The Wal-Mart Effect
By stocking its shelves with affordable organic foods, the world’s largest retailer is about to prove that what’s good for the company is good for the planet and consumers. Or is it?
Several times a week a blue truck with a stainless steel collection tank drives up a newly blacktopped road in Guilford, Vermont, heading toward Mary Ellen and David Franklin’s organic dairy farm. It rolls past a weathered white farmhouse roofed with Guilford and New York slate, past a sign advertising fresh eggs and grass-fed beef, until it arrives at the 19th-century barn where the Franklins do their milking. On both sides of the road, cows graze on pastureland that stretches beyond the Massachusetts line. The air is moist and earthy.
The Franklins, an eighth-generation farm family with three teenage sons, converted to organic agriculture in 2004. They developed a grazing system that keeps their animals on pasture for up to 22 hours a day, and fenced off brooks to prevent manure runoff. The switch has paid off: The Franklins’ income has grown steadier, their herd healthier, their land richer in fauna. “On a rainy morning in the summer, the earthworm population is wild,” says Mary Ellen. So is the population of bobolinks, ground-nesting songbirds whose numbers have declined elsewhere as their grassland habitat has disappeared. “Birders come and see them here,” she says proudly.
Leaving the Franklin farm, the dairy truck sometimes turns right at the end of the country road. Those days the milk ends up at natural-food stores, sold under the Organic Valley label. Usually, though, the truck turns left, traveling to a New Hampshire processing plant, where the milk is converted into Stonyfield Farm organic yogurt. Some of that product is, in turn, shipped to a retail giant that seems a world removed from this pastoral landscape. The milk produced by Dahlia, Periwinkle, Boo Boo, and 40 other Franklin cows ends up on the shelves at Wal-Mart.
This might sound incongruous to anyone who associates the world’s largest retailer with cheap imported merchandise. But Wal-Mart, ever responsive to consumer trends, has now tapped in to the hottest segment of the American food market. With organic sales growing by 20 percent annually, the company announced last year that it was mounting an aggressive push into territory long dominated by specialty markets like Whole Foods and Wild Oats.
In just a few months’ time, Wal-Mart promised, it would double the organic offerings at many of its 4,000 stores nationwide. Shoppers would find the U.S. Department of Agriculture’s green-and-white organic seal on not only milk and produce but also on blueberry waffles, kosher pickles, buttermilk dressing, and frozen enchiladas. They could buy Heinz organic ketchup and Kellogg’s organic Raisin Bran. They would even find Wal-Mart’s famous low prices. The $312 billion retailer relies on efficiencies of scale—and pressures suppliers to cut costs—in order to offer some of the best bargains anywhere.
Organics, Wal-Mart promised, would be no exception. “Typically, organic products can cost 25 percent to 30 percent more against competitive products,” chief marketing officer John Fleming told the 2006 American Consumer Conference. “We’re able to get those prices down to about 10 percent.”
To optimists, the benefits of this move could be far-reaching. “If Wal-Mart abides by the strict USDA standards, that’s going to convert more land to sustainable farming practice,” says Arran Stephens, founder and president of Nature’s Path, an organic breakfast-food firm (and a Wal-Mart supplier). “It means more land that is not planted with genetically engineered crops, more land that is not having tons of chemical fertilizer, pesticides, and herbicides dropped on it. That means less pollution in our waterways, better chances for species survival, and a purer food supply that will benefit the health of all who consume it.”
But could the move backfire—watering down standards, threatening ecosystems, and squeezing out small farmers like the Franklins? That’s the topic of a spirited debate among conservation-minded Wal-Mart watchers. How will this move by the world’s most powerful chain store alter the foodscape of the world, the nutrition of Americans, and the environment in which we live?
For most of its 45-year history, Wal-Mart could hardly be considered an environmental champion. The retailer has repeatedly been cited for fouling the water and air, and in 2004 it agreed to pay $3.1 million for violating storm-water runoff laws in nine states. (Sediment from runoff kills fish and their eggs and destroys aquatic habitats.) These illegalities have further blemished a company that many activists equate with corporate irresponsibility. Watchdogs have accused Wal-Mart of selling products made in Chinese and Bangladeshi sweatshops where workers are paid as little as 13 cents an hour. The company faces a class-action lawsuit for sex discrimination, and last year was ordered to pay $78 million for labor violations in Pennsylvania. Wal-Mart’s arrival in a town often heralds the closure of smaller, locally owned businesses that pay higher salaries but can’t compete with the giant’s “everyday low prices.” And a study by the University of California, Berkeley revealed that Wal-Mart’s low wages cost Golden State taxpayers $86 million annually in public assistance.
