#806: Walmart's Pickle Walmart and Amazon are in a battle to be the store where you buy everything. But when both companies sell everything, what sets them apart? Food inventions like a bright, red pickle!
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#806: Walmart's Pickle

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#806: Walmart's Pickle

#806: Walmart's Pickle

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JULIA DEWITT, HOST:

The other day, I got an invitation that I wasn't expecting. It was from Walmart. In the past, Walmart hasn't been the most open company. They've famously kept their cards close to their chest. But for the last year, they've been working on something big - a project they wanted to tell the world about. And so I flew down there to their headquarters in Bentonville, Ark.

All right. This is Julia at Walmart. It is October 31.

I get there, and I'm introduced to a guy named Jack Pestello.

Good to meet you.

JACK PESTELLO: Nice to meet you. I'm Jack.

DEWITT: Hi.

Jack is in charge of Walmart's Culinary and Innovation Center. He walks me over to this table where there's a plate. And on it is one of these culinary innovations.

PESTELLO: It is a bright red pickle.

DEWITT: It is a bright red pickle.

PESTELLO: And it's got a lot of fruit punch loaded in. As you get - you pickle it with fruit punch.

DEWITT: Walmart would like the world to know it is creating a tropical fruit punch pickle. They call this the Tropickle. Jack says it's actually inspired by similar pickles you might find in barbecue joints in Mississippi. And he'd like me to try it.

I think I can probably just cut it with this fork. I'm not sure...

(LAUGHTER)

DEWITT: ...I'm your prime consumer for this.

(LAUGHTER)

DEWITT: Wow. This tastes crazy.

PESTELLO: Yeah.

MOLLY BLAKEMAN: But it does taste like tropical punch, doesn't it?

DEWITT: It sure does.

(SOUNDBITE OF BUD GUIN'S "ROWDY AND READY")

DEWITT: Hello, and welcome to PLANET MONEY. I'm Julia DeWitt.

KENNY MALONE, HOST:

And I'm Kenny Malone. And Walmart is inventing food because, for the last decade, it has been doing everything it can to stave off one main competitor, Amazon.

DEWITT: These two companies are in a battle to be the place where we buy everything. And today on the show, how it may all come down to a pickle.

MALONE: A Tropickle.

(SOUNDBITE OF DOGS BARKING)

CHARLES FISHMAN: That's the dogs. I don't know what they're doing. Hold on one second.

MALONE: This is Charles Fishman and his dogs.

FISHMAN: (Unintelligible).

DEWITT: He's an author and reporter. He wrote a book called "The Wal-Mart Effect." And he says that when Walmart first started, food was not part of the plan.

MALONE: The first Walmart opened in 1962 in Rogers, Ark. And the founder Sam Walton's plan was to sell all the other everyday stuff that we need.

FISHMAN: Like toothpaste, like laundry detergent, like diapers.

MALONE: But to sell those things cheaper than anybody else. And to sell everything cheap, the company had to be cheap.

DEWITT: Sam Walton was legendarily frugal. There's a story in Charles's book about one of the company offices where he'd shell that money for a desk and a chair.

FISHMAN: But the chairs for the guests were lawn chairs that another supplier had brought as samples and left. And so instead of buying office furniture, Sam was like, hey, the guy left you lawn chairs. Let's use them.

MALONE: And, sure, it's a funny story. But as Walmart grew and grew, it got really good at these kinds of things - at inventive ways to save money and then sell stuff ridiculously cheap. At one point, Walmart decided to only carry concentrated detergent, for example - cut down on shipping and plastic and, of course, costs. It also decided to make its receipts shorter. It saved $7 million a year as a result.

DEWITT: And they were known for not paying their employees very well. They've gotten better on this, but it's definitely a part of their cost-cutting history. For better or for worse, though, these cost cuts resulted in big savings for the customer, savings that were irresistible. And by 1988, virtually every state in the country had a Walmart.

FISHMAN: Sam understood that if he was going to grow - he was already selling as much toothpaste, as much deodorant, as many things like athletic socks that people buy and then wear out and buy again as you can sell. **

FISHMAN: And you look around. It's not hard to say, what aren't we selling. Well, we aren't selling milk and bread and chicken breasts. And if we sell those things, we change the game for ourselves.

DEWITT: And so Walmart decides to take on groceries. It started opening these Supercenters that are basically Walmarts with a grocery store attached.

MALONE: And Charles says that even though the existing grocery industry was this big, well-oiled machine, it did not matter because in just 10 years, Walmart had devastated the competition.

FISHMAN: When a Supercenter opened near you, as a grocery store, you immediately lost the equivalent of a whole day's sales each week. You lost one-seventh of your sales. Twenty-four regional grocery chains went bankrupt as Walmart rolled out across the country.

