Global fishiness

How can Wal-Mart sell Chilean salmon for $4.84 a pound? An excerpt from "The Wal-Mart Effect."

Editor's note: In 2006, the name Wal-Mart may have more polarizing power than any other corporate brand. The world's most powerful company is an economic juggernaut, political flashpoint and social phenomenon. In "The Wal-Mart Effect," a thoughtful, comprehensive examination of how those famous "everyday low prices" are changing the world, Fast Company writer Charles Fishman offers up a compelling look at the company that, more than any other firm, is driving the global economy.

By Charles Fishman

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Jan. 23, 2006 | The glass seafood display case in Wal-Mart Supercenter #2641 near Allentown, Pennsylvania, is small, but it is a mouthwatering testament to the power of global sourcing. From Thailand -- sea scallops and three kinds of shrimp. From Namibia -- orange roughy. From the United States -- swordfish steaks and fresh shrimp. From China -- squid, scallops, tilapia, and crawfish. From Russia -- Alaskan king crab. From the Faeroe Islands -- cod. (The Faeroe Islands are an archipelago in the North Atlantic, halfway between Iceland and Norway, population forty-seven thousand -- no Wal-Mart, but some Wal-Mart effect.)

Every item for sale is meticulously labeled -- kind of fish and country of origin -- but also whether the seafood is farm raised or wild caught, and whether it has been previously frozen. The signs themselves conjure exotic images. The squid are a "wild-caught product of China." Wild, indeed.

Right down front in the display case, with fillets thick and long enough that they run from the front of the case all the way to the back, is a platter of Atlantic salmon. Each fillet, the flank of big fish, is gleaming and vivid pink-orange. The salmon is a "farm-raised product of Chile," according to the sign, and it's fresh. It managed to get from southern Chile to a small town seventy miles outside Philadelphia -- more than five thousand miles -- without even being frozen. The salmon fillets are priced at $4.84 a pound. Almost any American over thirty is old enough to remember a time when you could hardly buy a quarter of a pound of salmon for $5.00. Any American over forty can recall an era when salmon was a delicacy. A half pound of smoked salmon, the kind you'd put on a bagel, might have cost $16.00 or $20.00. But there it is, in the Wal-Mart display case -- pink, oily, and alluring -- salmon fillets for $4.84 a pound. That's not a special; it's the everyday low price, and available in most supercenters from one end of the country to the other. It's a couple of dollars a pound cheaper than farm-raised salmon at a typical supermarket. It's less than half the price of the farm-raised salmon sold by Whole Foods.

Salmon for $4.84 a pound is a grocery-store showstopper. If prices contain information, if prices are not just a way of judging whether something is expensive or affordable but contain all kinds of other signals about supply, demand, prestige, and even the conditions under which products are made (bad freeze in Florida, expensive orange juice; hurricane on the Gulf Coast, expensive gasoline), then salmon for $4.84 a pound is a new, unintended Wal-Mart effect. It is a price so low that it inspires not happiness but wariness. If you were so inclined, you couldn't mail a pound of salmon back to Chile for $4.84. It's a price so low, it doesn't seem to make sense if you think about it for even a moment. Salmon at $4.84 a pound is a deal that looks a lot like a gallon jar of Vlasic dill pickles for $2.97 -- it's a deal too good to be true, if not for us as the customers, then for someone, somewhere. What exactly did Wal-Mart have to do to get salmon so cheaply?

The Atlantic salmon fillet in grocery display cases and on restaurant menus is, as one expert in the business says, "a factory product" -- hatched from eggs, raised to adolescence in freshwater hatcheries, grown to maturity over two years in open-topped ocean cages of thousands of fish suspended in cold coastal waters. And most of the farm-raised salmon we eat comes from Chile -- 65 percent of the farmed salmon sold in the United States is imported from Chile; most of the rest comes from Canada. As bemusing as it is to see how salmon has found a place on American menus and plates as a kind of affordable luxury, salmon really has conquered the economy of southern Chile. The area around Puerto Montt, six hundred miles south of Santiago, now has eight hundred salmon farms, and the salmon business provides nearly one in ten of the area's jobs. In 2005, Chile expected to export $1.5 billion worth of fresh-packed salmon, with 40 percent of it coming to the United States. Salmon is the second largest export in Chile now, behind copper, ahead of fruit.

"Five years ago," says Rodrigo Pizarro, "salmon wasn't on the list of exports. Chile didn't have any salmon twelve years ago." Pizarro is an economist who heads Terram, a Chilean foundation dedicated to promoting sustainable development in Chile. Understanding the impact of salmon farming is one of Pizarro's most urgent projects. When he says that twelve years ago Chile didn't have any salmon, he's not exaggerating for effect. He means it literally.

