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I've written on the topic of Wal-Mart's entry into the offering of organic foods and produce before. Some people think that Wal-Mart's scale alone will diminish the quality and status of the organic foods marketplace, and others think that the entry of healthy organic foods into Wal-Mart stores will transform obesity in the U.S. to a thing of the past, more or less. Whatever your opinion, make no mistake: organics are coming to Wal-Mart and other bix-box stores like Costco in increasing numbers.But, with the sheer quantity needed to supply all these Wal-Mart stores, organic produce and food suppliers are going to have to transform the entire industry to take on this new super-challenge. You have more fields, you invest in three to four times as much property -- which in organic produce-producing California is not cheap -- and these organic foods suppliers suddenly are "betting the farm" on the long-term sustainability of Wal-Mart carrying and growing the organic segment for a long time.
What if this does not happen? What if customers choose not to embrace organic, healthy eating in droves like Wal-Mart expects so that it can grow revenue and recruit a new customer base? An entire industry could plummet rather quickly. Generally, any good business plan has a disciplined growth strategy that includes multiple backup scenarios and redundancies to prevent something like this from happening.
It's another example of the power Wal-Mart has -- and yes, it's nearly bankrupted companies like Rubbermaid before who gave too much of their business to the retailer. Will the organic industry befall the same fate? Let's hope not, but as an industry, the plan needs to start, well, yesterday.
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Reader Comments (Page 1 of 1)
3-01-2007 @ 2:17AM
Jane said...
If Walmart or Costco need cheap organic product, they will simply source it from overseas. The influx of international organic products will swamp the market with cheap product, thereby driving down prices to all organic producers selling into the retail market. This is a more likely scenerio than organic growth being overstimulated by large-scale retailers and then collapsing when demand wanes.
There is no sign of demand waning. There will be consequences to this: the organic market, which has until recently been fairly small and local, in some sectors will become very large and industrialized in order to capture the cash behind the demand; also, an increasingly high proportion of organic food sold through retail outlets will be imported (already, organic imports far exceed exports in the U.S.).
U.S. organic producers who market locally will be largely insulated from the impacts of what goes on at the mass marketing level, and we will see an increasingly bifurcated food system, with one strand being fresh, grown regionally, organic, and priced to accurately reflect the true cost of production; and the other strand being processed, internationally sourced, and inexpensive, with the costs of production being externalized and borne by cheap labor and the environment rather than by the consumer.