Wal-Mart searching for footing in organics

by Eric Schroeder
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A produce display at Wal-Mart
Organic products must be sustainable and affordable, Wal-Mart C.f.o says.

NEW YORK — Nearly a year ago Wal-Mart, the nation’s largest grocer, teamed up with Wild Oats to offer organic food items that are at least 25% less expensive than the national organic brands it carries. The initiative was expected to cover a broad variety of categories and be available in about half of Wal-Mart’s 4,000 U.S. stores. But so far, it has been slow going.

“It’s still rolling out, with different products from Wild Oats at the store,” said Charles Holley, chief financial officer of Wal-Mart Stores, Inc., in a March 4 presentation at the Bank of America Merrill Lynch Consumer and Retail Conference in New York. “But beyond just Wild Oats, one of the things we know is that over 90% of our customers would like access to organic sustainable products in the food area if they are affordable. So they aren’t willing necessarily to pay a high premium all the time, or at least our core customers are not. And so that’s the challenge for us to making sure that we can source — and we should be able to do a lot of that with our size, to lever our size — but source sustainable organic products for our customer.”

Mr. Holley also addressed supply and whether there are enough organic raw inputs to satisfy demand.

“I think it takes working with suppliers over a period of time in order to lever the quantity to get the price down that’s affordable for our core customer,” he said. “But I do think that most of the products that we sell can go a long way with sustainability in organic by working with our suppliers. But it takes volume and it takes planning, and we do work with our suppliers on that.”

Organic was not the only aspect of Wal-Mart’s food business addressed at the conference. Mr. Holley stressed the company must run “a great fresh area” if it hopes to be successful in food. He said the company needs to do a better job in its deli, bakery and meat areas.

“I think we’ve upgraded some of those (areas), but I think they have a longer way to go,” he said. “We need to not just satisfy customer need, we should be exceeding some of those.”

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