That record hasn’t deterred Peter Seligmann from courting the company as an ally. Seligmann, president of Conservation International, reasons that if a colossus like Wal-Mart can be convinced to adopt green business practices, the impact could be staggering.
A few years ago Seligmann was introduced by mutual friends to Wal-Mart chairman Rob Walton, who invited him to company headquarters in Bentonville, Arkansas. After an initial meeting, the men began traveling together. They watched jabiru storks in Brazil, lemurs in Madagascar, and cocks-of-the-rock in Surinam. They dived in waters brimming with hammerhead sharks, and flew over devastated landscapes. Seligmann encouraged Walton, a conservationist, to think beyond philanthropy. “I said to him: ‘You can have more power over the quality of life for future generations when Wal-Mart says sustainability is a core value.’ ”
In 2004 Seligmann and some colleagues were invited back to Bentonville for a series of meetings with company executives, including CEO Lee Scott. They discussed how earth-friendly practices could attract upscale shoppers, and began mapping strategies to lighten Wal-Mart’s environmental footprint. Since then the company has promoted energy-saving products like compact fluorescent light bulbs. It has increased the number of hybrid trucks in its corporate fleet. It has asked suppliers to reduce packaging. It has begun experimenting with recycled building materials and energy-saving technologies in its stores.
“There may be no other entity as well positioned to improve the quality of life for customers and the world as we are,” Andy Ruben, Wal-Mart’s vice-president for sustainability, told shareholders last year. Ruben said these innovations would save more than the planet—they’d also reduce operating costs. “We won’t simply become a more responsible company,” he said. “We’ll take advantage of this opportunity to become a much better business.”
Two years ago the retailer announced it would conserve at least 138,000 acres—including bat, salmon, and steelhead habitat—to offset an equal amount that will be lost to store construction by 2015. It has already surpassed its own goal, helping to acquire and then donate parts of Louisiana’s Catahoula National Wildlife Refuge, Michigan’s Arcadia Dunes shoreline, and the North Rim of the Grand Canyon.
Curiously, while Wal-Mart touts its own greening, it downplays the benefits of organics. “Organic agriculture is just another method of agriculture—not better, not worse,” Bruce Peterson, Wal-Mart’s head of perishable food, told The New York Times last year. “This is like any other merchandising scheme we have.” Spokesperson Karen Burk echoes that Wal-Mart is responding solely to consumer demand. “We’re agents for our customers,” she says. “We believe both organic and conventional agriculture provide sustainable products. We will not say one offering is better than another.”
Of course, the science is more complex than the corporate line.
|Illustrations by Christoph Niemann
Even with 20 percent annual growth, organic foods still amount to just 2.5 percent of sales nationwide, or $15 billion. If Wal-Mart can persuade a fraction of its 127 million weekly U.S. customers to shop organic, the demand could potentially remove synthetic fertilizers and pesticides from a wide swath of American farmland. That’s hardly trivial: Conventional agriculture places tremendous stresses on the natural world. According to the United Nations, modern farm practices affect 70 percent of threatened bird species. Fertilizers aggravate the oxygen shortage that endangers marine habitats in the Gulf of Mexico. Pesticides take a $12 billion annual toll on the environment and human health in the United States alone, says David Pimentel, a Cornell University entomologist.
By contrast, organic farming relies on biodiversity for its very success. Instead of chemicals, organic farmers use natural methods like crop rotation to increase the density of beneficial species in and above the soil. Earthworms and spiders thrive, as do wild plants and the animals that eat them. The increased soil activity deters erosion, protecting nearby waterways.
Throughout the world, organic agriculture has yielded concrete benefits. In Russia’s Muraviovka Park, home to the endangered red-crowned crane and 200 other bird species, a large demonstration farm has shown that corn, barley, and soybeans can be grown cheaply without chemicals. As neighboring farmers have eschewed pesticides, too, the park has seen its crane and stork population more than double. Likewise, organic rice farming in Spain’s Ebro Delta has enhanced habitat for other endangered species, including grey herons, purple swamphens, and black-winged stilts. At Brazil’s São Francisco Sugar Mill, which supplies organic sugar for Stonyfield Farm’s yogurt, reforestation with native trees has created shelter for almost 200 rare species, including jaguars, giant anteaters, and maned wolves.
