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Wal-Mart Eyes Organic Foods - New York Times Skip to article


Wal-Mart Eyes Organic Foods

Published: May 12, 2006

Starting this summer, there will be a lot more organic food on supermarket shelves, and it should cost a lot less.

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Misty Keasler for The New York Times

Michelle Philips and her daughter Madison at a Wal-Mart in Plano, Tex. Wal-Mart has decided that organic food will help modernize its image.


Wal-Mart Tries to Enlist Image Help (May 12, 2006)
Misty Keasler for The New York Times

Wal-Mart has asked suppliers to help it offer more organic food.

Most of the nation's major food producers are hard at work developing organic versions of their best-selling products, like Kellogg's Rice Krispies and Kraft's macaroni and cheese.

Why the sudden activity? In large part because Wal-Mart wants to sell more organic food � and because of its size and power, Wal-Mart usually gets what it wants.

As the nation's largest grocery retailer, Wal-Mart has decided that offering more organic food will help modernize its image and broaden its appeal to urban and other upscale consumers. It has asked its large suppliers to help.

Wal-Mart's interest is expected to change organic food production in substantial ways.

Some organic food advocates applaud the development, saying Wal-Mart's efforts will help expand the amount of land that is farmed organically and the quantities of organic food available to the public.

But others say the initiative will ultimately hurt organic farmers, will lower standards for the production of organic food and will undercut the environmental benefits of organic farming. And some nutritionists question the health benefits of the new organic products. "It's better for the planet, but not from a nutritional standpoint," said Marion Nestle, a professor of nutrition, food studies and public health at New York University. "It's a ploy to be able to charge more for junk food."

Shoppers who have been buying organic food in steadily greater quantities consider it healthier and better for the environment. Organic food � whether produce, meat or grain � must be grown without pesticides, chemical fertilizers and antibiotics. Then, before it is sold, the food cannot be treated with artificial preservatives, flavors or colors, among other things.

When Wal-Mart sells organic food on a much broader scale, it will have to meet the same Agriculture Department requirements. But nutritionists say the health benefits of many of these new offerings are negligible.

Wal-Mart says it wants to democratize organic food, making products affordable for those who are reluctant to pay premiums of 20 percent to 30 percent. At a recent conference, its chief marketing officer, John Fleming, said the company intended to sell organic products for just 10 percent more than their conventional equivalents.

Food industry analysts say that with its 2,000 supercenters and lower prices, Wal-Mart could soon be the nation's largest seller of organic products, surpassing Whole Foods. Already, it is the biggest seller of organic milk.

While organic food is still just 2.4 percent of the overall food industry, it has been growing at least 15 percent a year for the last 10 years. Currently valued at $14 billion, the organic food business is expected to increase to $23 billion over the next three years, though that figure could rise further with Wal-Mart's push.

Harvey Hartman, president of the Hartman Group, a consulting firm in Seattle that is working with Wal-Mart on its organic food initiatives, asserted: "What Wal-Mart has done is legitimized the market. All these companies who thought organics was a niche product now realize that it has an opportunity to become a big business."

Kellogg and Kraft say they began working on organic Rice Krispies and organic macaroni and cheese before having conversations with Wal-Mart. But David Mackay, chief operating officer at Kellogg, says it was helpful knowing that a big customer like Wal-Mart was enthusiastic about the product.

In July, Kellogg is planning to introduce organic Raisin Bran and organic Frosted Mini Wheats, with packages featuring the word 'organic' at the top in giant letters.

Other food companies say they are working on products at Wal-Mart's direction. General Mills and Pepsi say they plan to introduce new organic versions of some of their well-known brands late in 2006. These products are expected to appear in Wal-Mart first and then at other major retailers.

Officials at General Mills, the producer of Cheerios, Yoplait yogurt and Green Giant vegetables, among other things, and at PepsiCo, which owns the Tropicana and Quaker brands, declined to identify those products.

DeDe Priest, senior vice president for dry groceries at Wal-Mart, said the company had been urging food suppliers for the last year to embrace organic foods. At a recent conference in Rogers, Ark., near the company's headquarters in Bentonville, she said, "Once we let the companies know we were serious about this and that they needed to take it seriously, they moved pretty fast."

Bruce Peterson, head of perishable food at Wal-Mart, said that it aimed to change the way people think about the retailer.

"Consumers that gravitate to organic products don't always think of Wal-Mart as a top-of-mind destination to pick up those products," Mr. Peterson said. "We want to let customers know, 'Hey, we're in that business.' "

The strategy of working with food makers to tie in organic products with well-known brands represents a departure from the approach many of Wal-Mart's competitors are taking. Safeway, Kroger and SuperValu, which is set to acquire Albertsons, have private label organic lines with names like Nature's Best and O that they sell at prices below those of brand organic products.