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What To Make of Walmart's Move Into Organics


Last week, Walmart announced it will be teaming up with natural and organic food chain Wild Oats to bring a whole bunch of organic offerings into their stores. But that's not all. The announcement comes with a bold promise that their organic items will cost roughly a quarter less than the same offerings in other stores.

This is a game-changer.

The move will, theoretically, make organic items a whole lot more accessible to most Americans. This is good. It may also, perhaps, completely destroy the organic farming community. This is not so good.

Which is it going to be? While we won't know until the proposal becomes a reality, we can still speculate with a little game of On the One Hand/On the Other!

On the One Hand

The concept of expanding the accessibility of organic food by offering it at a low cost is not only a smart idea, it's a necessary one. As I concluded in my recent spiel about the decision to purchase organic over non-organic items, working on finding ways to lower the price point is the next step in organic's evolutionary process. One way is for the government to step in and offer organic farms subsidies. Another is, evidently, for a supergiant grocery chain to offer low prices and force the rest of the industry to follow suit.

See, this isn't some normal grocery chain we're talking about here. This is Walmart. They're inherently a trendsetter simply because of their massive size. Walmart jumping into organics is one thing, offering organics at a quarter of the price is an entire shake-up of the industry. And it's a shake-up that may take the supply side of things a bit to catch up:

An internal Walmart survey showed that 91 percent of its shoppers would buy organic if it were affordable, Marquardt said. But supply is a concern, which is why Walmart initially plans to sell Wild Oats organic products in just 2,000 of its 4,000 food stores.

But all signs point to supply catching up soon enough. And when it does, customers who haven't yet bought organic will give it a shot. And customers who already have will give Walmart a shot due to their low prices. The end result will be that other stores will be forced to find ways to match Walmart's low price, or get out of the game completely.

Meaning, the price of organics will be brought down and the whole world will be a happier and healthier place. Hooray!

On the Other

Or, maybe not.

One of the biggest things to keep in mind is that organic food isn't expensive just because organic farmers are greedy. It's more expensive because it costs more to produce:

One of the problems is the high barrier that needs to be surmounted to gain USDA organic certification. Under the program, any land used to produce organic commodities must not be treated with non-organic substances for three years before it can be certified. Livestock must be treated organically from before birth.

So the question then becomes two-fold: How is Walmart going to offer a low price? How will this affect organic farmers?

The first one's the easiest to answer: It's cheaper to buy in bulk. Because Walmart can promise to buy a certain amount (in this case, a very large amount) of organic food, farmers can make their items in bulk -- thus lowering the cost of production -- knowing they have a place to sell them. The problem with this is that only large-scale organic farms have the ability to produce quantities of that size, meaning those are the only ones that will get into the Walmart aisles.

Which wouldn't be that big of a deal if Walmart was sticking to the normal price for organics. But by changing the price point, other stores will have to adjust, meaning the new norm may be large-scale organic farms. And that's where things start to get scary:

In this model, farmers adhere to just the bare minimum of organic standards and ultimately end up depleting soil health on a piece of land, abandoning it, and moving on to another.

In other words, the same thing that happened to create large-scale non-organic farms may happen to organic ones. Small farms may be bought up and pushed out, only allowing the huge conglomerates to survive. And then they'll begin to take on the corporate philosophy of just doing the bare minimum to retain whatever the USDA claims "organic" means. And we'll all be worse off because of it.

Which scenario's going to play out? It's way too early to tell. But the fact is that entire game of organic food is about to be changed. Let's hope it's for the better.

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