Wal-Mart: how does it affect organic supply?

More than six months after Wal-Mart entered the US organic market, the jury is still out on the long-term effect of the retail giant's presence. For organic purists, Wal-Mart defies the organic ethos that revolves around small-scale production and low food miles; the more pragmatic point to the lowering of prices of organic produce, greater organic acreage and greater numbers of organic consumers as proof that Wal-Mart's entry has upsides.

"I'm not sure what the future will bring, but I can say I don't see any effect at this point, as it pertains to fresh produce anyway," said Jim Hagen of organic distributor Albert's Organics. "There is simply not the supply available for Wal-Mart to get into this market using traditional suppliers. They will have to develop new ones, and I'm all for getting more ground certified organic."

Elaine Lipson, New Hope Natural Media's organic programme director, said Wal-Mart has made a lot of people rethink the organic position. "It has expanded the dialogue about organic foods, where food comes from, how far it travels, where supply of organic ingredients will come from, whether farmers can earn a fair price if there is pressure to reduce prices of organics at retail through the entry of big-box chains," she said. "We will have to wait and see if organic standards are rigorous enough and if their integrity can be protected and compliance enforced as the market grows."

She points to the 'multistreaming' of the organic sector. "There is corporate organic sold through chain stores; there is small organic sold through independent stores, farmers' markets and CSAs; and there are various streams of commerce and scale in between those two. Right now it would appear that all these streams are viable, and we shouldn't be looking at it as either/or."

By the final quarter of 2006, sales at health food chain Whole Foods had not fallen in response to Wal-Mart, but Whole Foods issued a statement to shareholders that profitability targets would not be met this year. A Whole Foods spokesman was not available for comment. Lipson warned, "the natural chains are having to look at their positioning and pricing."

Amarjit Sahota, of UK-based consultancy Organic Monitor, noted Wal-Mart was developing an exclusive organic-supply chain that paid little heed to the source of ingredients, but he noted a similar practice among some of the smaller organic retailers.

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