According to a news release published yesterday and widely parroted around the web, Walmart is poised to take its “lowest price is the law” approach to some of its organic offerings, promising to make organic food “affordable” to all. According to their own research, 91% of its shoppers would buy organic food if the price were the same. By partnering with the Wild Oats organic food brand, they plan to introduce a line of organic products priced the same as non-organic equivalents.
On the surface, it sounds do-able. As I’ve pointed out before, the organic premium is largely a factor of economies of scale in transportation, processing, marketing, and distribution, as well as the laws of supply and demand that allow all players in the food chain to earn a little extra along the way (whether they’ve incurred all that extra cost or not). This also means that the premium paid to the grower is rarely directly reflected in the retail price.
By utilizing their immense purchasing power and perhaps by reducing their own mark-up, Walmart aims to overcome these challenges. The reporting also makes it clear that Wild Oats has made certain concessions in return for a commitment from the retail behemoth to vastly increase their sales volumes. Whether they in turn will pressure their suppliers for a lower cost structure remains to be seen, but given the tight supply of organic grains, competitive forces should maintain a healthy farm-gate premium for the time being. As for Wild Oats, I sincerely hope they know what they’re getting into – Walmart has a bad reputation of helping some of their smaller suppliers grow themselves right out of business!
Both parties are quoted as being motivated by the desire to bring more affordable organic food to consumers. Looking a little closer, however, it becomes apparent that the move is less about saving the consumer money and more about marketing. According to data published by the USDA Economic Research Service, processed and packaged foods represent only 11% of organic sales, so this line of organic products represent a fairly small percentage of typical organic grocery purchases. Fresh fruit and vegetables and dairy, on the other hand, represent 43% and 15%, respectively. Walmart takes pains to point out that these products will not be part of its “affordability” campaign, but that it does hope to increase this product range in the future. The end game here is pretty obvious: by advertising a relatively small, unpopular range of products as “just as cheap” as non-organic groceries, Walmart hopes to lure customers into its stores, under the impression that they are the place to buy affordable organic food. And after the customer picks up a can of cheap tomato paste, chances are they’ll stock up on premium-priced veggies and dairy goods, too.
Whether or not Walmart is motivated by anything other than profit is certainly debatable. What’s notable is that they consider the organic consumer demographic one worth pursuing. In addition to low prices, consumers also demand accessibility and convenience – bringing more organic products into Walmart, at premium prices or not, helps accomplish these other two goals. This can only help increase the demand for organic food.
What do you think? Does the promise of cheaper organic food make you want to shop at Walmart? Is the lowest price the law for organic consumers? Are North American farmers prepared to meet the increasing demand?
The Fanning Mill 
Art Brûlant
April 11, 2014
Cheaper isn’t always better. The perception of “affordable” is one thing at stake. Certified Organic lettuce from California or non-certified from a neighbour?
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Victor
April 11, 2014
The well-to-do Whole Foods fanboys and fangirls won’t bite, but that’s OK — let them keep throwing their money away.
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Thomas Souliere
April 11, 2014
Thank you very much Rob – Great article!
thom
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Bill Price (@pdiff1)
April 11, 2014
I think you have correctly read the situation here, Rob. These products are loss leaders for them to get people into the store. In the US, these will be the “Super” stores that have groceries on one end, with the majority of other retail space devoted to the usual Walmart fair of clothes, electronics, households, etc.
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Tanmay Roy
April 15, 2014
Wonderful article Rob! Thank you very much!
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Mischa Popoff
April 15, 2014
Thanks to the lack of field testing in the organic industry, the lion’s share of USDA certified-organic food sold in America is imported from countries like China. Will Walmart rectify this situation? Will they insist that the organic food they carry has been field tested, and thereby shift the balance back in favor of the American organic farming community?
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songberryfarm
April 15, 2014
Organic products sold in North American markets must meet the certification standards of the country where they are being sold. These are comprehensive, holistic programs designed and continually refined and updated by a broad stakeholder community to ensure compliance with both the general principles of organic agriculture and the specific practices pertaining to each commodity.
