Wal-Mart Grows Organically, Responsibly

Discussion
Aug 21, 2006
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By George
Anderson


Wal-Mart’s announcement and subsequent ad campaign touting its organic product offerings certainly has gotten the attention of other retailers, manufacturers, industry organizations – and quite a few consumers, as well.


To date, those in organic products retailing have expressed little concern,
but that does not mean they are not keeping a close eye on what is going on
in Wal-Mart’s stores.


Walter Robb, co-president and chief operating officer at Whole Foods, told The Dallas Morning News, “I’m all over it, and so far I can tell you the impact is minimal.”


The fact that Wal-Mart may not have made a major dent in others’ sales of organic products should not necessarily bring a sense of comfort, said Sandra Skrovan, director of Retail Forward’s Wal-Mart program. She said Wal-Mart doesn’t get into a business unless it believes it can capture about a 30 percent market share. It accomplishes this, she said, by growing the category and grabbing market share from others.


“Wal-Mart is taking this seriously because mainstream grocery offers organics – and we all know how well Whole Foods has been doing,” she said.


“It doesn’t make sense for Wal-Mart to have it in all their stores, but Wal-Mart is indeed looking to broaden its customer base. They’ve done their homework and know which stores have shoppers who demand organics.”


Wal-Mart has promised to make organics more affordable for the average consumer with a goal of selling items at 10 percent over non-organic alternatives. Some see this as a source of concern because they fear the retail giant may push for a lowering of requirements to meet the organic standard.


“I truly believe that Wal-Mart’s promise to deliver lower prices is based on large, industrialized food production,” said Ronnie Cummins, national director of the Organic Consumers Association.


Gail Lavielle, a spokesperson for Wal-Mart, said the company is not looking to alter standards.


“It’s very important to us to work with suppliers who follow the rules. Cheating by anyone isn’t in our interest,” she said. “The trust factor is really a big one with our customers.” 


Discussion Questions: Will the standards set for gaining
“organic” designation become more lax as demand for these types of products
increases? What role, if any, should retailers play in maintaining the integrity
of the organic food supply to consumers?

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8 Comments on "Wal-Mart Grows Organically, Responsibly"


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Bernice Hurst
Guest
14 years 6 months ago
Note to Ms Lavielle – altering standards isn’t the same as cheating; your comment is somewhat disingenuous. No one, at least in this article, has suggested that you would encourage your suppliers to bend the rules. However I do believe that there will be pressure sooner rather than later to amend standards. I really don’t think it is possible to mass produce organic food. And if it isn’t mass produced, someone is going to lose out. Possibly consumers who won’t pay the lower prices that Wal-Mart promises. Possibly Wal-Mart who will have to accept smaller margins. Possibly producers who will have to reduce their margins and/or alter their standards and/or methods of production. Likely the only people who would benefit are the lobbyists who would persuade the powers that be that the standards should be amended. They will be able to spin out the debate about definitions and uniform standards and verification processes for decades. Between their power, and Wal-Mart’s, I don’t for a minute believe that standards even five years from now will be… Read more »
James Tenser
Guest
14 years 6 months ago
Reading between the lines here and in the linked newspaper articles, I find myself wondering, “does organic equal elitist?” If this ruffles a few free-range feathers, please hear me out: I may be a contrarian but I mean no disrespect to the good folks who have invested their life’s work in developing organic food production and distribution practices. You see, the argument that any attempt to enlarge the scale of distribution of organic foods must necessarily lower standards smacks of elitism. It might then follow that only consumers with the means or determination to pay premium food prices deserve access to organic products. So when Wal-Mart and Safeway attempt to bring organics to the masses, the status quo is threatened. (Status quo is another term for traditional margin structure.) I advocate open and vigorous debate on this topic. The organics pioneers deserve to be heard and they have every right to protect their business interests and belief system. I also wholeheartedly believe in good old-fashioned competition, because it keeps prices down. I deplore public deception… Read more »
Mark Lilien
Guest
14 years 6 months ago

Some words have ambiguous meanings. One of those words is “organic”. For example, some organic shoppers want organic eggs to be free range. Some organic shoppers assume organic eggs to be produced by chickens not given medicines and fed with feed not produced with chemical pesticides. Kosher foods are a great comparison. There are hundreds of different kosher certification authorities and frequently they don’t agree with each other. Many careful kosher food consumers examine labels closely and won’t buy items whose certifications are suspect. Wal-Mart would do well to clearly articulate its organic standards, or bad public relations could be a risk.

David Livingston
Guest
14 years 6 months ago

My guess would be that the definition of “organic” will change as Wal-Mart puts pressure on suppliers. With most natural food retailers hitting double-digit same-store sales, it’s hard to determine what impact other competitors are having on the market. In this kind of environment, Wal-Mart can capture large amounts of market share and it can go unnoticed to their competitors. With Trader Joe’s doing $20 per square foot plus per week and Whole Foods not far behind, this is just too much low hanging fruit not to be harvested by Wal-Mart. Once Wal-Mart gets into high gear with organics, it will be interesting to see just how much “organic” products will be imported from China.

Gene Hoffman
Guest
Gene Hoffman
14 years 6 months ago

When most every retailer promotes “fresh” and “organic” foods there is likely to be some alteration in what “fresh” and “organic” really mean. That will present a challenge to labeling integrity, which may have already started to exist. Yesterday I saw a reference on a non-fresh processed product stating that is was “organically produced.” Perhaps this is a forerunner of what could occur.

Race Cowgill
Guest
Race Cowgill
14 years 6 months ago

I believe other factors will have a bigger impact here. At least as of this moment, mid-scale and upscale consumers who are not already frequent or moderate Wal-Mart shoppers do not see Wal-Mart offering high-quality merchandise in any category. This is likely to mean that these groups will not be much interested in Wal-Mart’s claims to have organics. Shoppers who already are moderate or frequent Wal-Mart shoppers will likely be interested, though, but these are already “captured” market. Wal-Mart has quite a tough road to hoe in so many ways; in this arena, it has promoted itself (somewhat unwittingly) as the store with such inexpensive goods, that it may be extremely difficult to draw in new shoppers who are not convinced by Wal-Mart’s PR or are not subject to it.

George Anderson
Guest
George Anderson
14 years 6 months ago

The question really comes down to whether or not the new consumers brought into the category by Wal-Mart will become purists along the line of current organic shoppers. If the answer is yes, then Wal-Mart or any other company seeking to lower standards would find itself the object of a backlash. As Gail Lavielle said, “The trust factor is really a big one with our customers.”

Carol Spieckerman
Guest
14 years 6 months ago
For some purists, organic also equals “local” and by that standard alone, most retailers will fail as organic cotton is procured from Turkey, organic veggies are shipped in from far-away sources, etc. Organic watchdog groups are expressing irritation with Cotton Inc., noting that its data does not incorporate pre-planting fertilization and use of defoliants. In other words, many would argue that organic standards are already lax and lacking definition. The increased attention that organics is getting (P.S. Wal-Mart will be quick to tell you that they’ve been “in” organics for quite some time – they are not new to the party) will continue to spawn turf wars between activist groups, smaller providers, and mega-users. Wal-Mart has a great opportunity to not only make a statement about their increased agility and market responsiveness, but to also define the conversation by making their own standards very clear before things heat up further. Finally, Wal-Mart surely wants a piece of the organic market pie share; however, it has also demonstrated a willingness to let volume take a back… Read more »
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