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When Walmart announced last week that it would start carrying Wild Oats organic foods at prices at least 25% below those of national brand organics, I had some conflicted reactions.

Walmart’s rationale sounds terrific:

We know our customers are interested in purchasing organic products and, traditionally, those customers have had to pay more,” said Jack Sinclair, executive vice president of grocery at Walmart U.S. “We are changing that and creating a new price position for organic groceries that increases access. This is part of our ongoing effort to use our scale to deliver quality, affordable groceries to our customers.

But Reuters explains what this is really about:

Organic foods accounted for roughly 4 percent of total U.S. food sales in 2012, but growth in the category for years has outpaced the industry overall, buoyed by growing demand for simpler food made from natural ingredients.

Organic foods often cost more than their conventional rivals, and that has limited purchases by the legions of lower-income U.S. shoppers who are needed to propel a niche product into a national player.

Walmart caters to that audience…”If we can make that price premium disappear, we think it will grow much, much faster,” Jack Sinclair, executive vice president of grocery at Walmart U.S., said of the retailer’s small but faster-growing organic sales.

For Walmart watchers, the announcement raises many concerns.

Tom Philpott, writing in Mother Jones before the recent announcement did a brief investigation of Walmart’s organic and local offerings in Austin, Texas:

Of course, Walmart exists to generate profit, not social change. And that may explain the dearth of produce being trumpeted as local and organic in the Austin store I visited. The city teems with farmers markets, Whole Foods branches, and a successful food co-op. With so many options available, shoppers here are likely not heading to Walmart for their heirloom tomatoes. As Prevor [Jim Prevor, the Perishable Pundit] told me, the company tailors its offerings to each region. It will “essentially sell whatever its customers want, as long as there’s a profit to be made.” 

Forbes asks a tough question: Maybe Walmart has just killed the organic food market?

WalMart getting into organics in a big way [may not be] good news for the industry. Most especially when they say that they’re going to eliminate the price premium that organic has traditionally carried…I don’t think it’s revealing anything terribly new to state that those who preferentially buy organic are often those who would prefer not to be thought of as WalMart shoppers.

And Trillium Asset Management, a company that claims to be devoted to sustainable and responsible investing, wonders whether the Walmart plan means that organics have lost their soul:

Wal-Mart’s pledge…is making a whole lot of people very nervous. Wal-Mart’s modus operandi is to keep prices low by driving down costs in the production chain and keeping its own wages low; its competitors’ practices are variations of the same theme, if less cutthroat. Good ol’ American-style capitalism and its frequent bedfellow, inadequate regulation, now threaten to strip “organic” of everything it once stood for (and everything that has made it more expensive): small scale production, gentler treatment of animals, better treatment of farm workers, and the elimination of chemical aids to production.

My personal observations of Walmart stores also make me skeptical.  I haven’t seen some of the previous promises effectively translated into reality.

Walmart says it will roll out the lower priced organics to about half its 4000 stores by this summer.

I’m reserving judgment until I see how these particular promises are implemented in the stores.

This just in: USDA’s latest data on organic agriculture.

Here’s are some things I’d really like to know:

• How much food assistance money gets spent at Walmart?
• How many Walmart “associates” get SNAP benefits?

The USDA does not collect data on how SNAP recipients spend their benefits but I’ve been interested in these questions since reading Michele Simon’s report, “Follow the Money: Are Corporations Profiting from Hungry Americans?”

Our research found that at least three powerful industry sectors benefit from SNAP:

1) major food manufacturers such as Coca-Cola, Kraft, and Mars;

2) leading food retailers such as Walmart and Kroger; and

3) large banks, such as J.P. Morgan Chase, which contract with states to help administer SNAP benefits.

Now the Los Angeles Times is asking the same questions.  It points out that Walmart’s annual filing with the Security and Exchange Commission, which is required to list potential risks to profits, includes this mention among many others:

changes in the amount of payments made under the Supplement Nutrition Assistance Plan and other public assistance plans, (and) changes in the eligibility requirements of public assistance plans.

Translation: if Congress cuts SNAP and makes it harder for poor people to get benefits, Walmart loses money.  Three reasons:

• People on food assistance spend a lot of their benefits in Walmart.
• Walmart employees qualify for food assistance benefits.
• Its business model will lose its taxpayer-supported subsidies.