In lowland England, researchers at the British Trust for Ornithology found that organic cereal farms proved hospitable for lapwings and reed buntings, farmland birds that have seen their numbers dwindle in recent years. Not only is the soil uncontaminated, says research ecologist Dan Chamberlain, but the tall, dense hedgerows on English organic farms provide shelter for birds and bats.
While many conventional dairy farms import grain and export manure—burning truck fuel in the process—family organic farms aspire to be closed loops. They raise only as many cows as their acreage can support. They graze the animals for much of the year and recycle the manure back into the soil. “There are no additional fossil fuels needed,” says John Cleary, an agricultural specialist who works for Organic Valley, a farmer-owned cooperative with higher standards for grazing than the USDA requires. “It’s directly harvesting solar energy.”
Moreover, in a University of Washington study, children who ate organic diets had one-ninth the concentration of certain organophosphorus pesticide metabolites in their urine as those who ate primarily conventional foods. (Organophosphates have been linked to diseases of the nervous and reproductive systems and possibly to cancer.) Other research shows that organic produce and milk tend to be higher in antioxidants. The USDA, of course, maintains that foods produced with legal levels of pesticides are both safe and nutritious.
If expanding the organics market is good for the planet, why are many people skeptical of Wal-Mart’s plans? Stroll down Wal-Mart’s grocery aisles and a few organic brand names pop out. Horizon Organic, a subsidiary of the $10.5 billion conglomerate Dean Foods, provides much of the milk. Wal-Mart’s private-label milk comes from Aurora Organic Dairy, which raises its cows on large corporate farms with minimal access to pasture. Many of the vegetables come from Earthbound Farm, a 30,000-acre behemoth. In his book Organic, Inc., journalist Samuel Fromartz documents how Earthbound’s growth has put smaller farms out of business.
Wal-Mart says it carries these products to meet a growing consumer hunger. “We did not create the demand,” says spokesperson Burk. “The demand is already there. We’re providing a selection of organics at a value, so [shoppers] can feed their families affordably.”
But some scientists believe that as organic farming upsizes, many of its benefits diminish or even disappear. “For honest, uncompromising organic crops and dairy, you really need a scale that one farmer can comprehend,” says Rutgers University conservation biologist David Ehrenfeld. Wal-Mart’s leading vendors, by contrast, operate on a scale that can only be described as industrial.
Take $330 million Horizon Organic, which obtains its milk from more than 360 large and small farms across the country. One of them is the company’s own 4,500-head dairy in Paul, Idaho, near Twin Falls—an operation 100 times the size of the Franklin farm. “Part of our goal is to prove that you can run a large dairy organically and do it well,” says Caragh McLaughlin, who until two months ago served as Horizon’s marketing director. By following USDA organic rules, she says, Horizon keeps 2 million pounds of pesticides out of the soil and the Snake River annually.
But critics say the Idaho facility is more akin to a concentrated feedlot operation—making it the antithesis of traditional organic agriculture. They claim the cows have little access to pasture, instead spending much of their time in pens and open sheds, where they eat processed grains and forage that have been trucked in. Much of the manure is composted using a technology that requires diesel. “It’s a fossil fuel-based system,” says Mark Kastel, co-founder of the Cornucopia Institute, a research and advocacy group for family farmers. Last year Horizon invited Kastel to the Idaho farm; he came away unimpressed. “Here we were in the middle of the desert, and they were parading their cattle back and forth on this pasture,” he recalls. “But when we went out to the pasture, it was two-foot-tall oats that had gone to seed. This is not what cattle graze on. There was no evidence of legitimate pasture.” McLaughlin calls Kastel’s allegation “completely without merit,” saying the cows graze 120 days a year. She says the addition of 2,500 new acres this year, bringing the total pasture to 3,700 acres, will further improve grazing opportunities.
Because Paul, Idaho, gets just 10 inches of precipitation a year—less than Tucson, Arizona—water for irrigation comes from neighboring states. Horizon calls its operation sustainable, but not everyone agrees. “All over the country, the water tables are dropping quickly,” says Ehrenfeld. “At some point you run out of water, or the energy required to draw the water out of the ground becomes prohibitive. Why would you want to raise cattle in the desert when you can raise them in Massachusetts or Wisconsin, where the water comes from the sky, free?”
