Saying it was “trying to disrupt the market,” Walmart yesterday announced a deal to revive the Wild Oats organic brand that “may potentially have big implications for the organic-food industry,” as Andrea Cheng puts it in MarketWatch.
“Starting this month, the big box giant aims to drive down the price of organic food nationwide with its new in-house line of 100 or so products in exclusive partnership with Wild Oats, a pioneering health brand of the 1980s,” writes Clare O’Connor on Forbes.com, in a story whose hed points specifically to the likely competitive pressure on Whole Foods.
“Walmart’s new Wild Oats organic products — including kitchen cupboard staples like olive oil and black beans — will cost about 25% less than those sold by competitors, based on price comparisons of 26 national brands.”
“We are removing the premium associated with organic groceries,” Jack Sinclair, EVP of Walmart U.S.’s grocery division, said on a call with reporters Wednesday morning monitored by Heather Somerville of the San Jose Mercury News. “They will be able to buy organic products at nonorganic prices.”
“Cost has been one obstacle for many shoppers who say they would like to buy organic food but hold off because of typically higher prices,” writes the Chicago Tribune’s Jessica Wohl, citing Walmart research that showed that “91% of its shoppers would consider buying products from an affordable organic brand.”
Wild Oats was born in 1987 in Boulder, Colo., as a Denver Post headline proclaims, as the house brand of Wild Oats Markets, which was bought by Whole Foods in 2007. In 2009, the FTC found Whole Foods in violation of antitrust laws and ordered it to divest 32 Wild Oats Market stores and the Wild Oats brand.
Hidden Villa, an egg company, bought the brand, then sold it to Los Angeles-based The Yucaipa Co. 18 months later, the Post’s Howard Pankratz reports. Yucaipa is the private equity firm controlled by Ron Burkle, who was the majority owner of Wild Oats when Whole Foods bought it. Yucaipa also owns 167 Fresh & Easy grocery stores. (One sees why Burkle’s name is usually accompanied by the modifier “grocery magnate.”)
“Customers can still find some Wild Oats products in other, smaller retailers, but at higher prices,” Somerville writes. “The discounts are exclusive to Walmart; for example, a 6-ounce can of Wild Oats organic tomato paste will sell at Walmart for 58 cents, while the competing organic brand sells for 98 cents. Some Wild Oats products will be half the cost of other leading organic brands.”
Said Wild Oats CEO Tom Casey: “It will pass along savings to the customer in a way that's not been done before in the organics food industry.”
The announcement “is likely to send shock waves through the organic market, in which an increasing number of food companies and retailers are seeking a toehold,” write Elizabeth A. Harris and Stephanie Strom in the New York Times.
“In an effort to manage and ensure the supply, Mr. 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,” they report. “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 and other products generated sales of $31.5 billion in the U.S. in 2012, the most recent data available,” according to the Washington-based Organic Trade Association and reported by the AP’s Anne D’Innocenzio “The sales figure was up 10.3% from the year before and has more than tripled since 2002 when sales were $8.4 billion.”
On Tuesday, Target said “it will partner with 17 existing brands to expand its line of natural, organic and sustainable products,” John Ewoldt reported in the Minneapolis Star-Tribune. “The ‘Made to Matter — Hand-picked by Target’ collection will feature about 120 products from brands as diverse as Burt’s Bees, Evol, Horizon Organic, Method, Seventh Generation and Kashi.”
The products will be sold exclusively at Target for at least six months.
“Natural and organic is past the fad stage,” Jim Hertel, managing partner at Willard Bishop grocery consulting firm, tells Ewoldt. “What used to be a lifestyle for the best educated and highest incomes is now skewing younger, although it’s still an educated, above-average-income consumer.”
That’s the type of customer Walmart would no doubt like to attract more of. Sinclair said during the call that customers should begin to “think of Walmart as a destination for organic foods.” And while they are there, why not just about anything else.