The L.A. Times refers to other stories on the same topic

• Barry Ritholtz’s Bloomberg account of how food corporations encourage employees to get federal assistance benefits
• Good Jobs First’s state-by-state analysis of how many Walmart employees get Medicaid and food stamp benefits

Maybe Congress would be kinder to SNAP benefits if it understood that big corporations benefit so much from them.

Walmart, by the way, sold $466 billion worth of goods in 2013, of which roughly half comes from groceries.

The  big news last week—and it is very big news—is that Walmart has signed on to the Coalition of Immokalee Workers’ (CIW) Fair Food Program.

Under this program, Walmart agrees to pay Florida tomato pickers one penny more for each pound harvested — and says it will apply that premium to other fresh produce sold by the chain.

A penny a pound may not sound like much, especially since Walmart took in $466 billion  in revenue last year.

But it means that workers who are now paid 50 cents for a 32-pound basket will get 82 cents, and their wages can go from $50 to $90 dollars a day.

As Tom Philpott explains in Mother Jones

Late Thursday, CIW netted the biggest fish of all: Walmart, by far the largest private food buyer in the US. A company that muscled its way to the top of the US corporate heap by pinching pennies—squeezing suppliers and its own workers relentlessly—has now agreed to shell out an extra penny per pound for tomatoes.

CIW has shown yet again that scrappy workers, sufficiently organized, can win concessions from even the most ruthless companies.

Barry Estabrook, whose book Tomatoland has done so much to bring attention to the CIW’s accomplishments, writes in Civil Eats

The struggle for labor justice in the fields of the United States—and perhaps far beyond—took an historic stride forward yesterday. At a folding table in a metal-clad produce packing shed beside a tomato field in southwestern Florida, two high-ranking executives from the giant retailer Walmart, which sells more groceries than any other company in the world, sat down beside two Mexican farmworkers and signed an agreement to join the Fair Food Program…The implications of the Walmart decision cannot be understated. Enormous pressure will be placed on competing grocery giants to follow Walmart’s lead.

Good work, CIW.

Last week, First Lady Michelle Obama did a national tour to celebrate the third anniversary of her Let’s Move! campaign to end childhood obesity within a generation.  

As explained in the White House press release, the tour was to focus on school lunches, physical activity, and getting businesses involved—“Healthy Families, Thriving Businesses.”

To that end, she visited a Walmart in Springfield, Missouri to congratulate the company on its pledge to open 300 stores in communities with limited access to affordable healthy foods, to reduce salt and sugars in its products, to make healthier food more affordable, and to put front-of-package logos on healthier foods.

As the press release explained (and as Walmart says in its own):

Walmart is one of many businesses across the country that is making healthy changes to support their customers, because they recognize that what’s good for their customer’s health is also good for their business. Following the tour, Mrs. Obama will deliver remarks about how supporting the health of American families is also good for business, and remind consumers that it’s up to them to continue demanding healthier options.

Did this mean that the new emphasis of Let’s Move! would be on personal responsibility?  Mrs. Obama explained further in the Wall Street Journal:

Take the example of Wal-Mart. In just the past two years, the company reports that it has cut the costs to its consumers of fruits and vegetables by $2.3 billion and reduced the amount of sugar in its products by 10%. Wal-Mart has also opened 86 new stores in underserved communities and launched a labeling program that helps customers spot healthy items on the shelf.

The best reported account of this visit is by Eddie Gehman Kohan at Obamafoodorama.  She points out that this particular Walmart is not located in an underserved community.  She also did the math and calculated that the savings in the cost of fruits and vegetables work out to 16 cents per week per customer.

At this point, I thought it was time for a field trip.

I was in Ithaca, NY over the weekend and checked out its Walmart to see what its Let’s Move!-inspired actions looked like on the ground.  I particularly wanted to see how its “Great for You” labeling program was working out.   This, you may recall, identifies healthy products with this logo:

Although the labeling program was announced a year ago, I had to search hard to find any examples.  Here are a couple in the produce section.

 

 

 

 

 

 

 

 

Only a few bins of produce were marked with those labels.  There’s a tiny one in the picture below in front of some clementines from Honduras, but none of the other foods in that section had labels.

 

 

 

 

 

 

 

 

I could not find another such label anywhere else in the store.

How else was this Walmart promoting healthier eating?  Its big in-store promotion that day was right along the produce section: a large display of Oreo Mega Stuf cookies (the ones with twice the filling and twice the calories of regular Oreos).  A man was handing out free samples and dollar-off coupons.  When I picked up a package to read the label he said “Don’t do that. Treat yourself.”

