Could Walmart's War on Unhealthy Food Challenge McDonald's?
Walmart (WMT) is making a major effort to improve the quality of the food it sells. The world's largest retailer announced a five-year plan "to make thousands of its packaged foods lower in unhealthy salts, fats and sugars, and to drop prices on fruits and vegetables," according to the Wall Street. Journal. Walmart intends to pressure its food suppliers to offer goods that contain fewer calories and trans fats. It will also keep down prices on fruits and vegetables to encourage customers to buy more of these items.
Walmart has picked a good time for the announcement. Recent research shows that when Walmart opens a large store, people in the area around it become more obese. Walmart has been targeted -- along with other big food retailers and fast food chains-- by some municipalities and activist groups demanding improved food quality and lower calorie fare.
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Walmart's decision puts it on a collision course with McDonald's (MCD), the world largest fast food chain. Walmart's low food prices make it an alternative to the fast food outlet. McDonald's has been in the cross hairs of many groups that want it to cut the calories and improve the quality of the food and drinks it serves. The company has even been sued for offering toys that lure children into its restaurants where they are sold meals with too much cholesterol.
The criticism of McDonald's has not hurt it on Wall Street, however. Its shares trade near an all-time high. Earnings have continued to improve. The company has increased its dividends and share buybacks. The pressure to change its menus has had little effect on what the chain serves. But Walmart's new plan could change that. It is one of the few retailers of food and drink that is much larger than McDonald's.
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