Horizon has reaped particularly vehement scorn for a practice it finally abandoned last October: selling off its newborn calves rather than rearing them organically. To replace the herd, Horizon purchased conventional heifers—potentially raised with growth hormones, antibiotics, and pesticide-treated feed—and phased them into organic management. Horizon defends the system (which is legal), saying its previous farm manager lacked expertise in calf rearing. Critics say it not only violates the spirit of organic agriculture but also puts small farmers who raise their own calves at a disadvantage.
Today Horizon dominates the U.S. organic milk market. When Wal-Mart began carrying its product, Horizon undercut the brand already on the shelves: Organic Valley, a cooperative of 922 family farmers (including the Franklins) in 27 states with strict grazing standards. “If you are part of an industrial style of agriculture, you can afford to be cheaper,” says Organic Valley CEO George Siemon. “We were slowly getting circled by their success.” Pressured by Wal-Mart to slash its prices, Organic Valley instead withdrew its product.
Some organic growers worry that Siemon’s experience foreshadows their own future. “There is concern that they will be squeezed out as organic farming starts to look like global agribusiness,” says Byron Albano, director of marketing for Cuyama Orchards, an organic apple farm outside Santa Barbara, California. For now, Albano says, a produce shortage has kept prices high. “If supplies catch up to the demand, however, we know from history that retailers will grind suppliers down to unsustainable pricing levels.”
Critics fear that Wal-Mart could also put the squeeze on the organic regulations themselves. Spokesperson Burk insists her company supports the current rules; others are skeptical. “There is relentless pressure to try to weaken the standards,” says Marion Nestle, a New York University professor and author of Food Politics: How the Food Industry Influences Nutrition and Health. In 2005, for example, Congress quietly passed an industry-backed measure making it easier to introduce synthetic additives to processed organic foods. With its deeper entry into the market, she says, “Wal-Mart is likely to join the pressure group.”
Water down the standards, and the very word organic loses its meaning. That, says Wal-Mart critics, could hasten the downfall of the movement. “I am not an enemy of bigness,” says Michael Pollan, author of The Omnivore’s Dilemma, a best-selling book about U.S. food production. “But my fear is that all the patterns of industrial agriculture will be repeated. If organic food merely mirrors the industrial food chain, we haven’t made any progress at all.”
If there’s any Wal-Mart supplier who has wrestled with these issues, it is Gary Hirshberg, president of Stonyfield Farm. An environmentalist who started the yogurt company with seven cows, Hirshberg now finds himself leading a $260 million enterprise controlled by French multinational Groupe Danone.
Hirshberg’s own journey toward Wal-Mart began in the early 1980s, when he was running the New Alchemy Institute, a center devoted to sustainable agriculture and renewable energy. On a visit to Epcot, Hirshberg saw a Kraft-sponsored exhibit on the future of food. “It was a monument to agribusiness as usual: mining the earth’s crust for bottomless resources, and sending your CO2 to someplace called
‘away,’ ” he says. Grappling with how to reach Americans en masse with a counter-message, “I came to a conclusion that business was the ticket. I needed to harvest the power of Kraft to move those ideas into the marketplace.” That meant selling a product that promoted clean technologies and family organic farmers—and turning a profit to boot.
After 24 years Stonyfield now enjoys double-digit annual growth and has passed Kraft in yogurt sales. Yet Hirshberg remains discontented. He says organics have never truly entered the mainstream, even with $15 billion (and growing) in annual sales. “The reality is that we’re 2.5 percent of the food system,” he says. “To put it more bluntly, we’re a rounding error. We have done nothing to slow down the rate of toxifying the planet or warming the planet. We’re now just approaching the starting line of being effective.
“The sooner we can convert the largest companies in the world to organics—not only the better, but that’s the only hope,” Hirshberg continues. “So when Wal-Mart calls me and says, ‘We would like to convert our consumers to a better way of eating,’ my response is, ‘How high do you want me to jump? And how fast do you want me to run?’ ”
Hirshberg knows that Wal-Mart offers no panacea: Its customers will still buy milk from Aurora’s and Horizon’s industrial-scale farms. “I don’t agree with confined animal feedlots and turning animals into machines,” he says. Still, he believes Wal-Mart offers him the best shot at spreading a more wholesome vision. “I believe if we educate consumers, people are going to choose the Stonyfield approach, and not the Aurora approach,” he says. “But first I have to get on the ballot.”
Barry Yeoman is a freelance journalist based in Durham, North Carolina. His work has appeared in The New York Times, Discover, and O: The Oprah Magazine.
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