"When our grocery suppliers bring price increases, we don't just accept them," says Pamela Kohn, Wal-Mart's general merchandise manager for perishables. Even with gas, grain, and dairy prices rising almost daily, Wal-Mart has managed to roll-back prices on hundreds of food items by as much as 30% this year.

Small suppliers are feeling the pain from Wal-Mart's pushback the most. One supplier of potatoes, Bushwick, has seen its costs rise 10% over the past year, but has passed only half that amount on to Wal-Mart and its other retailers. However, for consumers who are having a hard time paying US$3.80 for a gallon (approx. €2.5 for 3.5 liters) of milk, without those measures cost would be even higher.

Another way Wal-Mart has been able to manage prices is with transportation. By sourcing more produce locally, the retail mega-giant is able to cut shipping costs.

Foodmakers love big boxes because they serve as billboards on store shelves. Wal-Mart has been working to change that by promising suppliers that their shelf space won't shrink even if their boxes do. As a result, some of its vendors have reengineered their packaging. General Mills' Hamburger Helper is now made with denser pasta shapes, allowing the same amount of food to fit into a 20% smaller box at the same price. The change has saved over 400,000 kg of paper fiber and eliminated 500 trucks from the road, giving General Mills a cushion to absorb some of the rising costs.

This works, of course, if you're General Mills. Smaller suppliers are continuing to absorb higher production and transportations costs; and if that's not bad enough, they may lose their biggest client, if they can't meet Wal-Mart's standards.