Seeking to boost sales | Some worry farmer premiums will disappear, others anticipate a demand increase
The world’s largest retailer is taking steps to substantially reduce the price of organic food.
Walmart recently announced it will be carrying the less expensive Wild Oats line in about half of its more than 4,000 stores in the United States.
Customers will save 25 percent or more on the nearly 100 Wild Oats products compared to competing national brand organic products.
“We know our customers are interested in purchasing organic products and, traditionally, those customers have had to pay more,” said Jack Sinclair, executive vice-president of grocery at Walmart U.S.
“We know our customers count on us to provide them with affordable access to all of the groceries they are looking for. Organics are no exception.”
Sinclair told reporters that Walmart is “removing the premium associated with organic groceries” in an attempt to boost grocery sales.
Some people have speculated that Walmart’s announcement is the death knell for organics because other retailers will follow suit, eliminating the price premiums that make organic farming a viable option for growers.
Matthew Holmes, executive director of the Canada Organic Trade Association, doesn’t see it that way. He believes Walmart is expanding its product line and diversifying the price point to appeal to a broader spectrum of consumers.
“Ultimately, in our opinion, that’s a really good thing. It gives more consumers the ability to choose organic products,” he said. “There is just a tremendous de-mand out there and it’s growing every year.”
Holmes said the Target chain recently announced that it is expanding its organic product offerings in the U.S. He said he wouldn’t be surprised if the two mega-retailers make similar announcements in Canada in the near future.
Mainstream retailers like Loblaws, Sobeys, Costco, Walmart and Target account for nearly half of organic food sales in Canada, so they can have considerable clout when setting prices paid to growers.
However, Holmes isn’t overly concerned about the organic premium eroding. He said demand is far outstripping supply in North America, and that won’t change soon.
Wally Hamm, general manager of Pro-Cert Organic Systems, said there is no financial basis to reduce the premium that organic growers receive for crops used in processed food products.
The corn in a box of Cornflakes accounts for eight cents of the $4.08 price tag, he said, which means there are plenty of ways to reduce the price without slashing what farmers are paid.
He is more concerned about what might happen to the premium for fresh produce because the price of fruits and vegetables on grocery store shelves are more closely related to the farm price.
Hamm agreed with Holmes that the premium for organic crops will remain intact because of the chronic North American supply shortfall. In fact, he thinks it would be there even if supply and demand were in balance.
“The premiums for organic crops will stay there regardless of what Walmart or Target does,” he said.
“That would be my gut feeling because it’s not that easy to grow a bushel of organic wheat or a bushel of organic corn.”