Trade data clearly contradicts your fear-mongering about the source of organic food. Data from the Canadian Organic Trade Association (http://bit.ly/1bFyelr) shows that the majority of organic food sold in Canada originates in North America. If you really want to get into it, visit the USDA GATS site (http://1.usa.gov/1jHJvSM) According to these official government statistics, of all the organic food imported into the USA in 2013, only 5% was from China. Europe, on other hand, accounts for 22%.
My policy is not to restrict or censor any comments on this blog, but please try to remain factual.
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Mischa Popoff
April 15, 2014
The lack of field testing in the multibillion dollar organic industry is most definitely not fear mongering. It’s a problem that you, of all people, should take seriously. I notice that you don’t deny that there is a lack of field testing as you have attempted to do elsewhere. Everyone reading this should try to imagine if they quit testing athletes at the Olympics. That’s how the organic industry operates.
The data you quote from the Canadian OTA confirms precisely what I said: that only a minority of the organic food sold in Canada is of domestic origin (43%). Also, the OTA left out the part where the CFIA discovered that almost HALF of all certified-organic food sold in Canada is contaminated with prohibited pesticide residue… same as what the USDA discovered with regards to American organic food.
And on that note, the data you cite for America is for all food, not organic. That is problematic from your perspective. Please be more specific with your citation.
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songberryfarm
April 15, 2014
The fact is that field testing is conducted where there is a suspicion of fraud. Organic standards are developed and revised by a large committee of experts from a broad range of experiences. The recurring consensus is that routine field testing would be an impractical, expensive waste of resources. You, of all people, should recognize that by now.
The data I quoted shows that 43% of food sold in Canada is domestic, yes. It also shows that an additional 30% comes from the U.S. You said that the lion’s share sold in North America comes from places like China. If you remove over 70% from the equation, I don’t believe what you have left is a “lion’s share.”
COTA has also addressed the pesticide residue issue in great detail. The market report was published before the CBC reports, but you can find that information with a little research.
Speaking of research, the data I cited for America was for organic imports. If you use the query option on the site, you can get very specific information on organic imports by product and country. That is the information I used.
Again, please try to remain factual.
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Mischa Popoff
April 15, 2014
A broad-spectrum prohibited-herbicide test costs less than $100. So that’s factual or starters.
The “consensus” against organic field testing, meanwhile, is from people with a vested interest in keeping things the way they are in the organic industry: i.e. importers who want to continue relying on importing the lion’s share of their volumes – as you now admit – from outside the country.
No one has ever addressed the fact that almost HALF of all organic food sold in the United States and Canada is contaminated with pesticides. Apologists for the organic industry who contend that we don’t need to test until there is suspicion of fraud, certainly tried claiming that the abysmal results were all caused by pesticides drifting from neighboring conventional farms. But in all of the organic field tests I have conducted, the results were clean; no evidence of pesticide drift from neighboring fields.
If you disagree with these results, please provide results that show how much pesticide drift one should expect to see on organic farms. Is there any such data? It would be irresponsible for someone to try blaming the contamination of organic crops on conventional farmers if they didn’t have proof. Right?
Awaiting your factual response.
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songberryfarm
April 15, 2014
Glad to see that you’ve factored inflation into your old, unsubstantiated claims that a test cost $75. As I’ve requested numerous times previously, show me a link to that price.
Anyone who wants to see where the consensus is coming from can view the membership of the Technical Committee on the Organic Federation of Canada website – you won’t find many importers represented there. Perhaps you could explain how organic food importers could stop relying on imports from outside the country? Isn’t that kinda how the term “import” is defined?
I haven’t seen anyone blaming pesticide drift for all contamination issues: the possible means are numerous. There’s also the simple truth is that we lived in a world where small levels of pesticide contamination are ubiquitous. They find them in polar bears in the Arctic, for heaven’s sake. Maybe we should do routine field testing of the tundra and ice cap to figure out who’s deliberately using prohibited pesticides up there? If we want to reduce pesticide contamination, the best means is to support more organic production. End of story.
Sorry, Mischa, I think I’ll stop here. The circles in your logic are starting to make me dizzy.
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Mischa Popoff
April 15, 2014
The more tests you do the cheaper the price. I did less than 10 tests at a time, so the price was higher. The USDA or CFIA can do tests themselves in batches of 100 or more for less than half that.
