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The organic market's bet on Wal-Mart and Costco

Posted Jul 10th 2006 4:15PM by Brian White
Filed under: Rumors, Products and services, Launches, Industry, Consumer experience, Internet, Competitive strategy, Wal-Mart (WMT)

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.

Tags: Costco, Organic foods, Organic Produce, OrganicFoods, OrganicProduce, Wal-Mart, WMT

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