DEWITT: Really?

FISHMAN: Yes. And they knew what they were doing. They were the No. 1 seller of groceries in the United States.

DEWITT: Charles later told us that he actually checked that number, and it was even more chains that went bankrupt because of Walmart. It was 27.

MALONE: And in essence, Walmart became a different company with groceries because selling food meant that people just needed the store in a totally different way.

FISHMAN: People go to the grocery store once a week or twice a week. And by the way, if you're in the Walmart to do a quick grocery shop, the grocery aisles, of course, abut the rest of the store - the clothing, the underwear, the lightbulbs. And so you may just say, oh, I'm here. We need lightbulbs. Let me go grab them.

DEWITT: With the addition of groceries, Walmart started making even more money and eventually became the biggest company in the history of the world.

MALONE: The biggest by revenue. Last year, Walmart made around $480 billion.

DEWITT: Half a trillion dollars in revenue.

MALONE: Which is to say that there are now half a trillion reasons for Walmart to do everything it can to defend its grocery empire against - I don't know - let's say a company from Seattle who really wants to sell groceries.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED MAN #1: We are getting some breaking news on Whole Foods.

UNIDENTIFIED MAN #2: Holy cow.

UNIDENTIFIED MAN #1: Jim, I heard you gasp just now.

UNIDENTIFIED MAN #2: Holy cow. This is such a game changer. Amazon to buy Whole Foods.

MALONE: This was about six months ago. And I think part of the shock that day was that not very long ago at all, Amazon was this website that just sold books. And holy cow, now they're buying grocery stores?

DEWITT: But the reality is this kind of world domination - it was sort of baked into the identity of the company from the beginning.

BRAD STONE: Back in 19 - it must have been 1995. They were discussing what to call Amazon.

MALONE: This is Brad Stone. He wrote a biography about Jeff Bezos called "The Everything Store."

STONE: And they did register URLs like bookmall.com. But he very clearly chose a name that had nothing to do with books, that conveyed a principle, which was, like, the largest in the world. The Amazon - the largest river in the world, the largest selection in the world. The ambition was great even back then.

MALONE: Brad says they also considered the name relentless.com.

DEWITT: And even back then, Bezos has Walmart in his mind. He's reading and underlining the autobiography of Sam Walton. He gives copies to employees, quotes his wisdom.

MALONE: And about 10 years after starting the company, Bezos comes to the exact same realization that Sam Walton had come to. In order to sell everything to everyone, you have to make the leap into selling food.

DEWITT: They launched this service called AmazonFresh.

(SOUNDBITE OF YOUTUBE VIDEO, "AMAZON FRESH REVIEW")

ALEX NAPOLI: Hi, everybody. My name's Alex Napoli. Today, I am very excited. I have my first ever delivery from AmazonFresh.

MALONE: A side note here - there is an entire YouTube category of people receiving their first AmazonFresh package. It's a total rabbit hole. Stay away. We warned you.

DEWITT: Many people were very excited.

(SOUNDBITE OF YOUTUBE VIDEO, "AMAZON FRESH REVIEW")

NAPOLI: What? What? I'm pumped. Let's see what came in the bag. Eggs, apples, carrots, a whole chicken, two giant sweet potatoes.

MALONE: Other people - not as excited.

(SOUNDBITE OF YOUTUBE VIDEO)

UNIDENTIFIED MAN #3: I think this is our last time doing Amazon Prime Fresh (ph) after this because...

MALONE: This guy - his entire order was basically crushed when he got it.

(SOUNDBITE OF YOUTUBE VIDEO)

UNIDENTIFIED MAN #3: Look at this box of cereal - squished up. A bushel of bananas - they look a little - damn, see? Bruised. Everything's like that.

DEWITT: What Amazon learned pretty quickly is that delivering groceries is way more complicated than delivering a pair of socks. Socks don't go bad. And so Amazon's first crack at groceries - it didn't really go that well - certainly not as well as Walmart's. We should also say that Walmart, by revenue, is still way bigger than Amazon.

MALONE: But you can still imagine that Walmart is watching all of this from Arkansas and still worried because Amazon has a ton of money. And, eventually, it did figure out a way to sell groceries well - just buy Whole Foods.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED MAN #2: Holy cow.

DEWITT: Once Amazon bought Whole Foods, they immediately dropped food prices, and they drew a bunch of new customers. One survey showed about 1 in 4 of those new Amazon Whole Food shoppers came over from Walmart.

MALONE: And so Walmart is at a place where it needs to get those shoppers back. One way to do that is to sell food that Amazon can't possibly have, that no one else has - the kind of food you might have to invent in a secret laboratory hidden in Bentonville, Ark.

