CARS HOMES JOBS

Wal-Mart eyes even healthier bottom line

Wednesday, April 23, 2014
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When you’re the nation’s largest retailer — as well as its No. 1 grocer — people pay attention.

So when Wal-Mart announced plans this month to add a line of lower-priced organic products to its shelves, condolences were telegraphed to natural foods grocers large and small, including Whole Foods Market, the chain once nicknamed “Whole Paycheck” because of its pricing.

But a Whole Foods executive was quick to downplay any effect, citing Wal-Mart’s limited rollout — 100 so-called pantry staples such as pasta sauce, canned beans and spices — and distinct customer base. Besides, he told the cable business channel CNBC, “In the end, I think it’s an affirmation that this organic food marketplace continues to grow.” No doubt Wal-Mart saw that, too.

Since 2010, more than half of Wal-Mart’s annual sales have come from groceries; in fiscal 2014, which just ended, 56 percent of sales were in that category.

But overall sales, totaling $476.2 billion, were up modestly in fiscal 2014 — just 1.6 percent, versus 5 percent in fiscal 2013 and 6 percent in fiscal 2012.

So why not tap into the sentiment of eating healthier, which helped to triple sales of organic products over the decade between 2002 and 2012?

Wal-Mart’s new line of Wild Oats Marketplace products will save shoppers close to 25 percent over other brands already in its stores, according to the company. (Wal-Mart now carries more than 1,600 organic products, it says, including produce, dairy and packaged items.).

“We don’t think that people who want to eat organic should have to pay more for their food,” Jack Sinclair, Wal-Mart’s grocery executive, said in a statement. Internal research showed that 91 percent of Wal-Mart shoppers would consider purchasing organics if they were more affordable, he said.

Wal-Mart expects to roll out the Wild Oats products at about half of its 4,000 U.S. stores beginning this month. (I’m told not to expect any stores in the Capital Region in the first wave of introductions.) The products also will be available on Wal-Mart’s website this summer.

In partnering with Wild Oats, Wal-Mart will help revive a respected brand that once ranked No. 2 to Whole Foods in the natural foods space. Wild Oats, founded in Colorado in 1987, operated a chain of supermarkets in 24 states and Canada before it was bought out by Whole Foods in 2007.

Two years later, the deal was scotched by U.S. regulators as anti-competitive, and Whole Foods dumped the chain. The Wild Oats name survived, though, and now is owned by a private equity firm, which has been working with experienced retail executives to build a new company around the concept of affordable organics.

To Wal-Mart, “it’s a win, win, win,” says Sinclair, the grocery executive.

Customers can count on affordability, he says, while suppliers can count on demand.

And Wal-Mart, I’d wager, can count on boosting that ever-more-important revenue line for groceries.

Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at marlenejkennedy@gmail.com.

 
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