In what could be a major shake-up for the organic industry, Wal-Mart, the country's largest retailer and grocer, announced Wednesday that it's rolling out a new line of organic foods -- at prices that rival conventional products. Teaming up with former Whole Foods brand Wild Oats, the company plans to unveil about 100 new pantry items over the coming months, starting in half of its 4,000 U.S. stores.
The mega-retailer already sells about 1,600 organic products, but at the typical markup associated with the label. The Wild Oats line will retail for about 25 percent less than its other organic offerings. The AP breaks down the price difference:
Wild Oats' six-ounce can of tomato paste, for example, is priced at 58 cents, compared with 98 cents for a national-brand organic version. And a 32-ounce can of chicken broth under Wild Oats is priced at $1.98, compared with the $3.47 for a national-brand alternative, according to the discounter's survey of 26 nationally branded organic products available at Walmart.com.
In the short term, the New York Times reports, the announcement comes as bad news for other organic retailers:
In an effort to manage and ensure the supply, [executive vice president of Walmart U.S.’s grocery division Jack] Sinclair said, Walmart plans to enter into long-term agreements with suppliers — for five years, for example — so it can lock in what it will need to meet its enormous requirements.
Over at least the next few years, Walmart’s move is likely to raise prices for organic ingredients, which are already going up because of fast-growing consumer demand. Organic food accounted for $29 billion in United States sales in 2012, according to the most recent data, the Organic Trade Association said. Ten years earlier, its sales were $8 billion.
But in the long run, Wal-Mart's move could ultimately help drive down the overall price of organics: which in many cases demand a premium not because they cost more to grow, but simply because there isn't enough supply to meet the demand. “Prices can and will come down with scale,” David McInerney, a founder of online grocery retailer Fresh Direct told the Times. “We’ve already seen that as demand for organic products has grown.”