The sales test proved right—the promotion was an enormous success for Wal-Mart. Vlasic’s
sales numbers skyrocketed, showing double-digit growth in the first few weeks. The gallon
jar was so successful that Wal-Mart was purportedly selling on average 80 jars per store per
week, or more than 240,000 gallons of pickles, just counting those sold in the gallon jars.
However, the production quantities necessary to serve Wal-Mart put a strain on the procurement
and production system. However, the product was selling and the Wal-Mart business
grew to more than 30% of Vlasic Food International’s business.2
Wal-Mart was very pleased with the success of the item. Wal-Mart continued to re-order
gallon jars as stock became low. Since there was no cap on the order volume except for the requirement
to also purchase the grocery size, the one-gallon jar was no longer a short-lived deal
item, but a regular deal. From the consumer’s point of view, the $2.97 deal was the Wal-Mart
Every Day Low Price.
However, sources at Vlasic reported that profit was down 25%–50%. Some blamed the
Wal-Mart deal for this decline. Production was pressed to provide quantities in record numbers
and at times put a strain on the supply chain. Since the gallon jar used the same size and
generally same product quality cucumbers as the dills and spears, this at times affected the
availability of pickles for the jars of dills and spears. Since the jars of dills and spears consisted
of cut pickles, they carried higher margins than the whole pickles. In addition, the pickle cost
for the gallon jar could be reduced if less perfectly shaped pickles were added to the one gallon
jar. However, the expansion of the distribution of the gallon jar resulted in periodic substitutions
of the more perfect (and higher cost) pickles intended for the smaller but more
profitable jars of dills and spears. Thus, pickles that were needed for the jars of dills and spears
were sometimes in short supply and compromised the smooth flow of the supply chain. Marketing
reported that over time, the few cents that Vlasic was making on the promotion was
eroded, resulting in small losses per jar, given higher costs.
Supermarket sales, in non–Wal-Mart chains and independent stores, in 1999–2000 declined
significantly with many customers placing smaller orders than the previous year. Marketing
at Vlasic reported that predicted profits were eaten up by expenses associated with the
loss of business in the non–Wal-Mart grocery sector.
On the other hand, Wal-Mart business showed real, incremental growth in its stores, based
on analysis of organic growth from store expansion versus same-store growth. Not only was
Wal-Mart growing due to new stores, but its existing stores were growing and showing healthy
revenue and profit gains.
Through this promotion, volume of Vlasic pickles—all kinds—in Wal-Mart stores grew,
so that Wal-Mart accounted for 33% of the Vlasic business. According to Hunn, sales revenue
of Vlasic pickles was higher than before the gallon-jar “promotion.”