The reinvention of Wal-Mart Stores (NYSE:WMT) continues. After surprising observers by first raising wages above the mandated minimum and then coming to the defense of gay rights in its home state of Arkansas, the world's largest retailer is now asking its food suppliers to put greater emphasis on animal welfare.
The move comes as consumers are increasingly demanding greater transparency from their food chain. A wide range of restaurants and food makers have already said that they would remove artificial ingredients from certain products. Wal-Mart rival Target recently said it would give more promotional support and shelf space to natural and organic brands.
In some ways, Wal-Mart is simply responding to the demands of its customers. In a blog post, Kathleen McLaughlin, senior vice president of sustainability, said, "Our customers have told us that they want to know more about where their food comes from, and how it was sourced. As a retailer that sells products but does not produce them, we can use our strengths to influence change across our supply chain."
Wal-Mart said it would ask suppliers to adopt animal welfare standards including giving adequate space and sufficient access to food and water to animals and refraining from using antibiotics with healthy animals (and reporting antibiotic usage when it takes place). Though Wal-Mart's new standards are voluntary, the decision could help transform the food industry.
The power of Wal-Mart
Wal-Mart controls a whopping 25% of the nation's grocery sales, and when it says jump, suppliers ask how high. In 2006, Wal-Mart made a similar move with packaging, asking suppliers to cut back on needless plastic and other materials with the goal of reducing packaging by 5% throughout its global supply chain by 2013. It managed to hit that goal with the help of its vendor partners, like Procter & Gamble, which eliminated boxes from its toothpaste packaging.
Wal-Mart's food suppliers are also likely to be amenable to its requests. Much of the food industry is moving in that direction already, and vendors generally want to stay in Wal-Mart's good graces due to its market size.
Chipotle Mexican Grill, for example, applauded the decision, calling it a "good first step." The burrito chain, whose motto is "Food with Integrity," has been leading the battle for more natural food and better animal care standards. Earlier this year, it stopped serving pork at some of its stores after finding suppliers were out of compliance with its own standards.
McDonald's and Tyson Foods also both announced they would stop selling chicken that had been injected with human antibiotics. Those decisions should make it easier for agribusiness companies to adjust to Wal-Mart's demands.
The image factor
According to Wal-Mart's own research, a majority of its shoppers support the decision. 77% said stronger animal welfare standards would increase their trust in the company, and 66% said it would increase their likelihood to shop at such a retailer. There is also little cost to making such a request of suppliers, as the only potential negative consequence of the move could be slightly higher prices.
By emphasizing animal welfare, Wal-Mart is not only pleasing the majority of its shoppers, but also burnishing its image. Much like the decision to raise wages, the company is not only seeking to improve operations but also to improve its standing with customers.
Wal-Mart's image has become especially important as it seeks to penetrate new demographics with its e-commerce platform and with its push to open Neighborhood Markets in big cities, where Wal-Mart has not previously had a strong presence.
Those two segments have delivered the company's strongest growth in recent quarters, which helps explain why Wal-Mart is steadily revamping its image to appeal to today's consumer. With Amazon.com's sales growing quickly, Wal-Mart needs to galvanize its domestic sales growth. Look for more announcements such as this one as the company tries to broaden its appeal.
Jeremy Bowman owns shares of Apple and Chipotle Mexican Grill. The Motley Fool recommends Amazon.com, Apple, Chipotle Mexican Grill, and Procter & Gamble. The Motley Fool owns shares of Amazon.com, Apple, and Chipotle Mexican Grill. 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.