Wild Oats, considered a pioneer in the organic-food industry, is making a comeback in Wal-Mart.
Founded in 1987 in Boulder, Colo., at one time Wild Oats operated 110 stores in 24 states and Canada. The company eventually sold the stores but continued production.
Starting this month, Wal-Mart will begin carrying Wild Oats items, from salsa and pasta sauce to quinoa and chicken broth, at half of its 4,000 U.S. stores including some in Arkansas. Except for Wal-Mart, these particular Wild Oats product lines will be available only in a few small stores but not at national chains and not at Wal-Mart’s prices, said Jack Sinclair, executive vice president of grocery for Wal-Mart U.S.
“These products create a new price position for organic groceries at Wal-Mart and across the grocery industry,” Sinclair said. “We’re removing the premium associated with organic groceries.”
Wild Oats CEO Tom Casey added, “Many customers want and need organic products; they just can’t afford them.”
A survey of Wal-Mart shoppers conducted by the company found more than 90 percent of them would buy organic food and ingredients if they were more available and affordable.
The 2013 Organic Industry Survey, conducted and produced by Nutrition Business Journal for the Organic Trade Association, showed the U.S. organic-product market continues to take root, accounting for $31.5 billion in sales in 2012. Another report predicts double-digit growth in the sector over the next few years.
“What we are finding is that the organic growth is growing faster than our base business in almost every category,” Sinclair said. “But the absolute level of sales is not huge at this stage. If we can make that price premium disappear, we think it’ll grow much, much faster.”
But catering to a specific shopper demographic may not end the doldrums besetting Wal-Mart’s grocery business, which accounts for more than half of the retailer’s sales. The nation’s core grocery business is barely growing at all, and Wal-Mart has been experiencing negative growth in grocery among stores open at least a year, said Brian Yarbrough,a consumer product analyst for Edward Jones in Memphis.
“Everyone’s trying to get into this space, from Wal-Mart to Target to Kroger. Everybody’s increasing their presence there,” Yarbrough said of the organic sector.
He questioned whether Wal-Mart’s core customers - low- to middle-income families on a budget - care about organics.
“In my opinion, it’s going to be a tough sell,” he said.
There’s a substantial price difference between products by Wild Oats and other national organic brands. For instance, a 6-ounce can of Wild Oats Marketplace Organic Tomato Paste will be 58 cents, compared with 98 cents for the same item by another brand. A 32-ounce container of Wild Oats Marketplace Organic Chicken Broth will sell for $1.98, compared with $3.47 by another, and a 24-ounce pack of Wild Oats Marketplace Organic Cinnamon Applesauce Cups will be $1.98, compared with $2.78 for the same by a competing organic brand.
Wal-Mart and Wild Oats were able to dramatically lower costs by leveraging the scale by which Wild Oats will buy ingredients to supply products to Wal-Mart. Wild Oats also made some long-term commitments to suppliers and farmers of ingredients, he said.
Casey, the Wild Oats CEO, said the company will begin by selling its food in only half the stores to ensure Wild Oats will be able to fill orders.
The Wal-Mart-exclusive product lines are designated Wild Oats Marketplace Organic, which follows the U.S. Department of Agriculture guidelines for organic certification; Wild Oats Marketplace, which includes products with simple ingredients; and Wild Oats Marketplace Originals, which will offer items new to the Wild Oats offerings. The originals won’t be available until later this year, Casey said.
Wal-Mart already carries more than 1,600 nationally branded organic grocery items in categories of produce, dairy, meat and packaged food. At least to start, Wild Oats brand products will be available only in the pantry segment. Wild Oats items will be found in special sections among its organic competitors and where nonorganic options of the same product can be found. Fully organic items represent nearly 90 percent of the Wild Oats offerings headed for Wal-Mart.
“People want to know what’s in the food they’re eating,” Casey said. The Wild Oats website includes a list of 125 ingredients that are prohibited, such as preservatives and artificial sweeteners, colors and flavors.
Business, Pages 25 on 04/10/2014