BENTONVILLE, ARK. — Major food manufacturers face increasing pricing pressure from Walmart as the world’s largest retailer seeks further price cuts.

Price increases in core store grocery categories have continued even as overall grocery inflation, particularly fresh food, has eased, Walmart President and CEO Doug McMillon said last week on a conference call about the company’s second-quarter earnings. For this reason, Walmart wants to push grocery manufacturers to lower prices and counteract potential price increases, he noted.

“In grocery retail, inflation is more stubborn in processed foods,” McMillon said. “As mentioned, even last quarter there was still some inflation in grocery categories. So I’m hoping our branded suppliers are investing in pricing, and we’re seeing that from some of them, not others. We’ve got less upward pressure, but there are some (suppliers) that are still talking about cost increases. And we’re aggressively fighting back against that because we think prices need to come down.”

Walmart US currently has over 7,200 price cuts in effect across all categories. Although Walmart’s private labels have increased in value as consumers become more price sensitive, McMillon said the retailer would like to see brands improve their value propositions for customers.

“We want to sell brands,” he said. “It’s important for Walmart to sell brands and show value, so we hope our branded suppliers do the right things both in terms of quality and price to deliver the value that our customers want to see. I would suspect that private label will continue to grow, although we would be OK if the percentage of total volume stabilized for the reason I just mentioned. Our teams do a better job with private label in terms of both developing the product and its quality and value. So that’s good and helpful for customers, and we’ll continue to do that.”

At Walmart US, net sales increased 4.1% year over year in the second quarter, with comparable sales excluding fuel increasing a better-than-expected 4.2%. Customer transactions increased 3.6%, compared to 2.9% a year ago, and average receipt size increased just 0.6%, compared to 3.4% a year ago.

However, Walmart’s strong quarterly results represent a scenario of “good news and bad news” for the major food companies, said TD Cowen analyst Robert Moskow.

“While it’s usually a good thing when a large customer has good sales, Walmart continues to put pressure on grocers to improve their value proposition by cutting prices,” Moskow said in an Aug. 15 research note. “This could pose a challenge for a company like Hershey, which recently announced a price increase to offset higher input costs.”

As a group, the “Big 9” food companies – Campbell Soup, Conagra Brands, General Mills, Hershey, Kellanova, Kraft Heinz, McCormick, Mondelez and JM Smucker – saw retail volume decline 1.6 percent this year through July 27, according to NielsenIQ data. By comparison, the overall grocery market saw a 0.7 percent increase and private labels saw a 2.8 percent increase, according to TD Cowen.

“(Walmart) management said grocery inflation had dropped to 0.6%, but continued to ask branded dry-food suppliers to invest more in pricing,” Moskow said. “They also said some suppliers are still ‘talking about’ cost increases (we suspect Hershey) and that they are aggressively addressing them.”

Based on its second-quarter performance, Walmart raised its fiscal 2025 guidance for net sales, adjusted earnings per share and operating income.

“So far, we are not seeing any weakening of consumer sentiment overall,” McMillon said in the conference call.

However, this is not necessarily good news for packaged food suppliers, says Moskow.

“In theory, Walmart’s strong overall trends should spill over into the grocery industry as well,” he said. “However, we expect Walmart’s pressure for even deeper price cuts to continue, particularly in categories where Walmart can expand its private-label merchandising (60 basis point increase in market share). Companies with muted cost baskets, strong productivity savings or limited private-label presence could have a competitive advantage against this backdrop.”

Walmart is “committed to our customers,” Chief Financial Officer John David Rainey said during the call. “We want to keep prices low every day and have no intention of improving our margin performance by passing that on to our customers and (Sam’s Club) members in the form of higher prices.”