Not only is the Atlantic salmon not native to Chile -- the Chilean coastline, of course, runs along the Pacific -- but as Pizarro puts it, "Atlantic salmon is an exotic species in the whole Southern Hemisphere." The Atlantic salmon doesn't appear naturally anywhere south of the equator. Farming salmon in Chile is a bit like farming penguins in the Rocky Mountains. Now, however, not only are there far more Atlantic salmon in Chile than people, there are ten times as many, maybe even one hundred times as many. More salmon are harvested in Chile now than anywhere else in the world, including Norway. Even as the price has drifted down, the value of Chile's salmon exports has risen nearly 70 percent in five years. Chile wants to increase the amount of salmon it exports by 50 percent again by 2010.

In just a decade, salmon farming has transformed the economy and the daily life of southern Chile, ushering in an industrial revolution that has turned thousands of Chileans from subsistence farmers and fishermen into hourly paid salmon processing-plant workers. Salmon farming is starting to transform the ecology and environment of southern Chile too, with tens of millions of salmon living in vast ocean corrals, their excess food and feces settling to the ocean floor beneath the pens, and dozens of salmon processing plants dumping untreated salmon entrails directly into the ocean.

Pizarro is thoughtful, direct, and passionate about his country without being excitable. "Anyone who is working in a salmon plant, it's very much a factory-type system," he says. "It's an industrial-type system. If you were to see the factory, it's just like Charlie Chaplin's movie "Modern Times." The plants are very clean, very modern, with proper apparel and gloves. The issue is not the health conditions of the fish. It's the labor conditions of the workers" -- long hours, a demanding pace using razor-sharp filleting implements, low pay. As for the farms themselves, he says, "All the information we have indicates that the environmental impact is considerable."

Wal-Mart is not just another customer of farm-raised Chilean salmon. Wal-Mart is either the number-one or number two seller of salmon in the United States (the other top seller is Costco), and Wal-Mart buys all its salmon from Chile. Wal-Mart, in fact, may well buy one third of the annual harvest of salmon that Chile sells to the United States. That kind of focused purchasing in an arena of surging production is one part of how Wal-Mart delivers salmon for $4.84 a pound to supercenters around America. Chilean salmon needs markets; Wal-Mart has 1,906 supercenters. That kind of focused purchasing also gives Wal-Mart and its customers a unique window on the impact all that salmon raising, salmon buying, and salmon selling is having far away from Bentonville, in southern Chile. Does it matter that salmon for $4.84 a pound leaves a layer of toxic sludge on the ocean bottoms of the Pacific fjords of southern Chile?

Wal-Mart's ability to reach in and remake the operations of its suppliers is unchallenged. And Wal-Mart's single-minded focus on using that power to reduce price has sent waves of change across the U.S. economy and around the globe. But what if Wal-Mart imposed conditions on its suppliers that went beyond cost, efficiency, and on-time delivery? What would the ripples from that look like?

Rodrigo Pizarro has a calm appreciation for both the impact of the salmon industry in Chile and the opportunity. He also has a sophisticated appreciation for American business and consumer culture. "I know what kind of story Wal-Mart has," he says. "I am not naive about Wal-Mart." Pizarro's undergraduate degree is from the London School of Economics, his Ph.D. is from the University of North Carolina at Chapel Hill. How does he think Americans should think about that salmon in the seafood display case at Wal-Mart, selling for $4.84 a pound?

"I remember when I was in the United States, you had a debate about Kathie Lee Gifford promoting clothes which were produced in an offshore factory with awful labor," says Pizarro. In 1996, at a congressional hearing, a well-known labor rights activist revealed that the workers in a Honduran factory making a line of clothes under the TV personality's name were children. The Kathie Lee Gifford line was sold exclusively at Wal-Mart. By the time the use of child labor became public, Wal-Mart had stopped using the factory. But the ensuing scandal took Gifford and Wal-Mart by surprise, and the publicity was scorching. Forbidding child labor is one of the absolutes of the global economy. But the larger issue of the overseas factory conditions where products sold in the United States are made is still being navigated gingerly by multinationals. They don't necessarily want to assume the responsibility, and the cost, for monitoring everything that goes on in workplaces in countries that have their own laws, cultures, and enforcement mechanisms; they also don't want to have to explain dramatic, unsettling revelations about how the familiar products they sell manage to have such low prices.

Pizarro is thinking not of child labor in particular, but of the widespread public outrage when American shoppers connected clothing they were familiar with a well-known personality, and sweatshop factory conditions.

Says Pizarro, "Increasingly, the American consumer is aware of these types of working conditions, and the salmon is the same as the clothes. The only difference is, what is being produced by these workers is something the American consumer is feeding to his children."

Next page: Hog farms of the sea