Will People Buy Organic Foods From Wal-Mart?

With its new line of Wild Oats Marketplace products, Wal-Mart hopes to deliver reasonably-price organics to a wider marketplace.

Apr 16, 2014 at 10:18AM

Quick! What's the first store that comes to mind when you think of buying organic groceries?

Did you say Wal-Mart? Me, neither. But the retailer is hoping that's about to change.

Here's another top of mind: What's the first word that comes to mind when you think of organic food?

If you said "expensive," you are like most consumers. We may be intrigued by organic food and even find appeal in the potential health benefits, but many of us will pass it by without even checking the price. We simply assume it will cost more. In fact, buying organic has come to be regarded as something of an upscale luxury.

Nevertheless, organic products carry many of today's hottest food marketing attributes. They will often fit into a "clean diet," and must be GMO-free to carry the organic label. The problem has been that the process of producing organic food has resisted being scalable to a wider market.

Rolling out Wild Oats

Could this be opportunity knocking? Wal-Mart (NYSE:WMT) and Wild Oats seem to think so. The two companies have announced that they will be "teaming up" to make organic foods available and reasonably priced to hopefully reach a much larger segment of the market.

The first Wild Oats products to hit the Wal-Mart shelves will be pantry staples, including canned vegetables, spices, and ready-to-prepare dinner kits. The products will be sold under the "Wild Oats Marketplace" label and will be priced about 25% less than Wild Oats' standard fare. In all, the companies plan to offer about 100 different products in the line. A 6-ounce can of Wild Oats Marketplace organic tomato paste, for instance, will retail for $0.58, which compares to $0.98 for a comparably branded organic item. At this price point, the product is line with other non-organic choices.

While Wal-Mart has incidentally carried organic products among its groceries – DelMonte organic varieties, for instance – the move is significant because of the high visibility of the rollout and a more full commitment to an organic line. The retailer plans to introduce Wild Oats Marketplace items in about half of its stores.

Wild Oats

Déjà vu all over again?

This is, of course, the same Wild Oats purchased by Whole Foods (NASDAQ:WFM) in 2007 before the national chain was forced to sell in 2009 amid antitrust concerns. In a strategic change of course, Wild Oats now positions itself as an organic seller "for the people" under the tag line "Quality shouldn't come at a premium price."

By offering products through Wal-Mart, Wild Oats will presumably be accessing a much wider – and different -- spectrum of the market than through Whole Foods. The test will be whether Wal-Mart can excite the market with the new product line.

A revolution in the making?

Both Wal-Mart and Wild Oats are hoping to lead a revolution in accessibility for organic foods. By choosing less lofty price points and stocking the shelves of a more populist retailer, this would seem to be a good start.

The most pressing initial question will be whether people will buy. Are the companies tapping an unmet consumer demand? Have price and accessibility been the only barriers to wider adoption of organic groceries? Shopping habits change slowly, and organic is nothing new. Likely, this collaboration will convert some shoppers, but the buying patterns of shoppers who have not been conditioned to choose organic – at any price – will probably change incrementally. Wal-Mart, whose grocery business has slumped some in recent years, hopes to gain a much-needed bump from the deal.

Target (NYSE:TGT) recently announced a similar initiative with its "Made to Matter" collection of well-known brands it has tagged as "wholesome." This collection is not exclusively organic, but is meant to appeal to a consumer interested in healthier eating and more sustainable sourcing. Target's move, then, can be seen more as an attempt to give a stronger identification of its brand to a wider segment of the market.

The larger question for organic foods overall is sourcing and scalability. Prices have traditionally been high because organic farming is not the purview of large-scale agriculture. Proponents of organic foods may cheer this as a step in the right direction, but supply and demand in this marketplace will need to work together incrementally, which will likely slow the pace of more widespread distribution at lower prices.

2 stocks changing the retail world
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Beth Nichols has no position in any stocks mentioned. The Motley Fool recommends Whole Foods Market. The Motley Fool owns shares of Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers