Kroger's Organic Growth

Kroger (NYSE: KR  ) has proudly proclaimed that it's helping to bring organics mainstream by increasing its selection of organic goods. (I can't help but wonder if this news is reaching the FTC's headquarters, which I recently supposed must be on the Planet Xenon due to the recent take on what constitutes the organic retail marketplace.)

The supermarket chain, which operates 2,458 supermarkets and multi-center department stores under various names in 31 states, said it's expanding its selection of organic goods under its Private Selection brand (called Private Selection Organic). The expansion includes 60 more items by September, including breakfast and dinner options. The company also offers items under its own Naturally Preferred line, first offered five years ago. It's interesting to note that many of the organic items noted in the press announcement sound like the types of foods organic purists would probably balk at (in other words, pasta, waffles, peanut butter, canned vegetables, and so forth, although Kroger also carries organic produce and milk).

This isn't the first organically motivated move Kroger has made this week. It said it will complete its phase-out of milk containing the artificial growth hormone rBST by early 2008. (Monsanto (NYSE: MON  ) stands to lose a bit in this arena, because such developments -- Starbucks (Nasdaq: SBUX  ) is going rBST-free too, for example -- will affect sales of its Posilac product as demand for milk from cows treated with rBST appears to be decreasing.)

Kroger said it's allowing customers to try organics at "their own pace," and that they have expressed the desire to try more. Surely Kroger wouldn't want them to go to Whole Foods Market (Nasdaq: WFMI  ) or Wild Oats (Nasdaq: OATS  ) , because, well, there's nowhere else consumers can go for organic goods, right?

Just kidding, but I couldn't resist the dig, since I know many of us thought the FTC's stance to block Whole Foods' acquisition of Wild Oats was nothing short of ridiculous. Kroger is certainly not alone in expanding its selection of organic goods. Wal-Mart (NYSE: WMT  ) is another giant retailer that has been stocking some organic goods on its shelves. And let's not forget Safeway (NYSE: SWY  ) , with its O Organics product line. There's certainly good business sense behind their motives, too: Sales of organic goods have more than doubled in recent years, to $16.7 billion in 2006 from $7.4 billion in 2001.

The mainstreaming of organic includes its share of questions. After all, strict organic proponents bring up the idea that with all the hefty growth in the segment, it is fast becoming just as industrialized as conventional options. That's certainly upsetting to purists, because the organic arena has a major philosophical bent that could certainly be tainted by too much growth (and the type of profit motive that is more in keeping with the conventional names).

It remains to be seen how the public reacts. Will shoppers view these big companies' offerings as too commoditized, just another marketing pitch to make higher profits, or ultimately lacking in authenticity? Will trying a smattering of organic goods impel them to go to the "real deal," which they can find in retailers like Whole Foods or Wild Oats, which focus solely on these products? Is the whole organic enchilada just a fad, like low-carb diets were, destined for permanence with only a small niche of diehards? I believe there are big changes taking place in the way people view their consumption, but regardless, it's clear the marketplace has expressed its appetite for now, and organics are cropping up everywhere.

Whole Foods Market and Starbucks are Motley Fool Stock Advisor recommendations. Wal-Mart is an Inside Value pick. Talk stocks with other investors and our analysts when you give our newsletters a try.

Alyce Lomax owns shares of Whole Foods Market and Starbucks. The Fool has a disclosure policy.

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  • Report this Comment On April 25, 2012, at 10:46 AM, Chavez2751 wrote:

    But does Kroger use local farmers or is the food shipped in from all over? Buying from local farmers decreases the amount of greenhouse gases in fruits and vegetables used to transport.

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