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When Wal-Mart goes organic, where will organic go?

By Ken Root

Wal-Mart’s announcement that it will sell organic foods, with the Wild Oats label, has many people buzzing about the impact the nation’s largest retailer will bring to what has been a niche market. It is likely to heighten the awareness of organic foods and increase consumption, but the volume needed and the standards required may make “organic” more of a trademark than the culture it has been. Traditional organic growers may find their market threatened or they may have to re-brand themselves to stay as profitable as a niche market and food experience for affluent shoppers.

It is something of a compliment to the organic food growers that their form of food production has now gone mainstream enough for America’s largest retailer to embrace it. It is also confirmation that the rhetoric about “industrial food production” has found a place in the minds of consumers. Wal-Mart’s research shows 91 percent of its customers would buy organic products if they were competitively priced.

The problem I see for Wal-Mart is to define what “is” organic. The USDA has definitions and standards for organic food production that allow growers to carry the organic certification on their packaging. Wal-Mart will have to have to adhere to that along with volume, uniformity and shelf life. That will be tricky. If you look at the list of Organic “No-No’s,” the list is 125 items that are mostly preservatives and synthetics. Shoppers who buy organic breads and other processed items will learn that they have to be consumed quickly or they will deteriorate. That means those products won’t really be cheaper since part of the contents will be discarded.

I think Wal-Mart envisions dealing with large growers who deliver organic produce that looks just like traditionally grown fruits and vegetables. Some will, but others will be smaller, misshapen and have insect damage. I don’t think that is going to play well within the system. Organic sweet corn sounds good until you shuck out a worm. What is the outcome for the shopper in either confronting that reality or buying the same product again?

Selling organic sounds like a “boutique” venture but for Wal-Mart is it all about the money. There is limited overlap between traditional Wal-Mart shoppers and those who purchase from high-end organic suppliers. Placing organic foods in a Wal-Mart superstore will bring a huge number of people in contact with the concept of purchasing organic foods. The key factor seems to be price. Wal-Mart says they will be 25 percent cheaper than other national organic brands. How does that compare to the price of the foods their shoppers have already been buying? Economics says you make money on volume and margin. Wal-Mart has to sell organic at a higher price than traditional because suppliers can’t source it for less. The price differential should indicate the volume and the lower the volume the higher the price has to be to stay profitable. In more affluent areas, organic may sell very well, but what about in the thousands of locations where the people are low income and struggling right now? I don’t see volume being high on anything that is perishable because it will be priced too high.

Organic growers and consumers who responded to my Facebook questions last week had this to say:

“I’m on the fence about organic. It’s mostly a marketing strategy in my opinion. My big concern, however, in the non-organic foods are the preservatives for processed and bagged fresh foods. Improved estimates for consumption and just in time delivery could negate the amount of preservatives needed for shelf life. Then organic vs. non would be less an issue.”

“I would personally be afraid to buy any of their organic leafy greens (lettuce, spinach and other leaf vegetables) as they absorb non-synthetic (manure, E. coli) sources of potential danger. If you research the last two breakouts (cantaloupe and spinach) of E. coli and Salmonella, you will find they were organically grown.”

“It tells me that there is a lot of profit selling organic food—science shows that there is very little wrong with food grown with the proper use of insecticides, fertilizer and good cultivation of foods. We have been consuming it for years. If we don’t continue in the same direction—non-organic—there will be serious food shortages in our future. We cannot grow enough food for the growing population without the use of sensible cultivation using fertilizers and other controls in our food production chain.”

“Wal-Mart brings to mind cheap, inferior, throw-away products. That isn’t what I choose to eat, grow or buy. People who want quality products from a company that values and stands behind its products likely don’t shop there now and won’t start.”

“W-M has been selling organic for years and making all kinds of plans/claims/stated “aspirations”... So I thought when their latest pronouncement came out, “now what?” and “why?” One thing I think is new—they claim they’ll sell organic at same price as non-organic. So does that mean they’ll just reduce organic prices to the consumer and raise other prices, or is there some other “magic” only W-M has? I think some organic interests are worried that W-M will just squeeze organic farmers—and they would be right to worry!”

At this point, all projections are speculation. Wal-Mart is a powerful player and a tough negotiator. Organic producers who sell to them should expect high risk and marginal rewards. Policing the organic label may require a great deal more government inspection and abuse of the system may become widespread. If shoppers have a good experience in buying and utilizing organic foods, then the whole industry may shift toward their needs. It may also be, as was predicted by Peter Sandman, a psychologist advising the pesticide industry in the late 1980s, that shoppers will go to the organic aisle, check the quality and price, then buy cheaper, traditionally grown products with greater satisfaction because they were given a choice.

What’s your view?

Contact me at kenroot@gmail.com, or send a letter to me at High Plains Journal, PO Box 760, Dodge City, KS 67801.

Editor’s note: Ken Root has been an agricultural reporter for 39 years. Root now does daily radio and television programming and is a columnist. He can be reached at kenroot@gmail.com, or send mail for him to High Plains Journal.

Date: 4/21/2014

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