Business is a harsh mistress. Yeah, you can make up for upping your costs with increased volume, but it only makes sense at certain ratios. After a certain point your basically giving your product away, or advertising it (through Wal-Mart) at cost. And in some labor-specific industries, your working twice as hard to make the same amount of profit...
But they are already well established in Canada, so, IMO, no need to make concessions for one retailer, even if it is Wal-Mart. They will most likely continue landing new stores in Canada with or without Wal-Mart.
Does Wal-Mart Canada help when it comes to penetrating the U.S.? I'm sure it does to some extent, but the United States and Canada are completely different markets, with entirely different metrics. The thing that's going to help them most is landing that first US national account (or at least implementing the one they've had landed.) This will do more than 10 Wal-Mart Canada accounts, IMO.
Psychologically, it's a bad Banner to lose - from the perspective of investors - but as far as affecting their business model and revenues, there's probably not much of an affect. If it was absolutely necessary to the business plan to keep Wal-Mart on board, the CEO would have made whatever concessions where necessary. But apparently it's not that important to the company, or at least not something they want to pursue if it's not mutually beneficial.
Wal-Mart is the low-price leader and the revenue-maker for a reason, and that reason isn't because they treat other businesses well.
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