Walmart announced last week that they will roll out a massive expansion in organic offerings through the Wild Oats label at prices 25% below those of other national organic brands.
Like many people, I have conflicting emotions when it comes to Walmart (a company so big that if it were a country it would be the 25th largest based on GDP). They are often in the press for wage disputes with employees and a seeming singular focus for profit at the expense of all else. On the flip side, as the largest retailer in the world they also have incredible power to change things for the good. In 2007, when Walmart mandated reductions in packaging materials for brands sold in its stores, it caused a massive reduction in packaging waste seemingly overnight. Just in laundry detergent alone, reductions saved more than 125 million pounds of cardboard, 95 million pounds of plastics and 400 million gallons of water (and that was in a period of just two years).
At first pass the Wild Oats news sounds amazing. On a theoretical level, I’ve always been a “Big Organic” supporter. Yes! Let’s shift organic from fringe to norm, raise the bar for farming in the US and bring organic to the masses. If cost is the primary barrier to entry for consumers, who better than Walmart to change the model?
However, as I have more time to reflect on the announcement, I’m feeling less sure. From a financial perspective, some of the cost premium associated with organic is due to lack of scale. However, some of that premium is also due to things where the price can’t (or at least shouldn’t go down), things like labor costs. So, will the massive expansion of organic production due to Walmart’s announcement create the “Big Ag” I’ve always hoped for, or a version of organic that is shoved into our conventional agriculture model with all its issues (inhumane treatment of animals, poor labor practices, disrespect for the soil) coming along for the ride? USDA Organic Regulations certainly provide an elevated framework from conventional requirements, however, are organic regs fail safe enough to ensure the right things will be done when a player like Walmart decides to get involved in a massive way?
As usual, Marion Nestle wrote a fabulous piece yesterday that also weighs some of the pros and cons of this announcement. Like her, I’ll be closely watching Walmart and the industry to see how things unfold.
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Image by Rusty Clark