Walking down the aisle: how brands can have successful big-box retailer relationships

While digital channels are the cornerstone of building communities and fandoms for consumer packaged goods (CPG), retail stores remain a critical distribution point for high repeat velocity goods. For brands, big-box retailers have the broadest reach, as 90% of Americans live within 10 miles of a Walmart with Walmart shoppers making an average of 67 annual trips. Retailers are often the beneficiaries of viral direct-to-consumer launches, as they drive store traffic for convenient retrieval of the products.

In April, the Science team walked the aisles of a Bentonville, Arkansas Walmart and Sam’s Club with merchandisers for a closer perspective on store dynamics and what it takes to succeed in the current and future retail landscape.

Power in physical presence

In Walmart, products are not organized based simply on category or happenstance. Shelf space is tightly managed, and Share of Shelf (SoS) is similar to market share, reflecting how valuable a brand or product is based on how much precious shelf space is allocated.

Brands have a limited window to catch shoppers’ attention. In particular, dry groceries or snacks that are high-velocity and price-sensitive need to stand out on shelves and communicate what it is and why someone should choose the product in three seconds.

Iconic brands like our breakout portfolio company Liquid Death understand the impact of packaging, creating unique and eye-catching designs to stand out on the shelves. Clear and prominent communication of health and wellness benefits is also key to attracting health-conscious shoppers.

Making sure the price is right

With 90% of consumers concerned about grocery/food prices, and 87% of people concerned about inflation generally, it is more important than ever for brands to align with Walmart’s low-price leader strategy.

Brands must work hand-in-hand with big-box retailers to ensure their pricing and promotional strategies benefit the company and the store. Cultivating strong relationships ensures optimal product placements when companies run offers to increase sales volumes. Data analytics can also be leveraged to make data-driven decisions and optimize pricing to reflect real-time demand, competitor pricing, and retail trends.

Pricing is more complex than just being the cheapest option, as the perception of value versus quality is a delicate balancing act. Increasingly, Walmart is looking to serve the other end of the pricing spectrum, offering more premium products if they have a high-end experience and a strong following.

Food and beverages categories are ripe for reinvention

With 85% of people prioritizing wellness more now than they did in 2023, and millennials and Gen Z spending more on health and wellness products, we continue to focus on investing in disruptive brands prioritizing cleaner ingredients that still appeal to consumer’s tastes. For example, OffLimits removed the artificial ingredients found in traditional cereals while still offering fun flavor combinations, and Liquid Death now sells iced tea lightly sweetened with agave and infused with vitamins rather than unhealthy sweeteners.

There continues to be a great opportunity for new companies to reinvent poor ingredient products with innovative healthier flavors to benefit the American consumer. A standout from our store visit was Quest Protein Chips, which provides a great amount of protein with a super clean label at a very competitive price.

Words to the wise

Going into retail is a complicated and costly process. Resist the urge to rush into stores — you only get one chance to make the right impression and cannot expect the retailer to deliver an audience. Take the time to build your online community and create a fandom that will translate into stores. Only expand into retail when you can really engage with at-scale partners and show them you can drive mass consumers into their environment.

Do not go into these distribution relationships too early — have high confidence in product and adoption and a real staff to manage the relationship and capital to handle sales. To better understand the ever-evolving retail environment, visit stores as often as possible and surround yourself with people with decades of experience. It was certainly helpful for the Science team to see the store through merchandisers’ eyes, and we are excited to leverage these insights to help brands drive more traffic into Walmart.

If you are interested in learning more, looking to partner, or want to discuss an investment opportunity, please reach out to investors@science-inc.com. We welcome the chance to connect.