The recent announcement that Wal-Mart has teamed up with Wild Oats to sell inexpensive, organic pantry basics has the food world in a tizzy.
The debate is raging about whether the new partnership—which will see Walmart stores offering about 100 new, low-priced organic items—is actually a good thing.
Yes, affordable organics will definitely benefit consumers, and Wal-Mart is opening up a world of possibilities for those in lower income brackets who can’t afford the high prices of most organic food. On the flip side, mass production of certified organic products on this scale might have implications for the market as a whole.
Fig 1: Organic Food in the US by Product Type 2013
Whichever side of the debate you’re on, it’s impossible to ignore the fact that deals like the Wal-Mart/Wild Oats one are actually major factors behind growth of the Natural and Organic Food Market in the US, which is posting a CAGR of 15.89 percent from 2014-2018.
Cheap Organic Food, but at What Cost?
The past few years have seen a significant shift in the organic food market. While it used to be a fairly niche segment, seen primarily as the domain of high-earning yuppies, organic has recently become mainstream. And in the US, there is nothing more mainstream than Wal-Mart.
“In 2011, retailers such as Wal-Mart Inc. and Costco Wholesale Corp. sold more than 70 percent of organic packaged foods, ” say senior TechNavio researchers.
“The increased retail shelf space for organic products will make natural and organic food products more easily available, as will new distribution channels like online retailing.”
There is hope that the presence of a behemoth like Wal-Mart in the market might actually drive down the price of organic food across the board.
However, not everything following the Wal-Mart announcement is sunshine and (organic) lollipops.
There have been concerns raised about what lower prices in this industry could mean for farmers. According to National Agricultural Statistics from 2008, the cultivated land under certification for organic farming in the US has more than doubled in the past 10 years with about 4.6 million acres of land cultivated during that period.
This uptake is due, in part, to the fact that organic farming is more profitable for farmers, as they can obtain higher prices for their products if they are certified organic. It also follows better, ecologically friendly farming practices.
The worry is that in order to meet Wal-Mart level demand for organic products we might see an increase in industrial organic farming practices, which could put smaller farmers out of business.
Additionally, there are environmental implications. In an article discussing the Wal-Mart deal, Grist.org explains that, “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.”
While this might seem like a deal breaker for the organics-consuming crowd, the recent popularity of organic products means that sadly, the label is more than enough for most consumers and the actual practices behind the product don’t count for much.
But it’s early days yet in the Wal-Mart deal. Far too early, in fact, to condemn or condone anything. What we can say for certain is that the Natural and Organic Food Market will certainly be seeing consistent growth over the forecast period as products become accessible to a much wider demographic.
For more insights, view our Natural and Organic Food Market in the US 2014-2018 report.
