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Organics: A Poor Harvest for Wal-Mart
Summarized by: Mandi Ellis, Johnny Trumps and Annie Halliburton
Overview
Why the Organic Market How to Become Organic Organic Push at Wal-Mart Why Wal-Mart is failing in Organics The Competition Conclusion & Recommendations
Why the Organic Market?
More than 100 countries grow and/or sell organic food.
Organic land totals up to about 59 million acres.
The organic food and drink industry made about $23 billion in the world market in 2002
More Trends and Bits The market is
expected to generate sales of $32.3 billion by 2009.
The organic industry has experienced annual growth between 17 and 22% each year
VS.The 2 to 3% in the conventional food industry
Australia and Europe
How do you Become Organic?
Well, anyone can…. Production standards…. Requirements:
avoidance of synthetic chemical inputs use of farmland that has been free from chemicals for a number of years keeping detailed written production and sales
records maintaining strict physical separation of organic
products from non-certified products undergoing periodic on-site inspections
Organic Push at Wal-Mart
In March 2006 Wal-Mart announcedit would push organicproducts by: Increasing organic
food offerings typesfrom 100-200 to 400
Have all its seafood caught in the wild certified by Marine Stewardship Council (MSC)
Offer clothing made of organic cotton
Why Sell Organic Products?
Sell to high end consumer Research showed that people
with $75,000 yearly income go to their store
Offer premium products such as wine, designer clothes, quality bedding and sushi.
Stop sales of guns and other outdoor products
Want a piece of growing $23 Billion organic market
A Year Later
Cutting back orders of organic foods Back to offering 100-200 types of organic foods
Selling foods that are “All-natural” Accused of misleading consumers
Complaints from organic suppliers that signs in store are wrong Only certain stores are keeping the
upscale image
Why Wal-Mart Failed
Image – Discount Retailer Business Model
Target Market – Low Income households
Value Proposition – Always Low Prices Competitive Strategy – Get best price
from suppliers Competition
Target, K mart, Local Retailers
Competition in Organics
Whole Foods Co-ops – Local
and Organic Wild Oats
Market Fred Meyer –
Natural Foods Section
Safeway – O Organics
Why Competition is Succeeding
Product Differentiation Appeal to the right people
higher income and environmentally conscious
Niche market No conflicting business models Private Labels Supporting the local market
Conclusion
To compete successfully in retailing you must: Set yourself apart from the competition Cost Leadership, Product Differentiation Service to your customer – make the
experience great Recognize pull of the market
Recommendations
New Brand Under Wal-Mart Example: Toyota and Lexus Nike and Starter
Stick to your own product line Don’t diversify your merchandising mix
to extremes KISS - Keep it Simple, Stupid!!
Bibliography
“Industry Statistics and Projected Growth.” Organic Trade Association. 2003. Alexandria, Virginia. 15 April 2007. http://www.ota.com/organic/mt/business.html
Gogoi, Pallavi. “Organics: A Poor Harvest for Wal-Mart.” BusinessWeek. 2007. McGraw-Hill Companies. 15 April 2007. http://www.businessweek.com/bwdaily/dnflash/content/apr2007/db20070412_005673_page_2.htm
“Organic Certification.” Wikipedia. 2007. United States. 15 April 2007. http://en.wikipedia.org/wiki/Organic_certification
Gogoi, Pallavi. “Wal-Mart’s Organic Offensive.” BusinessWeek. 2007. McGraw-Hill Companies. 15 April 2007. http://www.businessweek.com/bwdaily/dnflash/mar2006/nf20060329_6971.htm