Retail

Is Walmart's Relationship With P&G In Trouble?

Relations between Walmart and Procter and Gamble Co. (P&G) seem to have hit rough waters as the two companies struggle to squeeze more profits out of their partnership.

Relations between Walmart and Procter and Gamble Co. (P&G) seem to have hit rough waters as the two companies struggle to squeeze more profits out of their partnership.

P&G, which sells close to $10 billion worth of products through Walmart is seemingly unhappy with the retailer for making decisions that have put it at a competitive disadvantage, The Wall Street Journal reported.

One such example of the heating situation between the two companies came into light when Walmart placed Henkel's laundry detergent right next to Tide, a premium P&G product. This did not settle well with P&G. According to sources, P&G had to instantly increase its Tide marketing budget by 30 percent.

Despite P&G being a top supplier for Walmart, the retail giant seems to be resorting to desperate measures as it looks into regaining its market share, which is fast being devoured by eCommerce companies like Amazon.

Last year, the company's annual revenue took a hit for the first time since it went public in 1970. The loss was followed by a mass shuttering of 154 stores — something which Walmart has never done before, according to WSJ. At the same time, the company is paying more in wages and is investing billions of dollars in technological operations.

P&G on the other hand seems to be dealing with its own set of problems. Its annual sales have essentially been stagnating post-recession, and since 2005, the company has been unsuccessful at launching any premium product with a billion dollars in annual sales.

The relationship between the two companies also seems to be turning sour over matters like price control and sharing costs of moving products between Walmart warehouses.

With Amazon offering low prices on products, which are often sold for more even at low-budget stores, Walmart is finding it difficult to keep up with sales. To beat the rates, the company is reportedly forcing its suppliers such as P&G to cut back on the rates of their premium products like Tide and Gillette.

P&G instead wants Walmart to give it more shelve space, keep premium rates and help it increase product sales.

While the two companies didn't acknowledge any remorse, interviews with several executive veterans from Walmart and P&G tell tales of heated arguments and turmoil, according to WSJ.

“They need each other,” said Lou Pritchett,  former P&G vice president of sales. “They know it. Sometimes it can get incredibly tense.”

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