-square-foot, state-of-the-art facility in Olathe will package and distribute Angus cuts sourced directly from Sustainable Beef LLC to 600 stores across the Midwest region, which Walmart says will increase transparency and capacity in the beef supply chain to help the retailer meet customer demand. This immediately reduces the retailer’s need to lean on an outside party to cut and package beef, which can lead to higher costs that can get passed onto consumers. 

“This is the first case-ready facility fully owned and operated by Walmart, and that milestone ensures we’re able to bring more consistency, more transparency and more value to our customers,” Walmart U.S. Executive Vice President John Laney said in a statement. 

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Walmart made an equity investment in Nebraska’s Sustainable Beef LLC in 2022 as part of its effort to implement an end-to-end supply chain for Angus beef. Sustainable Beef sources cattle from no more than a 250-mile radius to the plant. 

Arun Sundaram, senior vice president and equity analyst at CFRA Research, told FOX Business that by taking greater control over sourcing and processing, Walmart can improve quality, enhance traceability and strengthen its supply chain, which is key in the highly concentrated U.S. beef industry. 

But, “this move should also help lower costs, allowing Walmart to offer more competitive pricing at a time when beef prices are rising and many consumers are trading down to value proteins like chicken,” Sundaram said.

In May, prices for beef and veal were up 8.6% compared to a year ago, according to the Department of Agriculture (USDA). The USDA projects that beef and veal prices will continue to increase throughout the year, up 6.8%, due to tight supplies and continued consumer demand. 

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Bernt Nelson, an economist with the American Farm Bureau Foundation, said in May that strong demand “means higher prices paid for wholesale, which means higher prices for fed cattle, feeder cattle, and even new calves.” At the same time, cattle supplies are currently at a 74-year low. Both factors are to blame for the uptick in costs, according to Nelson.

However, Sundaram added that Walmart’s move also aligns with its broader effort to improve its perception of fresh food. 

“While Walmart has long been known for low prices, it has recently placed more emphasis on quality, particularly in fresh categories like produce and protein,” he said, underscoring that “fresh quality perception is often the top factor influencing where consumers choose to shop.” 

While Sundaram said he believes the Arkansas-based retail giant is the market share leader in grocery, he noted that there is “still room to grow share, particularly among higher-income households” based on data that shoppers are still visiting four to five different grocers each month.