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HARNESSING THE GIANT

BRIAN PETERSON

Brian Peterson runs Wal-Mart's perishables, but he knows how to squeeze a tomato and argue in Sicilian when it comes to the products he buys. "Even though I work for the largest retailer in the world, I tend to think like a small merchant," he says.

Small is where Peterson got his start, working with tiny outlets and on the loading docks of the Midwest as the owner of his own produce wholesaling company. "I was a 'jobber' handling fresh fruits and vegetables and some flowers. I served restaurants and small grocery stores," says Peterson, who is now Wal-Mart's senior vice president, and general merchandise manager of perishables.

In that position, Peterson has a direct impact on a major share of the world's perishable purchases. "I'm responsible for the whole buying organization for the perishables in the Wal-Mart stores division," he says. Though Wal-Mart is best known for selling non-perishable goods from clothing to DVD players, its presence in the perishables world is predictably massive.

"We are in the top five receivers of fresh fruits and vegetables in the world," Peterson says. Wal-Mart doesn't just buy from perishables wholesalers; it is reshaping the entire industry. Ferocious waves of consolidation have swept through the perishables business over the last few years. Hundreds upon hundreds of middlemen every year have been crumpled into one another to create larger corporations.

"Since 1997, merger activity picked up and has been occurring at all levels of the food system," says Dr. Roberta Cook, University of California Davis Department of Agriculture and Resource Economics in a recent white paper published by the Produce Marketing Association. "In 1998, there were over 800 mergers, and in 1999, there were over 750."

Peterson says, "It's a huge issue for the produce industry; consolidation is happening on the retailer side and on the supplier side. It's mainly in response to us." Wal-Mart accounts for the majority of total sales by "supercenters" in the U.S., Cook adds. When the retailing giant first encountered the perishables business, it found an industry dominated by small, family owned businesses. To a company like Wal-Mart, small is anything but beautiful.

Founder Sam Walton defeated his retail competitors in part because he was willing to reinvent relationships between retailers and their suppliers. Walton realized that the traditional adversarial relationship between retailers and their suppliers wasted a tremendous amount of time and energy. In 1987, Walton decided it was time for a change. "We began to mm a basically adversarial vendor/retailer relationship into one that we like to think is the wave of the future, a win/win partnership between two big companies both trying to serve the same customer," Walton said in his biography, Made In America.

Big companies were rare in the perishables wholesaling business before Wal-Mart came on the scene--that's no longer the case. "Wal-Mart brought a new perspective to the perishables business, a mass-merchandiser, high-volume discount approach," Cook says. "What they attempted to do was carry that model over into the food industry, working with preferred suppliers to drive costs out of the system. One of the ways they do that is through contracting with preferred suppliers," she says.

Wal-Mart's choice of suppliers, and willingness to help some become the large companies it prefers to deal with, has fundamentally altered the world of perishables. In his 11 years with Wal-Mart, Peterson has played a key role in that transformation.

Born in Detroit in 1954, Peterson got his first experience among some of the smallest, fiercest players. Sicilian was the language of the produce business in Detroit, and Peterson learned lessons on the sales floor and loading dock that have shaped his views to this day.

"All of my early training in the produce industry came from Sicilians who took me under their wing. It was the best training a person could have. I learned more about hard work and how the industry works that any other environment I could be in," Peterson says.

Ask Peterson about the specific tactic and strategies that are at the core of Wal-Mart's approach to perishables, and he responds with uncomplicated sentences. "This is going to sound overly simplistic," he says of the company's approach, "but serve the customer better than anything else. Everything we do at Wal-Mart starts with the consumer and works backwards."

Beneath that seemingly basic philosophy, however, is a relentless commitment to implementing the most advanced logistics and communications systems available in the marketplace, and reshaping entire marketplaces to meet Wal-Mart's needs, if necessary. Truly listening and responding to the consumer means installing advanced point of sale technology to track sales on an almost moment-by-moment basis. It pushes companies to implement sophisticated logistics systems with their suppliers, so the messages from the marketplace conveyed in store sales are translated into action as quickly as possible.

"We believe that we and our suppliers form a collaborative relationship to market to our joint customer, who is the consumer," Peterson says. That means he has to know as much about technology as he does about fruit. "Wal-Mart has a proprietary system called RetailLink, which allows our suppliers immediate access to all information needed to help us run the business," he says. That system sometimes reaches around the world.

Unlike some big players in the industry, Wal-Mart doesn't demand companies to get hooked up to its system no matter what their size. "It may not be cost effective for a small corn grower who sells to two or three stores to get technologically wrapped up with us," Peterson says. "Any time there is change, there is resistance. But surprisingly, most of our suppliers have adapted quite well," he says.

One sign of his positive approach and sense of duty to the field that provides his livelihood is his involvement in industry organizations. He was named "Marketer of the Year" at a produce trade convention in 1997, and is about to become chairman of the Produce Marketing Association. One of Peterson's most recent honors bewilders him slightly. He was just named the International Refrigerated Transportation Association's Executive of the Year.

Sam Walton probably would not have been one bit startled. Getting good products to the store shelves as efficiently as possible in a consistent way is what Wal-Mart is all about.

PHOTO (COLOR): Wal-Mart's choice of suppliers, and willingness to help some become the large companies it prefers to deal with, has fundamentally altered the world of perishables.