The battle for organics is on!
Here at The Lempert Report, we recently discussed the growth of sales for organic products and the retailer competition that's building up for Whole Foods Market, especially if they can't lower prices. Well, here's another reminder that organics are going mainstream. Walmart is expanding its selection of organic foods, and it’s promising to sell the stuff at the same prices it sells nonorganic food.
Generally we expect organic offerings to be more expensive than its ordinary counterparts, but not for Walmart. According to Bloomberg News, Walmart is not only expanding its selection of organic foods with the launch of the Wild Oats label, but planning to sell it at the same prices as non-organics. Market estimates currently place most organic products about 20 percent higher than non-organic options. The deal with Wild Oats came together back in 2011 and as quoted in Bloomberg News, the goal was “to democratize organic to the masses,”
Whole Food Markets, which once had the organic market pretty much to itself is now having to combat some fierce competition, something their attempting to combat with its first national ad campaign, but something we believe will only ever be achieved by lowering prices.
But, the next question; is with organics going mainstream, will there be enough supply to meet demand? Bloomberg News notes that, Farmers can’t convert to organic production overnight, and in recent years there hasn’t been much incentive to do so because of the high prices they’re getting for conventional products. The drought in California, where 21 percent of the 14,326 organic farms in the U.S. are located, is further limiting supplies. So as Walmart continues to roll out its organic line and other big retailers take a piece of the pie as well we will soon see the impact this will have.