Organics: A Poor Harvest for Wal-Mart

Summarized by: Mandi Ellis, Johnny Trumps and Annie Halliburton

Overview

Why the Organic Market How to Become Organic Organic Push at Wal-Mart Why Wal-Mart is failing in Organics The Competition Conclusion & Recommendations

Why the Organic Market?

More than 100 countries grow and/or sell organic food.

Organic land totals up to about 59 million acres.

The organic food and drink industry made about $23 billion in the world market in 2002

More Trends and Bits The market is

expected to generate sales of $32.3 billion by 2009.

The organic industry has experienced annual growth between 17 and 22% each year

VS.The 2 to 3% in the conventional food industry

Australia and Europe

How do you Become Organic?

Well, anyone can…. Production standards…. Requirements:

avoidance of synthetic chemical inputs use of farmland that has been free from chemicals for a number of years keeping detailed written production and sales

records maintaining strict physical separation of organic

products from non-certified products undergoing periodic on-site inspections

Organic Push at Wal-Mart

In March 2006 Wal-Mart announcedit would push organicproducts by: Increasing organic

food offerings typesfrom 100-200 to 400

Have all its seafood caught in the wild certified by Marine Stewardship Council (MSC)

Offer clothing made of organic cotton

Why Sell Organic Products?

Sell to high end consumer Research showed that people

with $75,000 yearly income go to their store

Offer premium products such as wine, designer clothes, quality bedding and sushi.

Stop sales of guns and other outdoor products

Want a piece of growing $23 Billion organic market

A Year Later

Cutting back orders of organic foods Back to offering 100-200 types of organic foods

Selling foods that are “All-natural” Accused of misleading consumers

Complaints from organic suppliers that signs in store are wrong Only certain stores are keeping the

upscale image

Why Wal-Mart Failed

Image – Discount Retailer Business Model

Target Market – Low Income households

Value Proposition – Always Low Prices Competitive Strategy – Get best price

from suppliers Competition

Target, K mart, Local Retailers

Competition in Organics

Whole Foods Co-ops – Local

and Organic Wild Oats

Market Fred Meyer –

Natural Foods Section

Safeway – O Organics

Why Competition is Succeeding

Product Differentiation Appeal to the right people

higher income and environmentally conscious

Niche market No conflicting business models Private Labels Supporting the local market

Conclusion

To compete successfully in retailing you must: Set yourself apart from the competition Cost Leadership, Product Differentiation Service to your customer – make the

experience great Recognize pull of the market

Recommendations

New Brand Under Wal-Mart Example: Toyota and Lexus Nike and Starter

Stick to your own product line Don’t diversify your merchandising mix

to extremes KISS - Keep it Simple, Stupid!!

Bibliography

“Industry Statistics and Projected Growth.” Organic Trade Association. 2003. Alexandria, Virginia. 15 April 2007. http://www.ota.com/organic/mt/business.html

Gogoi, Pallavi. “Organics: A Poor Harvest for Wal-Mart.” BusinessWeek. 2007. McGraw-Hill Companies. 15 April 2007. http://www.businessweek.com/bwdaily/dnflash/content/apr2007/db20070412_005673_page_2.htm

“Organic Certification.” Wikipedia. 2007. United States. 15 April 2007. http://en.wikipedia.org/wiki/Organic_certification

Gogoi, Pallavi. “Wal-Mart’s Organic Offensive.” BusinessWeek. 2007. McGraw-Hill Companies. 15 April 2007. http://www.businessweek.com/bwdaily/dnflash/mar2006/nf20060329_6971.htm