Commentary by Mark A. Kastel
As Yogi Berra said, “It seems like déjà vu all over again.” In 2006 The Cornucopia Institute released a report accusing Walmart of cheapening the value of the organic label by sourcing products from industrial-scale factory farms and developing countries, including China.
At the time, Walmart announced that they would greatly increase the number of organic products they offered and price them at a target of 10% above the cost for conventional food. They failed miserably at that first attempt, eventually removing many of the organic items from their stores.
This past May, Walmart announced they will once again enter the organic arena, in earnest, with the goal of eliminating the premium price for organic food.
Since the announcement, Cornucopia has received numerous press inquiries asking if Walmart’s organic expansion is “good news or bad news” for the industry. My stock answer has been, as it was in 2006: If Walmart lends their logistical prowess to organic food, both farmers and consumers will be big winners by virtue of a more competitive marketplace. However, if the company applies their standard business model, and in essence Walmarts organics, then everyone will lose.
Organic family farmers in this country could see their livelihoods disintegrate the same way so many industrial workers saw their family-supporting wages evaporate as Walmart, Target and other big-box retailers put the screws to manufacturers—forcing a production shift to China and other low-wage countries.
WalMart became the nation’s largest organic milk retailer by partnering with the dairy giant Dean Foods/ WhiteWave (Horizon Organic). They then introduced their own private-label organic milk packaged by Aurora Organic Dairy. Aurora, based in Boulder, Colorado, has faced a maelstrom of organic industry criticism and negative press for operating a number of industrial-scale dairies with thousands of cows confined in feedlot-like conditions. They were the subject of a USDA investigation that found the giant dairy had “willfully” violated 14 tenets of the federal organic standards.
This time around Walmart is keeping the sourcing of their organic products a secret by using a private- label supplier and marketing products under the Wild Oats brand, a former natural foods grocery chain briefly owned by Whole Foods before, in 2009, an antitrust rule forced it to divest its holdings (resulting in the eventual shutdown of the Wild Oats chain).
Walmart claims that each item in the line, to consist of about 100 packaged products including pasta, peanut butter, dried spices, and olive oil, will cost at least 25 percent less than other organic goods sold at their store, according to Consumer Reports.
I’ve always said that “private-label, store-brand organics” is an oxymoron. By its very nature the practice is secretive. Grocery chains want to pit supplier against supplier. They want the companies manufacturing their products to feel insecure knowing they could lose the business for a few pennies to a rival competitor. For that reason retailers don’t want their customers to become loyal to a specific brand-name supplier.
In contrast, most organic consumers are label readers. We want to know where our food is coming from, how it is produced and, if livestock are involved, how respectfully they are treated. None of that is possible with private-label products.
Target has taken a different approach. Although they have plenty of private-label brands (Archer Farms, Market Pantry, and Simply Balanced in their grocery aisles), they are also presenting a “curated” product line including many name brands owned by large agribusinesses that have invested in organics.
It should be noted that the product lines at Walmart and Target include both organic and conventional (“natural”) products under the same private- label brands.
Cornucopia’s 2006 report documenting the Walmart/factory-farm connection also highlighted the company’s decision to lower the per unit cost basis on organic products by collaborating with its long-time trading partner China.
Even if the organic certification process in China were not cause for serious concern—coupled with the fact that the USDA has provided little if any regulatory oversight there— food shipped around the world, burning fossil fuels and undercutting our domestic farmers, does not meet the consumer’s traditional definition of what is truly organic.
Meanwhile, Whole Foods Market announced that they are cutting many prices to meet increasing competition from mainstream retailers like Kroger, Safeway and now Walmart, and their stock plunged nearly 19% this past May.
“I don’t think consumers have any idea just how industrialized [mainstream organics] is becoming,” said best-selling food movement author Michael Pollan in an interview with the St. Paul Pioneer Press. “There are some real downsides to organic farming scaling up to this extent,” he added.
Both Pollan and I worry that the expansion of “Big Organic” will lower food quality, weaken standards and hurt small family farms.
There’s a reason that organic food costs more. It costs more to produce, and paying farmers a fair price has always been part of the deal. The claim that Walmart will be able to provide organic food that truly adheres to federal organic standards, without a premium price, seems questionable at best.
The last time Walmart rolled out organic foods on a large scale, The Cornucopia Institute caught them labeling “natural” food as organic. After an investigation by the USDA and making the commitment to take down fraudulent signage, the company was not prosecuted. Walmart obviously did not have the expertise, at the store level, to manage organics.
The gold standard in organic retailing remains the hundreds of member-owned food co-ops and independent natural foods grocery stores across the country. Many of them are like a farmers market seven days a week where you can also find reputable national brands. They also act as a portal for accessing the local food movement. Your community’s farmers market, or joining a CSA, can also provide your family with the highest quality organic food.
When Walmart and Target complete their product roll-out, you can be sure The Cornucopia Institute will publish a new report for our members, the public and the media. We will provide discussion and analysis as to whether these massive corporations have learned from their past failures relating to organics and are now offering a true competitive alternative in the marketplace.