Wal-Mart Tinkers with Organic

It's not easy to maneuver a battleship to hit a floating cork, but that appears to be what Wal-Mart is doing in the organic market. On that score, I just came across this Reuters interview with a Wal-Mart executive about its experience in the organic market. It was published on Friday. (See what happens when I miss one day of reading Ethicurean's news digest?). Here are some choice bits from a chat with Ron McCormick, Wal-Mart vice president of produce and floral. He's talking about problems with getting supply:

"The growers were straining to meet our volume, which I think also pushes you into an unenviable position in produce," he said.

"Whenever growers are straining to meet your volume it means they're forced almost into selling you something that would not be their best crop because they're desperate to get you something to meet your demand."

McCormick said Wal-Mart continues to fiddle with its organic strategy, trying to figure out the premium that its shoppers will pay for organic produce. It is also focused on developing a consistent supply of products.

"We're now trying to build a network of good suppliers that will be able to grow with us and be consistent. Our ideal supplier is one that has a passion for what they're doing and also has the ability to grow as we grow, so you don't have thousands and thousands of suppliers," he said.

I found that last point particularly interesting, since it underscores the point that Wal-Mart will source from larger growers rather than "thousands of suppliers." That's not necessarily bad, since it means other competing retailers can differentiate by sourcing from smaller, local growers in the market - and succeed.

Comments

[Samuel Fromartz]

Just saw this Wal-Mart letter in response to the Business Week story on organics, we wrote about earlier:
http://www.chewswise.com/chews/2007/04/walmart_organic.html

April 13, 2007

Dear Editor,

Pallavi Gogoi's article, posted April 12, 2007, on Businessweek.com is an erroneous and inaccurate representation of Wal-Mart's commitment to providing our customers with affordable access to organic products.

We have been selling organic products in our Supercenters and Neighborhood Markets for many years and, due to customer demand, announced plans to double the organic food offerings in those locations in March of 2006. We quickly met that goal and even exceeded it in communities where there is an exceptionally high demand for organic offerings. We continue to see steady customer interest in buying quality organics at great prices.

We realize that the customer base in each of our communities is unique, so we tailor the assortment in each of our stores to meet our customers' needs. This is part of our long-standing "store of the community" philosophy of matching the mix of merchandise with the customer base and demand in each specific community. At a Bear Stearns investors conference on March 8, 2006, Wal-Mart executive Stephen Quinn announced, "We're soon going to have over 400 SKUs (stock keeping units) of both fresh and brand name superior organic foods available at the Wal-Mart price." Today we're proud to offer significantly more than that company-wide, which is completely in line with our plans. This enables specific locations to customize their assortment of organics to fit the consumers in their community. This simply makes good business sense. We've used this same philosophy of tailoring our merchandise mix for each store for various categories for more than 10 years.

As a company that's always working to provide our customers with the best products at the best value, we determine what we'll buy based on ongoing assessments of quality, price, customer feedback and other factors. Organic apples are one of the top selling organic produce
items at Wal-Mart, along with carrots, citrus, lettuce and packaged salads. Far from "backing off," sales for Wal-Mart's organic produce for 2006 were at a growth rate well above the industry average of 13.7 percent, based on data from the Organic Trade Association.

Bottom line, Wal-Mart's growth in the organics category will continue to be reflective of the demand and we will continue providing our customers with the organic products they desire at low prices.

Sincerely,

Karen Burk
Wal-Mart Corporate Communications