DEWITT: Which is how I ended up going down to Walmart's headquarters to see what they're up to. And I'm imagining, like, this impenetrable fortress, you know, serious guards at the front door. But nope.

So good to meet you in person.

BLAKEMAN: So nice to meet you. Thanks for being here. I know it's a trek.

DEWITT: The first person I meet is Molly Blakeman, a very enthusiastic employee of Walmart. We're at the front desk of Walmart's headquarters, and she gives me a pass to get through security. There are a couple levels of clearance.

BLAKEMAN: If you're just going to the vendor rooms here, that pass will get you to that. But if you're going past it, you'll need the second one.

DEWITT: This is the second.

BLAKEMAN: Yes.

MALONE: Julia, did they give you top clearance at Walmart?

DEWITT: Well, I mean, I don't know. I don't know how high it goes. But I feel pretty good about it.

MALONE: Sure.

DEWITT: Anyway, so it's enough to get me back into the Walmart compound, where there's a bunch of buildings. They all look like Walmarts. And, eventually, we end up over at the Culinary and Innovation Center. Inside, we walk down this hall where there's a bunch of identical kitchens. They're meant to just look like, you know, an average home kitchen. And this is where I meet Victor Verlage.

UNIDENTIFIED WOMAN: Hi.

VICTOR VERLAGE: Victor. Hi.

UNIDENTIFIED WOMAN: Good to meet you.

VERLAGE: Very good to meet you.

DEWITT: Hi. Julia DeWitt.

VERLAGE: Julie.

DEWITT: Victor is one of a bunch of people who are trying to think up and invent entirely new foods for Walmart.

MALONE: Please tell me he's in a lab coat.

DEWITT: No, a little more Silicon Valley than that - something like a Patagonia soft shell?

MALONE: (Laughter) OK.

DEWITT: (Laughter) Do you know what that is?

MALONE: Sure. It's like a soft coat or a light coat.

DEWITT: (Laughter) Soft coat.

MALONE: I don't know.

DEWITT: So, anyway, Victor's job is to create brand new kinds of produce for Walmart. While we're sitting there, he pulls these little, plastic bags out of his pockets full of seeds.

Oh, my God. What?

UNIDENTIFIED WOMAN: You just carry those seeds around with you?

VERLAGE: Absolutely. They're my babies.

DEWITT: Some of these seeds are for a new tomato that Walmart can ship long distances, but it still tastes really good. Some are for a brand-new kind of cantaloupe. They named it the Sweet Spark, which is sweet even in the winter - apparently, a big problem for cantaloupe. And the rest of the seeds were a new kind of watermelon.

VERLAGE: This watermelon is actually yellow-skinned and striped.

DEWITT: Whoa.

VERLAGE: And they're bright red inside, and the flavor is unbelievable.

DEWITT: He says the yellow color - it was actually an accident. But it does also give them a competitive edge.

VERLAGE: When a piece of fruit or vegetable looks odd, at first, you know, people really have to try hard, you know, to taste it. But if we put demos in the stores, and they love it, then that becomes your best friend because your kid will tell you, mommy, bring me the yellow watermelon that I love - easy to recognize.

DEWITT: This yellow watermelon is potentially exactly the kind of weapon they'll need in the food fight with Amazon because it will be found exclusively at Walmart.

MALONE: I keep thinking, like, imagine you could only buy something like the baby carrot at Walmart. Like, that would be a huge advantage.

DEWITT: If you're a parent, and you have to go to Walmart to buy baby carrots, may as well buy your socks there, too, and toothpaste and everything else you might need.

MALONE: And so Walmart is in search of the next baby carrot. And they've started to put systems in place to test these as they invent them. They have a laboratory called the Sensory Lab.

DEWITT: I went over there after seeing Victor and his pocketful of seeds. And the way the testing works once you've got your new watermelon, say, is that hundreds of employees come through the Sensory Lab. And they taste it. And then they rate it. And on the day I'm there, there are a bunch of things coming through for taste testing. I run through them with an employee named Reggie.

So we're going to do this.

REGGIE: OK. Let's do it.

DEWITT: We sit down at this booth. There's a whole row of them. And each booth, you sit. You face the wall. And then one by one, these food inventions come out from this slot in the wall.

REGGIE: So you always want to start with a bit of water to cleanse your palate, of course.

DEWITT: While we're sitting there in the booth, Reggie explains to me how this is going to work. The food will come out. He's going to taste it. And then he'll rate it on a scale from dislike extremely to like extremely. First up, out pops some Greek yogurt. Reggie tastes it, and then he rates it.

REGGIE: I'll go extreme. That's really good.

DEWITT: There's a lemon poppy seed muffin.

