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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Reader Comments (Page 1 of 1)
6-07-2006 @ 1:11PM
Christalena said...
i think this is ridiculous and iam outraged that once again walmart is ruining small business and the quality of organic products.
walmart makes me sick
6-07-2006 @ 6:20PM
Robby Santillo said...
I really think wal-mart should stay out of organic products because they can't insure fresh products on a daily basics. The small farms would start cutting standards to meet demand.Small farms couldn't keep up with demand without cuting corners.
6-07-2006 @ 6:43PM
Marie Poutre said...
Well, I never shop at Walmart anyway because I just plain dislike their business practices. So I guess I'll continue to buy organic produce from our local Farmer's Marker or the local grocery. Marie
6-07-2006 @ 8:20PM
Richard said...
The attitude displayed in this post, and in the comments is super-elitist.
1. Don't all the shoppers at Wal-Mart deserve access to organic foods like you do?
2. Won't a giant player like Wal-Mart buying organic encourage larger producers to move to more organic methods?
I thought that every consumer of organic products would be happy about this - it validates your choice, and it means that more farmers will start ot grow organic.
You guys sound like the cool kids in high school that just found out that everyone got into your exclusive party. Sad.
6-08-2006 @ 1:09AM
Christina V said...
Responding to the comment above me, I must say that there a few things wrong with your statement. In economic theory, there is a different market for specialized demand. I am a vegetarian for health AND moral reasons and have been for over 3 years, so I will use this as an example. I have always complained how meat can be so much cheaper by the pound, such as ground beef, then a 4 pack of Boca (Fake Meat) Burgers. Most specialized vegetarian food is VERY expensive, and the reason for this is that us vegetarians do not have the same broad options as general omnivorous consumers do. We pick from a very small group of products, and while we do chose to be vegetarians, we will NOT chose meat products. Since there is a small monopoly in the fake meat product industry from Morningstar Farms and Boca, they can release new products and increase the price tragically because we have no choice. We CHOOSE this, and this is how I feel about organic foods. Just like vegetarian foods (which are usually FDA certified Organic), Organic foods are a choice that symbolize a lot. Let me quickly list them:
1.) It is a choice made by your beliefs, and not by force. It has not honestly been proven that there are any significant health benefits (such as preventing diseases such as cancer later in life) from consuming ONLY organic foods. Therefore, it can be looked at as a luxury item. In all honesty, I do not believe that luxury items NEED to be supplied to the general public. If you want them and you have the income to afford it, economic theory basically says that you WILL find it and probably pay an exhorbitant amount for it.
2.) Most people do not ONLY consume organic foods. If there were significant health benefits towards eating these foods, it would be futile to eat organic tomatoes and cucumbers while still eating meat injected with antibiotics and hormones. (I am sure both could cause varying health problems, but for this discussion, I think you can understand where I am coming from). Again, it is an impulse buy for the affluent consumer. I highly doubt someone with a fixed amount of income on food stamps will allow themselves only 2 organic tomatoes per week for their family over a huge package of 'normal' tomatoes that will help them survive. Again, this proves that organic food is once again, a luxury.
To the poster above me, it is unfortunate of you to think that large producers would specialize in serving the general population (quantity over quality) would actually benefit the organic food industry by moving towards more organic methods. If you remember, Wal-Mart is a HUGE contributor to PACs and political parties (please view www.opensecrets.org for proof), and because organic foods are now CERTIFIED by the FDA (an organization that is staffed by the administration du jour), it could heavily lax these standards in the future if there is invested interest in them doing so. This would further deter the benefits of organic food for what they are according to their current standards, and in turn, destroy the organic food industry.
If you are going to argue a point, you must bring up satisfactory points. It makes for a better discussion.
6-08-2006 @ 4:59PM
Richard said...
Your points are pretty unsatisfactory in my view. First, "If you want them and you have the income to afford it, economic theory basically says that you WILL find it and probably pay an exhorbitant amount for it." This sounds pretty elitist to me.
Then you contradict yourself:
"It has not honestly been proven that there are any significant health benefits (such as preventing diseases such as cancer later in life) from consuming ONLY organic foods."
and later:
"I am sure both could cause varying health problems..."
While entirely missing my point.
Wal-Mart getting into this market is a good thing because it will bring larger producers into the market. While everyone wont buy organic products because of the price difference, everyone will benifit by the overall reduction in the use of pesticides, hormones, and the like.
Secondly, we are not powerless in the face of Wal-Mart's huge PAC contributions. Our job is to hold Wal-Mart to the standard that they are trying to embrace. If Wal-Mart tries to change the organic standards, then make it very publically known, and get your representatives to stop them.
Don't be a victim, and do think of how to help "someone with a fixed amount of income on food stamps".
6-12-2006 @ 12:31PM
G Barker said...
While no lover of Walmart their trade practices or their pay rates, they at least pay?? the increasing use by organic growers of wwoofers,willing workers on organic farms (come and work on my farm all summer for room and board, no money) makes a
mockery of complaints from the organic sector about the greed and averice of the corporate sector, some of these so called organic farmers could show Walmart a thing or two about corporate greed,
6-12-2006 @ 6:24PM
Organic George said...
Economies of scale, Econ 101.
Most of the higher cost associated with Organic foods comes from the fact that there are transshipped and handled many times after they leave the organic farm. Most conventional foods ship directly to the stores or regional warehouses.
If you buy from directly at a farmers market the premium for Organic is not that high.
Quality has gone up as the Organic market has matured. In the 80's nobody graded their fruit and vegetables, no bar codes to for the store scanners to read. Most of the prepared food tasted like cardboard.
I'm not sure what the author was thinking about but he doesnt know anything about the history of Organics.
7-29-2006 @ 9:30PM
Kevin said...
This is in response to Christina V:
You comment about the costs of foods such as Boca and Morningstar farms, and the prices on them, yet state that Wal-mart joining the market is a bad thing because standards will lax.
I seriously doubt this, have you ever visited any country besides America? I was recently in England staying with a friend, a few times I stopped by Sainsburies and Tescos (major supermarket chains over there).
Both of these places stocked meatless products, and STORE brand meatless products. The standards they follow are the same as they are for any meatless product but an 8 pack of meatless sausages (hot dogs, rather) cost a few pence more than regular hot dogs.
Vegetarian meat is rivalling real meat over there, and the pushing our big distributors into this competition would do the same over here. The poster was right, you display an overly-elitist attitude.