The organic market has long been a luxury niche in the grocery business. In return for products that are perceived as being healthier and better for the environment, consumers pay more.
Wal-Mart thinks it has found a way to eliminate that premium.
The nation's largest grocer is rolling out a line of packaged goods from supplier Wild Oats that promises to be competitive with traditional offerings that don't carry the coveted "organic" stamp. "Our customers have been asking for this," said Jack Sinclair, executive vice president of grocery for Wal-Mart U.S., during a conference call with journalists Wednesday.
The Wild Oats name is familiar to those in the natural and organic grocery business because it traces its roots to a retail chain founded in Colorado in 1987 that grew to more than 100 locations. The stores were sold to Whole Foods Markets in 2007.
"The legacy of the brand as a much-loved pioneer continues, and we're pleased to be offering it at Wal-Mart," said Tom Casey, CEO of Wild Oats, on the conference call. The new line, which won't include fresh produce or dairy goods, will start with about 100 packaged food items such as canned vegetables, spices, salsa and pasta sauce.
A report on the organic market compiled by the U.S. Department of Agriculture indicated sales of organic products exceeded $28 billion in 2012 and were projected to hit $35 billion this year. Those data were credited to the Nutrition Business Journal, which estimated organic food sales accounted for more than 4 percent of total food sales.
The vast majority of those sales came through supermarkets, with about 7 percent through farmers markets and other channels, according to the Organic Trade Association. Stores such as Whole Foods, Fresh Market, Giant Eagle and Shop 'n Save have all expanded organic offerings.
While Whole Foods noted in a mid-February conference call that since the recession it has focused on improving its price competitiveness, the chain reported a 6.9 percent increase in sales at established stores in its most recent fiscal year. The company's co-CEO John Mackey described last year as the best fiscal year performance in Whole Foods' 35-year history and noted there are 94 leases in the development pipeline, including one for a store planned in Pittsburgh's South Hills.
Wal-Mart, which last year saw sales at established stores drop 0.6 percent, excluding sales of fuel, has noticed sales of organic goods are growing faster than the base business. In addition, 91 percent of Wal-Mart customers said they would purchase organic products if the goods were affordable.
"We're creating a new price position for organic groceries that will increase access," said Mr. Sinclair, who credited part of the ability to lower prices to higher volumes and fewer middle men. In addition, he said, Wal-Mart's commitment to several years of purchases is allowing suppliers to invest in land, seeds and other elements needed to deliver larger quantities.
He offered the example of a 6-ounce can of Wild Oats tomato paste that will be priced at 58 cents, which compares to an organic offering now sold by Wal-Mart for 98 cents. And a 24-ounce package of cinnamon applesauce cups at $1.98 compares to an item in the stores now sold for $2.78.
The retailer claims customers will save 25 percent or more over the national brand organic products that Wal-Mart already sells.
Roll out could take awhile. The plan calls for starting with about 2,000 stores. While not listing which stores might see the line first, Mr. Sinclair pointed out the initiative isn't targeted to certain types of neighborhoods as might be expected for an organic line. "We've not picked certain stores with certain demographics."
Teresa F. Lindeman: email@example.com or at 412-263-2018. First Published April 9, 2014 11:18 PM