REGGIE: This one - I liked it very much, I would say.

DEWITT: A chicken poblano burrito bowl.

REGGIE: I'm going to do very much here.

DEWITT: Some onion bread.

REGGIE: It's another like very much.

DEWITT: Are you generally a pretty positive guy, Reggie?

REGGIE: I think so. I think that's fair. It's fair to say. I think you have to be nowadays, folks (laughter). I think you do.

MALONE: So no testing any breakthroughs as big as, say, the tropical fruit punch pickle?

DEWITT: No. Can't have a Tropickle every day. But there has been some pretty groundbreaking research - birthday-cake-flavored oatmeal...

MALONE: OK.

DEWITT: ...The cotton candy grape.

MALONE: Childhood Kenny would be delighted to hear that someone finally understands him.

DEWITT: Unfortunately, I didn't get to taste those. Those are not quite in season yet.

MALONE: OK.

DEWITT: And what struck me while I was visiting the Culinary and Innovation Center was that this grocery war between Amazon and Walmart has reached an almost absurd point. Amazon is buying actual stores. Walmart is inventing grapes. And it's all part of this bigger battle to be the store that sells everything to everyone.

MALONE: Which creates a whole new problem because what is the difference between two stores that both sell everything? Why do you go to one versus the other? How do you even choose? And these companies seem to understand that what this means is that they need special stuff - anything you can offer that the other one can't.

DEWITT: Speaking of which, I'm just going to go grab something.

MALONE: Julia is leaving the studio. I'm waiting in the studio for Julia. She has left. Left is Julia. Gone has Julia. Julia's coming back in the studio.

DEWITT: OK, Kenny.

MALONE: What do you got?

DEWITT: All the way from Bentonville, Ark...

(SOUNDBITE OF JAR SEAL BREAKING)

MALONE: Tropickles.

DEWITT: After the break, we bring the Tropickle to a food professional.

Kenny, I want people to know what this Tropickle eating experience is like.

MALONE: Tropickle.

DEWITT: Yes.

MALONE: (Laughter).

DEWITT: I obviously tried it.

MALONE: I also tried it. I thought it tastes like a salty Capri Sun. But we realized that we have no idea what to make of the Tropickle. And so we brought in a food expert.

DAN PASHMAN: My name is Dan Pashman. And I host a food podcast called The Sporkful.

DEWITT: Yes. So, Dan, we have something that we would like you to try.

PASHMAN: OK (laughter).

DEWITT: It is a recent development of Walmart's.

PASHMAN: First of all, I can just tell you it looks like Maraschino pickles. That's what it looks like to me.

DEWITT: It is called the Tropickle.

PASHMAN: All right. Here we go. I'm going for a bite.

(SOUNDBITE OF CHEWING PICKLE)

PASHMAN: It's very sweet.

MALONE: Could you imagine eating barbecue and then enjoy enjoying this as a side or, like...

PASHMAN: I could, actually.

MALONE: Yeah.

PASHMAN: I could because...

MALONE: Dan said that the Tropickle reminded him of this food concept called the sweet out that he learned about while he was at a barbecue joint in Centerville, Tenn.

PASHMAN: So we had finished our barbecue lunch. And we were having cake and pie. But they left the barbecue on the table. After we were finished with dessert, my host said to me, now it's time for the sweet out. Have one more taste of salty barbecue meat after the dessert. And the barbecue was even better then because it tasted saltier and smokier after having just eaten the carrot cake and the chess pie.

MALONE: Oh.

DEWITT: Oh.

PASHMAN: What these Tropickles are making me crave is some pulled pork.

(SOUNDBITE OF DAVID ISAAC FELDSTEIN, ERIC J. BERDEN AND MARC FERRARI'S "ALL THE PROOF YOU NEED")

DEWITT: We want to try more weird foods and use them to talk about economics. What have you got for us? We love to hear from you. Email us at planetmoney@npr.org or find us on Facebook or Twitter.

MALONE: Today's episode was produced by Sally Helm. Alex Goldmark is our supervising producer. Bryant Urstadt runs PLANET MONEY's culinary and innovation center and edits the podcast. And if you're looking for something else to listen to, I cannot recommend more highly 1A. It's a show hosted by my former colleague from way back in the day when we were working in Miami, Joshua Johnson. It's newsy. It's insightful. It's surprising. It is a really smart conversation that you get to eavesdrop on. That's 1A, available wherever you get your podcasts. I'm Kenny Malone.

DEWITT: And I'm Julia DeWitt. Thanks for listening.

(SOUNDBITE OF DAVID ISAAC FELDSTEIN, ERIC J. BERDEN AND MARC FERRARI'S "ALL THE PROOF YOU NEED")

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