Walmart’s price-cut organics: good, bad, or indifferent?
When Walmart announced last week that it would start carrying Wild Oats organic foods at prices at least 25% below those of national brand organics, I had some conflicted reactions.
Walmart’s rationale sounds terrific:
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.
Organic foods accounted for roughly 4 percent of total U.S. food sales in 2012, but growth in the category for years has outpaced the industry overall, buoyed by growing demand for simpler food made from natural ingredients.
Organic foods often cost more than their conventional rivals, and that has limited purchases by the legions of lower-income U.S. shoppers who are needed to propel a niche product into a national player.
Walmart caters to that audience…”If we can make that price premium disappear, we think it will grow much, much faster,” Jack Sinclair, executive vice president of grocery at Walmart U.S., said of the retailer’s small but faster-growing organic sales.
For Walmart watchers, the announcement raises many concerns.
Tom Philpott, writing in Mother Jones before the recent announcement did a brief investigation of Walmart’s organic and local offerings in Austin, Texas:
Of course, Walmart exists to generate profit, not social change. And that may explain the dearth of produce being trumpeted as local and organic in the Austin store I visited. The city teems with farmers markets, Whole Foods branches, and a successful food co-op. With so many options available, shoppers here are likely not heading to Walmart for their heirloom tomatoes. As Prevor [Jim Prevor, the Perishable Pundit] told me, the company tailors its offerings to each region. It will “essentially sell whatever its customers want, as long as there’s a profit to be made.”
Forbes asks a tough question: Maybe Walmart has just killed the organic food market?
WalMart getting into organics in a big way [may not be] good news for the industry. Most especially when they say that they’re going to eliminate the price premium that organic has traditionally carried…I don’t think it’s revealing anything terribly new to state that those who preferentially buy organic are often those who would prefer not to be thought of as WalMart shoppers.
And Trillium Asset Management, a company that claims to be devoted to sustainable and responsible investing, wonders whether the Walmart plan means that organics have lost their soul:
Wal-Mart’s pledge…is making a whole lot of people very nervous. Wal-Mart’s modus operandi is to keep prices low by driving down costs in the production chain and keeping its own wages low; its competitors’ practices are variations of the same theme, if less cutthroat. Good ol’ American-style capitalism and its frequent bedfellow, inadequate regulation, now threaten to strip “organic” of everything it once stood for (and everything that has made it more expensive): small scale production, gentler treatment of animals, better treatment of farm workers, and the elimination of chemical aids to production.
My personal observations of Walmart stores also make me skeptical. I haven’t seen some of the previous promises effectively translated into reality.
Walmart says it will roll out the lower priced organics to about half its 4000 stores by this summer.
I’m reserving judgment until I see how these particular promises are implemented in the stores.
This just in: USDA’s latest data on organic agriculture.