By Lisa Baertlein
April 10 Wal-Mart Stores Inc wants
Americans, even those on a budget, to buy more organic food.
The retailer that leads U.S. stores in grocery sales said on
Thursday it struck a deal to sell Wild Oats brand organic foods
at non-organic prices.
The move could help revive Walmart's flagging grocery sales
and boost the profile of the resurrected Wild Oats brand.
The effort also could turn up the heat on mainstream food
sellers, such as Campbell Soup Co and ConAgra Foods Inc
Organic foods accounted for roughly 4 percent of total U.S.
food sales in 2012, but growth in the category for years has
outpaced the industry overall, buoyed by growing demand for
simpler food made from natural ingredients.
Organic foods often cost more than their conventional
rivals, and that has limited purchases by the legions of
lower-income U.S. shoppers who are needed to propel a niche
product into a national player.
Walmart caters to that audience and says it will price Wild
Oats products at par with conventional items and at least 25
percent below branded organic foods. The Wild Oats offers will
include staples such as salsa, organic olive oil, canned black
beans and tomato paste.
"If we can make that price premium disappear, we think it
will grow much, much faster," Jack Sinclair, executive vice
president of grocery at Walmart U.S., said of the retailer's
small but faster-growing organic sales.
Walmart's own research showed that 91 percent of its
shoppers would purchase affordable organic products if they were
offered, Sinclair added.
Kraft Foods Group Inc, Kellogg Co, Unilever
Plc and many other large companies have taken small
steps to respond as health-conscious consumers lose their taste
for the highly processed foods that the industry made famous.
As a result, they have lost some market share to smaller
players such as WhiteWave Foods Co, the parent of
organic dairy seller Horizon, and Annie's Inc.
"Consumer demand has been ahead of traditional packaged
food. Walmart is acknowledging that," said Consumer Edge
Research analyst Robert Dickerson, who called the move from
Walmart inevitable and said it could place incremental pricing
pressure on the packaged food industry over time.
Walmart will roll out 100 Wild Oats packaged foods products
to half of its 4,000 stores in the coming months.
The retailer, which is not expanding shelf space to
accommodate the new items, already sells more than 1,600 organic
products, including produce and dairy items. Walmart is not
removing the organic price premium on those products.
It plans to keep a lid on prices by eliminating middle men
and striking long-term agreements with farmers, Sinclair said.
Experts say increased supplies of organic ingredients should
support expanded production and distribution, which often
results in lower prices.
That could be bad news for conventional food sellers, who
may be forced to respond by cutting their own prices.
Wild Oats was the second-largest natural and organic grocer
when Whole Foods Market Inc bought the chain for $565
million in 2007.
After the acquisition, Whole Foods sold the Wild Oats name
and other assets. They are now owned by billionaire Ron Burkle,
who was Wild Oats' biggest shareholder when the chain was sold.
Britain's Tesco Plc late last year loaned Burkle's
Yucaipa investment company roughly $126 billion to take most of
its money-losing Fresh & Easy stores off its hands. Fresh & Easy
stores in California, Nevada and Arizona now sell products from
Walmart said it would be the only national retailer to carry
Wild Oats products and that in the future it may consider adding
fresh organics such as the milk, eggs and salads.
Organic food sales were up 10.2 percent to $29.0 billion in
2012, the latest available figures, and are expected to continue
rising, according to the Organic Trade Association.
(Reporting by Lisa Baertlein in Los Angeles and Phil Wahba and
Jonathan Stempel in New York; Editing by Lisa Shumaker)