Organic Wal-Mart?

On June 10th, 2006 The Economist published this article that discusses the transition into a market with 'Big Organic Businesses'.

'Texas' and 'organic' are not words that generally appear in the same sentence. But Wal-Mart is doing its bit to change that. At the company's 24-hour “supercentre” in Plano, a McMansionised suburb of Dallas, boxes of organic apples, bananas and kiwis nestle close to the entrance, and the meat department is stacked high with “all natural” chicken. You can find spinach-flavoured organic baby food and dairy products supplied by Horizon Organic in Colorado.

Wal-Mart opened the Plano store this spring, as a laboratory for new products. The several hundred organic and “natural” items are a highlight. On the non-organic side, it has a posh coffee shop offering raspberry-truffle lattes, a good wine selection and an excellent sushi bar. Wal-Mart, built on the idea that ordinary folk want good, honest value-for-money, is reaching out for the yuppie dollar.

The firm is hardly alone in embracing organic food. The age of 'Big Organic' has dawned. In the spring Supervalu, which owns Albertson's and other grocery stores, started a line of organic apple sauce, canned tomatoes and other delicacies. Safeway, another grocer, launched its organic line in January. McDonald's is pumping out radio advertisements in New England for its coffee, which is now blended with beans from Newman's Own Organics. Everyone, it seems, is envious of Whole Foods Market, an Austin-based chain, which has seen its share price rise by nearly 900% in a decade.

But can big companies and organic food co-exist? After all, “organic” used to suggest small farms or co-operatives supplying locally produced, fertiliser-free food. Now the market is worth about $14 billion a year. Although that accounts for less than 3% of America's retail-food sales, the segment claims to be the fastest-growing part of the food market in America. The “organic” label costs more, but it is becoming a big business.

Greens have mostly embraced the trend. “By and large, it's a very positive thing,” says Paul Rauber, an editor at Sierra magazine. Even so, he predicts: “As the big boys get into the market, there's going to be more of a push to water down the organic standards.” Some American producers worry especially about lax oversight of organic certification for imported foods.

There are also supply problems. At some Whole Foods stores, up to 60% of the produce is organic in the summer—but that number dips in the winter because “natural” food has to respect the seasons. There is also a shortage of organic farms. “The sheer number of stores [offering organic products] has stressed the system,” says George Siemon, chief executive of the Organic Valley co-operative. The fertilisers and hormones that make mass agriculture easier are banned in the organic business.

Then there are pricing pressures brought on by large retailers. Organic Valley withdrew from supplying milk direct to Wal-Mart a few years ago after being undercut by a “significant” amount in price by its rival, Horizon Organic. But, says Mr Siemon, demand still exceeds supply—and with his co-operative growing 15-20%, there may soon not be enough organic milk to go around.