It’s been quite an interesting few weeks in the world of organics. Walmart announced a new organic initiative under the Wild Oats brand, and Target a day later shared the details of its “Made to Matter” program with 17 handpicked organic brands. Clearly, both chains are vying for that average shopper who has the desire for organics, but just can’t seem to cross that Whole Foods threshold.
While it is true that organic foods and beverages continue to grow double digits (and now represent just over 4% of total at-home food sales, according to the USDA), far more than the non-organic offerings occupying supermarket shelves, these two announcements might give a needed nudge to an industry that has seen market share relatively stable over the past decade. And in 2014, the California drought has had a major effect on the availability and price of both organic produce and organic meats, and while it may be too soon to quantify just how much sales have been lost, there is little doubt that some shoppers have switched to their less expensive non-organic counterparts.
The big question is: Will the shoppers come to Walmart and Target for organics? And why?
Walmart’s organic positioning is about price. The company says that the Wild Oats brand will retail for 25% less than other organic brands. Does the Walmart shopper even care about organics, no matter what the price? As more consumers find the perceived nutritional advantage of organics untrue, and discover that even organics can use over 100 specified pesticides, the organic industry will have to do a better job of showcasing their attributes. Some brands have already begun touting their non-GMO status on packaging and in their advertising hoping that will attract a broader audience.
As the two mass merchandiser giants begin their organics battle, one thing is for sure: The price of organics everywhere, even at Whole Foods, will be lowered — as will the margins for the brands themselves. Look for increased advertising and support for the more affordable pricing strategy to attract new consumers to the category. One concern is that as organics become more affordable for all, we may well see some manufacturers step away from this once extremely profitable category. Then there is the theory that giving Walmart the Wild Oats brand fuels the path to convert Fresh & Easy to an all organic and affordable Wild Oats chain, and then sold off to Walmart.
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