Agriculture Reference
In-Depth Information
and natural food has become extremely profitable with the entry of private equity firms into the business.
The deals are made with expansion and further consolidation in mind, facilitated by the infusions of large
amounts of capital to open new stores and maintain and upgrade old ones.
For instance, in April 2012 the private equity firm Oak Hill Capital Partners acquired an 80 percent
interest in Earth Fare, an organic and natural food store based in North Carolina with twenty-five stores
in the Southeast and Midwest. The deal, which uses Nature's Best as a distributor, was worth about $300
million. Another equity firm, Monitor Clipper Partners, had acquired the chain in 2006; it maintains a sig-
nificant minority interest in Earth Fare. 19
Tyler Wolfram, a partner at Oak Hill, said: “Earth Fare is well positioned for expansion given robust
consumer demand for natural and organic food. . . . We look forward to working closely with Jack Murphy
[Earth Fare's CEO] and the rest of the management team to support Earth Fare's next phase of growth.” 20
Unsurprisingly, as organic and natural foods trend upward in profitability, Walmart has gotten into the
action. The behemoth, known for its extremely efficient distribution network, announced in 2006 that it
would expand the number of organic products it sells and price them at 10 percent above conventional
products, virtually guaranteeing a further cheapening of the organic market by increasing its dependence
on industrial agriculture, processing, and distribution.
Walmart, as usual, had done the numbers. The move into organics was part of a marketing strategy to
attract wealthier consumers and to improve its image. While some food advocates cheered Walmart's con-
version to organics, others could see the writing on the wall—one more nail in the coffin of organic food's
integrity, as the supergiant pushed down its cost and quality. The processed-food industry rejoiced. Com-
panies began introducing organic versions of the foods they already produced—organic Keebler crackers,
Ragu pasta sauce, and Nabisco's Oreos. Mars introduced Dove Organic Chocolate, exclusively for sale at
Walmart.
When Walmart talks about organic, it is different from what many consumers expect from organic
products. It means partnering with big food companies making organic versions of the processed foods
that are already on Walmart's shelves—like Rice Krispies and Kraft Macaroni & Cheese—processed foods
made “organic” by replacing high-fructose corn syrup with cane sugar and removing preservatives. The ex-
ecutive in charge of perishable food at Walmart admitted that the move into organics is simply a merchand-
izing scheme, and that “organic agriculture is just another method of agriculture—not better, not worse.” 21
Walmart is not concerned about the principles behind organic agriculture, and will accept the bare-minim-
um requirements for what it takes to make a product fit the USDA's organic labeling requirements. Milk is
a good example.
Organic Valley, the largest organic dairy co-op in the country, stopped selling its products to Walmart
because of the pressure to cut prices. The farmer-owned coop supplied Walmart for approximately four
years, selling 1.3 million gallons of fluid milk to the company each year. Yet this represented only 3.6 per-
cent of Walmart's total milk sales for that year. Organic Valley decided that it no longer wanted to be a
supplier to Walmart after a shortage of organic milk meant that it would have to short other customers in
favor of Walmart. Organic Valley executives feared that they would become so reliant on Walmart that the
box store could force them to lower prices, and thus pay their dairy farmers less.
When Organic Valley was considering ending its supplier agreement with Walmart, Dairy giant Dean
Foods was waiting to get in line. Dean's Horizon organic milk brand, produced on factory farms, was will-
ing to offer lowball prices to Walmart—prices so low that Organic Valley could not begin to compete.
The company knew that Walmart was interested only in price, not in whether the dairy farmers could have
smaller herds, use better practices, and still make a living.
Walmart's own private-label organic milk brand, provided by Aurora Organic Dairy, is produced by
cows living on factory farms—thousands of cows raised in tight conditions without adequate access to pas-
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