Will Wal-Mart's entry into the organic food industry hurt the industry?


The time-tested rule of thumb always comes to pass in the business world -- the selective niches some customer segments have high prices (which niche customers will pay), high demand and lower overall supply. This happens in consumer electronics (think of Bang & Olufsen), cars (Mercedes comes to mind), and now, organic foods at the supermarket.

Organic foods are made mostly by smaller companies that take pride in producing fresh and semi-processed foods that the health-conscious consumer will be willing to pay extra for. Until recently, you wouldn't see much (if any) selection of organic foods in major supermarket chains like Publix, Wal-Mart and Kroger. But the tide is changing -- customer demand is making these supermarket giants take a look at offering all kinds of organic products.

There is a universal issue here, however: Can these smaller manufacturers keep the organic quality they now have while increasing production to huge levels to satisfy potential demand from large, national chains?

The existing organic consumer probably most likely definitely does not want organic to go mainstream. When mass production takes hold, quantity rules supreme over quality -- there is not a case history in business where this is not true in my opinion.

So, if customer demand is driving Wal-Mart to start offering of organic products, where does that leave the existing organic customer? With the "certified organic" label meaning process certified (not "product" certified), the organic moniker may become diluted to a point where it's somewhat meaningless -- especially as large chains go nuts offering these products to grow customer bases. While Wal-Mart definitely has a piece of its growth plan tied up in offering new products, the informed organic consumer may need to pay more attention shortly.

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