Walmart, Milk, and the Future of the Organic Standard

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by: Michael Hoexter

The coming of the Walmart leviathan to the world of organic food has over the last year been viewed with trepidation by the organic food movement.

Prior to its recent organic offensive, Walmart is acknowledged throughout retailing as a transformative force in almost every market sector it enters. Manufacturers and distributors are eager to become Walmart suppliers yet at the same time realizing that once they start to supply Walmart, their way of doing business will be powerfully influenced by the world’s biggest retailer. With increased volume will come expectations for lower prices and margins will be squeezed. Those who wish to profit from a relationship with Walmart realize that they will need to become leaner and more productive, in addition to satisfying the quality, product design and selection requirements of their overwhelmingly powerful customer.

Within the last year post-Katrina, Walmart has started an initiative to become a greener company, including green building, waste reduction and renewable energy initiatives. At first this would seem to be a contradiction in terms, that a temple of suburban sprawl and mass consumption would show an interest in issues that appeal mostly to the LOHAS (Lifestyles of Health and Sustainability) demographic which would in the past have never been caught dead inside a Walmart.

But, when you think about it, there are some synergies between Walmart’s corporate identity and core competences and an orientation towards sustainability. Walmart is headquartered in and imbibes of the ethic of the US South, the heart of which was damaged by Katrina. Katrina’s immediate effects were felt a state away from it’s Bentonville, Arkansas headquarters. Second and more importantly, Walmart is an efficiency machine, a relentless cost-cutter with an eye towards long-term profitability and ECONOMIC sustainability. One component of ecological sustainability is efficiency and in this regard, Walmart’s corporate culture can fairly easily be transitioned to a greener one.

Other elements of ecological sustainability cost money upfront and an ongoing basis and it is here that Walmart will need to figure out where its priorities lie. Certainly investment in capital goods like more efficient buildings, renewable energy generation facilities, more efficient logistics are within limits affordable for Walmart without endangering its capital position or other capital programs. Longer term, though, consumer products that require ongoing costly inputs are going to come under pressure to change practices in order to be affordable for Walmart.

The organic standard has been one of the big success stories of the contemporary environmental movement. Organic food is still a small portion of the food market in any industrialized country but is growing at a rapid rate. In the US, organic’s 20% growth rate and price premiums look good to the big food companies and retailers. One can now find organics in most major supermarket chains and there are now mega-farms and bulk processors that specialize in supplying big stores with organics at a lower price point than family-farm sourced organics would cost.

An article by Melanie Warner in today’s New York Times, highlights the dilemma faced by organic producers and retailers when the price pressures of a giant like Walmart are applied. Organic milk is one of the top-selling organic foods, as the concern for infant and child health combines with environmental concerns to boost demand. The controversy centers around the practices of a large organic dairy, Aurora Farms, that according to independent experts does not allow its cows enough time to graze on grass, which is part of the organic standard. Instead the cows are housed in feeding sheds, albeit comfortably, and fed grain. The Aurora cows are higher milk producers (20,000 lbs/year)than typical organic milk cows that are allowed to graze more (14-18,000 lbs./year) and are milked 3 times a day rather than the usual 2. Otherwise, the Aurora cows are fed only organic feed and are given no hormones or antibiotics.

There are moves now to tighten organic rules to exclude practices like Aurora’s that skimp on pasture-feeding to maximize milk production. The success of these efforts will only provide temporary respite from a constant push and pull that will buffet organic rules in the future as cost and productivity considerations will compete with ecological and health considerations. There are already signs that the organic standard is being questioned by some small producers who have not bothered to get certified, as they count on their customers to trust that they use non-toxic methods. Some argue that local produce not necessarily certified organic competes for green virtue with industrial organic due to the lesser use of petroleum to transport the produce to market.

Instead of a story of progressive degradation of the organic standard by the market and a defection from eco-standards by small producers, there is still hope for a solution that accommodates both more ecological practices on an industrial scale and on a small farm scale.

I’m a big fan of the LEED standard in the building industry as it accommodates both the demands of business and the ideals of ecological balance and harmony. The LEED standard is what I call a “tiered” certification standard, in that different levels of “green” are recognized within it. Some building projects are Simply “Certified”, some certified “Silver”, some “Gold” and some “Platinum”, recognizing that budgets for green development vary from project to project.

The USDA has recognized this for years in the grading of beef with 3 grades usually offered the public for sale but as many as 8 available on the wholesale level. In organic and ecologically sustainable agriculture we are beginning to recognize that there are different degrees to which a product is both free of man-made toxins and good for the natural environment. We may need to invent a tiered certification system for agriculture as well, that accommodates issues such as greenhouse gas emissions, the use of heritage breeds and seeds, and the use of monocultures and crop rotation. Tentatively we can name these standards “Organic Certified” “Organic Silver” and “Organic Gold” but if precious metals are not the right metaphor another one can be found.
From both sides in this debate, there would be benefits for such a system. It would allow industrial farmers to continue to green their practices without risking the goalposts being moved on them as they produce healthier food for less money. On the side of ethically concerned farmers it would stimulate the growth of farming practices that depended less on petroleum for tending crops and would reach into the distribution network, creating an “organic” food chain and not just a cultivation practice.

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