Walmart Takes On Trader Joe’s and Whole Foods With New Premium Brand

Walmart wants to expand its food empire. It thinks gluten-free muffin mix and oat milk ice cream hold the key.

Already the country’s largest grocer, the company is introducing a line of premium food called Bettergoods this year, aiming to attract new, often higher income shoppers more frequently and to encourage current shoppers to spend more.

The new brand took years to develop and will include foods such as cardamom rose raspberry jam for $5.24 and curry chicken empanadas. Walmart plans to add more than 300 Bettergoods items to shelves this year—many of which will cost $5 or less.

“We didn’t always show up for customers that were looking for this range,” said John Laney, head of grocery for Walmart U.S. The new line features more adventurous flavors and health call-outs.

It’s a big strategic bet for the retailer as it competes for customers with Costco Wholesale, Trader Joe’s and Amazon.com’s Whole Foods, which also have extensive store brands. It is likely to rankle food manufacturers already fighting for space on Walmart’s shelves. And it’s part of Walmart’s efforts to keep bringing people to its stores even when they aren’t on the hunt for inexpensive necessities.

Walmart is cutting back investment elsewhere. On Tuesday, the company said it will shut all 51 of the health clinics it has opened over the past five years as it tried to build a bigger healthcare business.

The clinics, often located directly next to stores, offered primary care services and telehealth appointments. Last year Walmart said it was planning to have 75 of the clinics by the end of 2024.

Walmart said Tuesday that rising operating costs and a challenging reimbursement environment “make the care business unsustainable for us at this time.”

A Walmart spokeswoman declined to say how many jobs are affected. Clinics will likely close in two to three months, she said.

Consumer confusion

In the grocery aisles, Walmart already owns one of the largest food and consumable brands in the U.S.: Great Value. Those products often come in nondescript packaging and include everything from butter to toilet paper. The roughly 4,000 mostly generic products are meant to be similar to national brand items, but cheaper.

Great Value is and will be a huge part of the business because it offers everyday value, said Scott Morris, head of private brand food and consumables for Walmart U.S. But Bettergoods gives Walmart a chance to attract more shoppers, more often, he said.

When Morris came to Walmart in 2020, his team found consumers confused about how Great Value products differed from Walmart’s other brand, Sam’s Choice. That brand—named after Walmart’s founder—was created in 2013 as a more premium range. Over the years it became too similar to Great Value and its packaging didn’t stand out to shoppers, said Morris. Current Sam’s Choice products—about 200 items—will shift to Great Value or Bettergoods or disappear.

Early in the pandemic consumers were cooking more elaborate meals at home, and many competitors had already created successful premium food store brands. Since 1995, Costco has used its Kirkland products to attract shoppers, building a reputation for quality and low prices on food, apparel and golf balls.

As more adventurous eating trends have become more mainstream, the market became big enough for Walmart to offer lower price points to increase demand, said Morris. Internally, Walmart executives rallied around the idea of grabbing more of those sales by owning a brand that offered new food items, not copycats of existing products.

Private food and beverage brands are gaining share over national brands—items such as Coca-Cola and Tide detergent that shoppers habitually buy—as shoppers confront higher prices. Private label’s growth briefly subsided in 2021 when shoppers felt flush but has since rebounded as food prices rose. Around 26% of overall food and beverage sales were of private brands last year, up from 25% in 2022, according to data from Circana, a firm that tracks sales of consumer goods.

National brand manufactures are “going to have to work a lot harder to win the space on the shelf, because ultimately the retailer owns the real estate,” said Mary Ellen Lynch, lead analyst for private label research at Circana.

Walmart executives say that national brands will always be an important part of their selection. But as Bettergoods rolls out this year and beyond, Walmart’s overall share of store-brand food sales will expand, say executives. Walmart counts on groceries for nearly 60% of its annual U.S. sales. Executives declined to share what percentage is currently from store brands.

Eight meals a day

Getting Bettergoods on shelves took years. To generate fresh ideas the team ate at hundreds of restaurants from fast-food chains to fine dining around the world, said Denise Wright, vice president of private brand foods for Walmart U.S.

The trips “sound like a lot of fun, but they are painful in that we eat eight meals a day,” said Wright. Restaurants tend to produce new food ideas ahead of packaged-food companies.

During the trips, executives made lists of the flavors, formats and textures they ate, she said, then compiled those into broader trends to guide new ideas. In conversations with different groups of executives and through consumer tests, they narrowed down product types.

The brand name Bettergoods emerged from thousands of contenders. Executives chose it because the term wasn’t too narrowly focused on health claims or adventurous food, but could encompass all those ideas.

Walmart’s sensory and quality team worked with internal product developers and external suppliers to further test ideas and verify the consistency of recipes. Walmart also works with flavor houses, companies that help formulate recipes and sell ingredients used across the industry.

Two flavors per seltzer

Take unsweetened flavored sparkling water. Walmart had endless flavor options to choose from, but internal tests showed that if a water listed more than two flavors on a label, consumers balked.

“At some point you add too many elements to it and it becomes polarizing,” said Kevin Trick, an employee of the Walmart food quality team who previously worked for PepsiCo.

Bettergoods will launch with basics like lemon and lime, as well as two-flavor varieties such as orange mango and coconut lime. An eight-pack will cost $3.27.

To start, Walmart isn’t making its new food line too trend-forward, aware that many of its core customers still want something familiar. Many categories have at least one product with a safe flavor, then some trendier varieties.

Frozen empanadas appetizers—an eight-pack will sell for $5.97—include a familiar apple hand pie. “Everyone knows what to expect from that,” said Wright. “But do they know what to expect from a chicken curry empanada or a beef bulgogi empanada?”

In early tests, some food combinations went too far, including a jarred pasta sauce with cubed zucchini, as well as strawberry and cucumber salsas.

“We don’t have the credibility yet to push that far,” said Wright. “We will.”

Write to Sarah Nassauer at [email protected]