The Ithaca Walmart is a quarter of a mile from Wegmans, so I did some comparison shopping.  I was surprised to find that the prices were remarkably close—about the same or only slightly higher (explaining why the Walmart price advantage is only a couple of cents a day).

But the people who shopped in Wegmans looked more affluent and healthier than Walmart shoppers.

Although the prices are similar—and the fresh foods at Wegmans are of higher quality—that Walmart is much less crowded, sparsely staffed by poorly paid employees,  and somehow makes it more comfortable for very poor people to shop there.

My conclusions:

• Walmart makes produce available at market prices to people who don’t feel comfortable going to Wegmans.  
• Walmart promises to open stores in low-income areas where Wegmans will not.

On this basis, does Walmart deserve this high level of White House praise and attention?

I don’t get it. 

Yesterday’s New York Times contained an enormous—three full pages—investigative report on Walmart’s use of bribes to circumvent zoning restrictions in Mexico.

The article pulls no punches:

The Times’s examination reveals that Wal-Mart de Mexico was not the reluctant victim of a corrupt culture that insisted on bribes as the cost of doing business. Nor did it pay bribes merely to speed up routine approvals. Rather, Wal-Mart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited. It used bribes to subvert democratic governance — public votes, open debates, transparent procedures. It used bribes to circumvent regulatory safeguards that protect Mexican citizens from unsafe construction. It used bribes to outflank rivals.

This is not the first time the Times has written about Walmart’s bribery in Mexico.  As I wrote at the time,

Wall Street pressures on corporations not only to make profits, but to grow profits every quarter, are the root cause of much food company corruption and corner-cutting.

But this report takes the investigations to another level. It documents how Walmart officials deliberately undermined efforts by the Mexican government to keep the historic area around the Teotihuacán pyramids free of commercial use.

It comes with:

• A slide show
• A multimedia Feature: Wal-Mart Abroad
• A video: Wal-Mart Comes to Teotihuacán
• Another video: A Leader in Protests Against Wal-Mart

Among other things, Walmart is the world’s largest supermarket chain. Its 10,000 stores in 27 countries sold $443.9 billion worth of goods—more than half from grocery sales—for net earnings of $15.8 billion in 2012.

As the Times’ article makes clear, the company resorted to whatever seemed necessary to get what it wanted.  This particular case may be an anomaly but it  could not have happened without a corporate culture deeply devoted to maintaining sales and profits.

A cautionary tale?

On April 22, the New York Times published an unusually lengthy account (front page plus three full pages) of how Walmart executives in Mexico bribed officials to allow the company to open stores in many locations in record time.

I was struck by the simplicity of the rationale for the illegal behavior (I’ve italicized the key points):

But The Times’s examination uncovered a prolonged struggle at the highest levels of Wal-Mart, a struggle that pitted the company’s much publicized commitment to the highest moral and ethical standards against its relentless pursuit of growth.

Under fire from labor critics, worried about press leaks and facing a sagging stock price, Wal-Mart’s leaders recognized that the allegations could have devastating consequences, documents and interviews show.

Wal-Mart de Mexico was the company’s brightest success story, pitched to investors as a model for future growth. (Today, one in five Wal-Mart stores is in Mexico.) Confronted with evidence of corruption in Mexico, top Wal-Mart executives focused more on damage control than on rooting out wrongdoing.

As I keep saying, Wall Street pressures on corporations not only to make profits, but to grow profits every quarter, are the root cause of much food company corruption and corner-cutting.

 

This morning, Walmart announced a new FOP labeling program:

The logo will go on Walmart’s in-house brand products that meet the company’s nutritional criteria.  These criteria are similar (but not identical) to those recommended by the Institute of Medicine (IOM) in its recent report advising the FDA about what should be included in front-of-package labels.

Because the FDA has not yet acted on the IOM report, Walmart—like other retailers—is jumping the gun in doing its own thing.  Its thing, however, is a substantial improvement over the Facts Up Front scheme put in place by the Grocery Manufacturers Association and Food Marketing Institute.

In general, strict nutrition criteria for salt, sugar, and saturated fat exclude most supermarket products.

Walmart’s criteria are pretty strict.  They exclude 80% of Great Value products.

