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[12 comments]

Walmart and Wild Oats to roll back organic food prices

April 10, 2014

Touché Target. The chain's announcement of its "Made to Matter" collection of organic and natural products has gotten a lot of attention. But stay en garde. Here's Walmart's counter-strike — news that it is helping to relaunch the Wild Oats brand with a line of organic products. The line is said to save customers 25 percent or more over the prices it currently charges for branded organics in its stores.

"We know our customers are interested in purchasing organic products and, traditionally, those customers have had to pay more," said Jack Sinclair, executive vice president of grocery at Walmart U.S. "We are changing that and creating a new price position for organic groceries that increases access. This is part of our ongoing effort to use our scale to deliver quality, affordable groceries to our customers."

Walmart, which will be the exclusive national retailer of the Wild Oats brand, plans to offer about 100 items in about half its 4,000 stores in the U.S. The chain currently sells more than 1,600 organic products, including fresh produce and dairy products. Research conducted with Walmart customers found that 91 percent would consider purchasing organic products if they were made affordable.

FINANCIALS:     [NYSE:WMT] [ NYSE:TGT] [ ]

Discussion Questions:

What will Walmart's distribution deal with Wild Oats mean for each company? What will lower priced organics mean for other retailers and manufacturers of organic food products?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

What effect will Walmart's deal with Wild Oats have on the grocery industry's pricing of organic foods?

Comments:

Since Whole Foods bought (and was forced to sell) Wild Oats several years ago, it's been a brand without a significant retail footprint. This is an obvious win for the owners of the brand, and is a potential win for Walmart, too. Presenting its organic assortment under one brand name (different from the Target approach) provides an umbrella for the overall business.

The usual caution about Walmart product initiatives needs to be raised: Hitting a "competitive" price point at the expense of the quality that an "organic" customer may be willing to pay for could turn out to backfire. Get the product right and if it's priced appropriately, it will succeed.

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Dick Seesel, Principal, Retailing In Focus LLC

This should be great for both companies and help force prices down, so long as supply is there. The chart confused me until I went into Walmart's press release, which includes this explanation: "Editor's Note: Savings claim is based on item price comparisons (per ounce) of 26 nationally branded organic products available at Walmart stores. Research was conducted in April 2014."

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Warren Thayer, Editor & Managing Partner, Frozen & Refrigerated Buyer

Just as Target thought it had a hook for its grocery business, Walmart trumps them. The challenge for organics has always been to find a price point that would appeal to the average shopper. With Wild Oats, they seem to have done that. Now let's see if WM brings the Wild Oats brand to more than a mere 120 SKUs, otherwise this is a nice PR move that will be of little consequence to the overall organics market.

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Max Goldberg, President, Max Goldberg & Associates

The deal is a winner for Wild Oats and Walmart. For Wild Oats, it revives the brand in the mainstream. For Walmart, it distracts analyst attention from lingering issues with store traffic and comp store sales performance. For the competition, well, it's hard to say because there is so much of it. Think Whole Foods' 365 value line, Kroger's Simple Truth, Safeway's O Organics, Aldi's Simply Nature, etc. That list doesn't even include the startups (e.g., Fresh Thyme Farmers Markets) entering the space.

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Kelly Tackett, Research Director, Planet Retail

This would present a formidable concern to retailers who charge more for organic products. It is no secret that when all factors are equal in a product, i.e. same product and or ingredients and quality, then the customer will usually go to the lowest price.

It my understanding that there is a substantial markup in organic foods. Whether or not these higher prices are justified needs to be proved.

Other retailers and manufacturers of organic food products will have to reexamine their pricing structures to stay competitive in the marketplace.

Tom Borg, Business Expert, Tom Borg Consulting, LLC

I saw these (very attractive) products in Walmart recently and they represent well on the shelf. What great timing on the heels of Target's recent move. My comments on the Target story yesterday apply here as well. It makes sense for Walmart to merchandise these items together on occasion in order to showcase the variety and value being offered. These brands will also "show" well in Walmart's small format stores and hopefully will be out in full force in those locations.

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Carol Spieckerman, President, newmarketbuilders

I'm not convinced that Walmart will win over Target on this initiative. Promoting "Made to Matter" vs "Wild Oats" could be an advantage as the name itself can connect with the consumer's emotional satisfaction while stating a rational offer. In addition, the "Made to Matter" still allows distinction among brands. When everything has the same name, products flourish or don't because of their association.

But I can't overlook the breadth of Walmart's coverage and the revenue it generates. So point of view can easily be dismissed because of the volume Walmart manages.

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Joan Treistman, President, The Treistman Group LLC

The potential organic volume does not fit Walmart's distribution model, its core values, or its brand. This is one more gimmick that Walmart is throwing up against the wall to see if anything sticks. It will not stop same-store sales loss. Walmart is in the toaster and the lever has been pushed. Within fifteen years it will be time to spread the jam.

'DrCellmor'

Walmart is once again demonstrating that high prices are not needed to enjoy a product or service that is considered an improvement over current acceptable standards of living. As a company they seem more in tune with what the consumer has established a need for, and addressing the need with their corporate market plan and production capabilities.

In the board rooms of successful companies, the competition is never discussed as this would be a waste of precious time. What is discussed is market trends and needs and how they can be expeditiously met using established corporate strategies and operation platforms. The market is the only supplier of profit. When you take your eye off of the market, you have changed course for a disaster.

'gjarnoldjr'

Deep fried arugala? Well, I guess we'll see...I wish them well.

'notcom'

This distribution deal will expand the overall use of organic products. The consumer will be the real winner. And, so will Walmart and Wild Oats.

Walmart has millions of shopping visits for groceries each year. And, they are the second only to Whole Foods for the top choice of consumers choosing to buy organics. Too often, the Walmart grocery shopper walks out the door, in order to find the organic product they are seeking at Whole Foods, Trader Joe's, Kroger, Sprouts, etc. Walmart will end up holding the shopper in the store for the sale.

In addition, more consumers will shift from a branded product to the Wild Oats organic product. Along with saving money on organics, the consumer will end up making added visits to Walmart, spending more there overall, and placing Walmart into a larger share of the grocery basket.

Wild Oats will find operational and cost savings, as well as new sales from other channels. Their profits will grow, they'll create new jobs, enrich consumers' lives with their products, and then likely expand their product line, continuing the cycle of growth.

The free market system is a marvelous tool. If Washington D.C. would stay out of the way of numerous other deals like this, the economy would be moving along at a smarter pace.

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Roger Saunders, Managing Director, Prosper Business Development

New Wild Oats items were to be a centerpiece of a revived Fresh & Easy. With Walmart selling the same items for far less money....

'storewanderer'

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