Natural Foods Merchandiser

Wal-Mart scales back organic offerings

In a statement to investors last year, Wal-Mart announced it would double the number of organic products sold in its stores to 400 organic SKUs, and offer them at what executives called "the Wal-Mart price." Now, it seems the company is reassessing its organic push.

Jami Arms, a Wal-Mart spokeswoman, said in a statement: "We're continuing to see a demand by many of our customers for organic alternatives and will always tailor each store's assortment to meet the demand. The average number of organic foods customers may find in higher-demand stores is approximately 200 offerings."

Bob Scowcroft, executive director of the Organic Farming Research Foundation, said this reduction in what Wal-Mart hoped to offer is a logical recalibration. "Some [organic] items just aren't available at the quantity Wal-Mart's operation requires. And it's important to remember that organic is an evolutionary development—it's not a fad, and it doesn't happen overnight. Any entity that comes to an organic program thinking that things are going to change in a quarter will learn that they won't."

George Siemon, chief executive officer of Organic Valley, a brand carried by Wal-Mart, agreed. "It's only natural that mass markets will try organics and find out what's selling and what's not," he said. "Sometimes mass markets tend to take on more than they should, and maybe [Wal-Mart] was a little too aggressive. But they're going through a normal process. Their core consumer who buys organic milk doesn't necessarily buy organic cheese or sour cream."

According to a survey by the Organic Trade Association, organic food sales were up 16.2 percent last year—accounting for $13.8 billion in consumer sales. So it came as little surprise when Wal-Mart announced plans to double its offerings of organic products, including produce, dairy and dry goods. But some industry groups expressed concern, questioning how the superstore juggernaut could drop its prices on products that have been proved to cost 30 percent more to produce.

Said Ronnie Cummins, national director of the Organic Consumers Association, an industry watchdog group based in Finland, Minn.: "I think this is an admission that Wal-Mart's business practices don't work with organics. If you're going to buy organic, you have to do it right. Don't squeeze supply lines—sign long-term contracts with family farmers to help them convert and supply your store."

However, Cummins said he believes Wal-Mart's announcement to sell organic products at "Wal-Mart prices" has already done damage. "They planted the idea in consumers' minds that they were being ripped off by local organic sellers."

In the end, trying to respond to short-term changes in the marketplace can be risky, said Scowcroft. "When it comes to organic, you have to have an evolutionary approach," he said. "Taking a long-range view with organic has worked pretty darn well. This is not an overnight sensation, and you shouldn't treat it that way in your own natural foods outlet."

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