In the cereal category, for example, only these Great Value items qualify:

• Extra Raisin Bran Cereal
• Raisin Bran
• Bran Flakes
• Crunchy Oat Squares
• Frosted Shredded Wheat
• Crunchy Nugget Cereal
• Toasted Wholegrain Oat Cereal

But these Great Value cereals do not:

• Cocoa Cool Cereal
• Cinnamon Crunchy Oat Squares Cereal
• Apple Blasts Cereal
• Sugar Frosted Flakes Cereal
• Toasted Corn Cereal
• Crisp Rice Cereal
• Fruit Spins Cereal
• Fruity Puffs Cereal
• Crunchy Honey Oats Cereal
• Vanilla Almond Awake Cereal

OK, but I wish the company had waited for the FDA to decide on a plan for FOP labeling (and I wish the FDA would get busy on that plan).

All of these schemes are ways to avoid putting negative information on package labels.  No seller or retailer wants a red traffic light—“don’t buy me”—on its products, especially because research shows that stop signals work.  Customers tend not to buy products marked with red traffic lights.

The IOM report concluded that negatives (“don’t buy”) worked better than positives (“buy me”) in guiding consumer choice.   A more recent study confirms that finding.

Companies much prefer green-light systems like the one Walmart is doing.

The Walmart press release explains:

Walmart moms are telling us they want to make healthier choices for their families, but need help deciphering all the claims and information already displayed on products…Our ‘Great For You’ icon provides customers with an easy way to quickly identify healthier food choices…this simple tool encourages families to have a healthier diet.

But does it?  Will Walmart customers buy more of the items marked with the logo instead of the other kinds?  The company says it is doing the research.  Will customers who buy products with the logo be healthier as a result?

I can’t wait to find out.

Addition, February 8: Here’s the way the New York Times dealt with this (I’m quoted).

Walmart is not satisfied with being the biggest food retailer in the world.  It wants more.  It has saturated national suburban areas, says the New York Times, and is now lobbying hard to get into New York City—that bastion of liberal thinking: 

Wal-Mart is pursuing that goal with the intensity, sophistication and checkbook of a full-fledged political campaign, hiring star political consultants, including Mayor Michael R. Bloomberg’s former campaign manager, producing expensive television and print advertisements and conducting polls.

And it is doing it with the kind of in-your-face aggressiveness that would make a New Yorker proud.

A glossy brochure it mailed to thousands of city residents appeals to their sense of autonomy, declaring: “You don’t ask the special interests or the political insiders for permission to watch TV. So why should they decide where you’re allowed to shop?”

A spokesperson for Walmart explained that after exhausting all other customer segments:

Now we only have one segment left…People who self-identify themselves as liberals.

In New York, an indisputably Democratic city, Wal-Mart faces a big challenge, both from lawmakers…and from unions, who accuse the retailer of endangering small businesses and mistreating its workers.

Wal-Mart has responded with an all-out push meant to overwhelm and outmaneuver its far less deep-pocketed opposition. It has put out a flurry of television, radio and newspaper advertisements, including one radio spot that accuses opponents of not caring “about how many jobs Wal-Mart would create or how badly people need them.”

 Advertising Age is also following the Walmart saga closely.  On March 6, it wrote about Walmart’s enormous influence over the retail industry.  This could be a force in favor of better industry self-regulation (if such a thing is possible):

Walmart, however, clearly has been out in front of the rest of the industry on many issues. And unlike a government, it isn’t bound by constitutional due process that bogs regulations sometimes for years. No Tea Party representatives are trying to withhold funds for its greenhouse-gas reduction plans. And with billions of dollars at business at stake for its biggest customers, Walmart wields a bigger stick than any fines a government can impose.

And on March 20, Advertising Age wrote about Walmart’s complicated problems with class issues related to its pricing strategies. 

The chain so far is having trouble winning back shopping trips and dollars it lost the past two years from middle- and lower-income core consumers, and it also appears to be turning off the group it made inroads with through its last strategic revamp, Project Impact. That initiative cleared promotional merchandise out of aisles and reduced assortments to make stores more visually appealing and easier to shop in for upscale shoppers. But as Walmart scaled back on Impact by adding products back to its shelves and aisles and returned to everyday low pricing, those shoppers have become less satisfied.

Walmart may be family owned, but the family is exceedingly wealthy and runs an absurdly large enterprise—$405 billion in 2010, of which $140 billion was in food.  Anything Walmart does has an out-of-proportion impact on customers, its 2 million “associates” workforce, and competing businesses, large and small.

Everything Walmart does deserves scrutiny, and its efforts to move into New York City are no exception.