As for organic imports, consumers buy organic food under the assumption that it’s domestic, and that they’re supporting farmers in their own country. The CBC meanwhile just published evidence that in Canada more than 80% of the “organic” food certified by the CFIA – almost half of which had pesticide residue on it – was imported.
All of the tests I’ve ever done on organic farms showed no pesticide residue. None. So we can assume, until someone shows otherwise, that the lack of organic field testing has resulted in widespread fraud in this multibillion dollar industry. And that’s a total shame given how many honest, hard-working organic farmers there are across the land.
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Ashley
April 30, 2014
Interesting article. I do not shop at Walmart and will not. Customers need to understand they can’t get quality organic food at ‘Walmart’ prices. If you want to pay for the convenience of one stop shopping, I understand. But if you want real organic food step outside your box and stop at your local farmers market or road side sellers. I just can’t trust Walmart is doing anything but trying to turn a profit. Thanks for the article!
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Mischa Popoff
April 30, 2014
But what’s your definition of “quality organic food” Ashley? Organic crops are not currently tested to ensure they’re pesticide-free (or as close to pesticide-free as required), nor to ensure they’re pathogen-free, let alone more nutritious.
Until the leadership of the organic industry mandates across-the-board field testing, we’ll have no way of knowing what level of quality we’re getting when we buy organic food, regardless of where we get it.
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songberryfarm
April 30, 2014
We’ve had this discussion before, Mischa, on other posts on this blog and other places on the web. Organic food is subject to exactly the same food safety monitoring as every other food – saying they’re not tested is simply a lie. Field tests are conducted when there is suspicion of fraud – a practical and economical practice.
Please stop attempting to hijack my blog posts with your pet peeve. This is your final warning.
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Saurus
November 10, 2014
I am curious to see what your thoughts are on the insertion of big agribusiness appointees as well as the lobbying efforts in regards to the National Organic Standards Board. It is supposedly weakening the standards for what qualifies as an organic food. There is also speculation that the small organic farmers are all getting passed over in favor of large commercial farms who claim they use some organic practices (i.e. Ashely Swaffer of Arkansas Egg Company. Her company lays over nearly 500,000 eggs a day, not exactly a small farm kind of operation.The new appointments came on the heels of a devastating National Organic Standards Board meeting in April where activists protested the new rules that make it easier for Big Agribusiness to use chemicals, pesticides, and antibiotics into the organic food supply. Rep. Peter DeFazio, D-Ore., one of the original authors of the 1990 Organic Foods Production Act stated that the change was “in conflict with the letter and intent of this statute.” To give an example of the abuse of the system, he states that the same organic label goes on carton of eggs made in a factory henhouse with 100,000 birds as it does on a carton of eggs from a small scale free range chicken farmer. Safeguarding the USDA from the lobbyists is a must if we are to protect our food supply from Big Agribusiness and their corrupt business practices. What are your thoughts here? What benefit will an organic label even offer if the standards become watered down?
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songberryfarm
November 10, 2014
Thanks for the thoughtful comment, Saurus. I’ve followed some of the controversy surrounding the NOSB, and I think a lot of it gets exaggerated out of proportion to the true impact. There will always be a tension between the organic “purists” who want the strictest possible interpretation of the standards and the “pragmatists” who believe that the best way to increase the market share of organic food is to build some flexibility into the system.
However, it is very important to emphasize that the majority of these debates address issues of bureaucratic process or concern materials that may or may not be used in relatively rare instances – suggesting that they are going to affect the “integrity” of organics or eliminate the benefits that an organic label offers is overblown hyperbole, in my opinion.
I do think that there are improvements to be made to the NOSB/NOP process and that small farmers deserve better representation. (Having said that, I don’t think it is the job of the standards to be biased with respect to the scale of operations – both large and small farms should be meeting the same standard and have the same right to use the label: if the small farms feels they offer additional value to the consumer, it’s their job to tell their own story.) Aside from that, I think there are a couple of important issues in the standards that have not been adequately addressed for much too long now. I don’t pretend that it’s a perfect system. But right now, I do not see any evidence that the standard has been or will be weakened: I appreciate the work that the “watchdogs” do in maintaining vigilant oversight, but I worry that their “sky is falling” rhetoric can have a damaging effect on consumer confidence in what remains a robust system.
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