Like it or not, organic isn't everything. Whole Foods Market (NASDAQ: WFM) is fed up with this increasingly irrelevant label and has created its own to inform Americans on whether they're eating in an environmentally responsible way. This move makes sense for the consumer, but it may also be Whole Foods Market's most innovative business move in more than a decade. Here's why.
Earlier this month, Whole Foods Market officially unveiled its "Responsibly Grown" rating system. This tiered label assigns produce and flowers a title of "good," "better," or "best" based on a long list of qualifications that protect both human and environmental health.
"After three years of research and planning, Responsibly Grown is the result of our collaboration with suppliers, scientists and issue experts to continue our strong commitment to organic, while embracing additional important topics and growing practices in agriculture today," said Matt Rogers, Global Produce Coordinator, in a statement.
"We are excited to broaden the conversation to recognize additional growing practices and drive more transparency in the industry."
Here's what Rogers is talking about in real terms:
Business innovation or yuppie pat on the back?
It's a bold move for any company to critically rate its food on a system of, essentially, "awesome" to "awesomer" to "most awesomest ever." But Whole Foods Market is making a statement about its offerings.
"Organic" has, in many ways, always served as a proxy for many things American consumers want in their food. Folks who flock to the organic section tend to want to eat healthy, not hurt the environment, support small farmers, and ensure a more sustainable food system for years to come.
That's what's allowed the organic industry to charge a pretty premium over other foods -- and allowed it to grow into the $35 billion economy it is in America today. It's also what's allowed Whole Foods Market to transform itself from a single Austin, Texas, storefront into the 360 stores it currently operates.
But with megacorporations like Wal-Mart Stores (NYSE:WMT) moving in on organic, that magic margin is disappearing as Whole Foods competes to stay relevant. Organic classification doesn't have anything to do with size, and Wal-Mart Stores' partnership with massive organic operator Wild Oats has allowed it to enter the organic arena in 2,000 stores already, with plans to double that number.
Responsible and relevant
Whole Foods Market's new "Responsibly Grown" rating system is a strategic move to stay relevant. The United States Department of Agriculture's "Certified Organic" stamp of approval simply doesn't tell the story Whole Foods wants to be telling.
From pollinator protection to farmworker welfare to renewable energy, "Responsibly Grown" goes well beyond what farmers can and can't throw on their crops. And consumers need that to justify a trip to "Whole Paycheck" instead of the organic section of their local Wal-Mart.
If America responds to Whole Foods Market's call to action that transformed the organic industry into what it is today, this new rating system could not only rocket Whole Foods' revenue -- it could also re-revolutionize our agricultural system.
John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Justin Loiseau owns shares of Whole Foods Market. 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.