More on Wal-Mart and Organics

Thom Lambert —  10 June 2006

An article from yesterday’s W$J sheds some light on the organic community’s anger over Wal-Mart’s decision to begin selling organic products. A few weeks ago, I accused Wal-Mart’s critics of wanting to keep price-sensitive consumers out of the organic “club.� The article in yesterday’s Journal suggests that that’s part of the story, but that the critics might also have a legitimate gripe. Examined closely, though, even that concern is unfounded.

To be sure, much of the opposition to Wal-Mart’s foray into organics is motivated by a desire to exclude. Consider, for example, the remarks of Michael Pollan, author of The Omnivore’s Dilemma and a leading Wal-Mart critic. Regarding Wal-Mart’s plan to sell organics at a small mark-up over conventionally grown food, Pollan writes: “To say you can sell organic food for 10 percent more than you sell irresponsibly priced food suggests that you don’t really get it.�

That statement just reeks of elitism. What is “irresponsibly priced food�? (Food that poor people can afford?) And what do these price-slashers “not get�? (That the organic label is largely just a status symbol?) Pollan’s focus on Wal-Mart’s pricing suggests that his real concern is to keep the hoi polloi from enjoying “responsibly priced� (i.e., expensive) organic food.

But the Journal article suggests there’s more to the story. “Organic� is largely in the eye of the beholder, and lots of organic consumers believe the term should include only locally grown products cultivated and harvested using non-industrial means. Many of the organic products to be sold at Wal-Mart (and currently sold at Whole Foods and Trader Joe’s) are not locally grown and are produced using modern industrial methods. When Wal-Mart floods the market with these products – all bearing the organic label – the meaning of the term will be diluted even further.

The fundamental problem is that the government has taken over the function of defining the term “organic� and – not surprisingly – has selected a lenient definition favored by the largest and most powerful businesses it regulates. If the government’s voluminous organic standard is revised in the future, Wal-Mart will undoubtedly have a prominent place at the table, and it will likely push the definition in a direction purists will not like. Elitism, then, is not the only reason for critics’ opposition to Wal-Mart’s organic endeavors.

But here’s some good news for those who are legitimately concerned about label dilution: You are not stuck with the government’s low standards. Granted, the government has wrested control of the organic label and has defined “organicâ€? leniently. That does not mean, though, that private certification agencies cannot create their own labels based on higher standards. Indeed, private certification agencies have proliferated since the government adopted its watered-down organic standards. (See here for free reprint of WSJ article documenting this proliferation. See here for Consumers Union’s guide to “stricterâ€? private labels.)

To see how a private labeling system could accommodate the organic community’s heterogeneous preferences, consider kosher foods. Kosher status is analogous to organic status in several respects. Both depend on production and processing standards rather than product standards and both are appealing to discrete groups of consumers, who often will pay a premium for compliant products. In addition, the terms “kosher� and “organic� may both mean different things to different people. Just as members of the organic community differ on matters such as the permissibility of natural pesticides and fertilizers or the wages required for farm worker, groups of observant Jews disagree on many details of the food laws – for example, whether gelatin may be deemed kosher absent a showing that it was derived from properly slaughtered, non-forbidden animals. In light of this pluralism, a single uniform kosher standard would leave many consumers dissatisfied. Groups within the religious Jewish community have therefore sought to accommodate their members’ pluralistic views of the food laws by privately developing competing labels that signify a food product’s kosher status. Indeed, private kosher certification agencies currently utilize more than 200 registered kosher symbols in the United States, enabling consumers to fulfill their process preferences by purchasing foods certified by the organizations they trust. A voluntary labeling system has thus developed – and thrives – without any government intervention beyond prosecution of intellectual property and fraud violations.

Private certification could similarly create win-wins for members of the organic community. Just as competing labels allow kosher consumers to select their preferred level of stringency, competing private labels could enable organic consumers to segregate themselves. People who care only about the basics (e.g., whether chemical fertilizers and pesticides were used) could purchase relatively cheap “organic� foods from Wal-Mart. Those who want more stringency (e.g., only local products, hand-harvested, minimum farm wages, etc.), could pay more for products privately labeled “biodynamic,� “beyond organic,� etc. Thus, everyone’s preferences could be accommodated.

In the end, then, there is no legitimate reason to oppose Wal-Mart’s decision to make organic (or, let’s say, “organic lite�) products available to modest income consumers.

Thom Lambert

Posts

I am a law professor at the University of Missouri Law School. I teach antitrust law, business organizations, and contracts. My scholarship focuses on regulatory theory, with a particular emphasis on antitrust.

3 responses to More on Wal-Mart and Organics

  1. 

    I’ve wavered a bit on this issue, but overall I’m leaning toward the “not a good thing” side. I’ve worked with vendors who sell to Wal-Mart and it is very much a double-edged sword – much like an addiction, the more you sell to them, the more they dictate how you run your business (and how much profit you make.) I don’t think there’s anything in the USDA definition of “organic” that specifies “locally grown,” so we all have to visit our local farmer’s markets for that. But you’re right that a company with Wal-Mart’s clout can easily use its influence to water down the existing standards, to find ways to force its suppliers to provide ever-cheaper goods.

    Another note: I agree that the word “natural” is meaningless. Poison ivy is natural (of course, it’s probably also organic!) “Fair trade,” however, is a different animal. There are global standards around the use of the term, as determined by Fairtrade Labelling Organizations International.

  2. 

    Cogent argument Thom, but you’re missing a few points.
    Calling food ‘irresponsibly priced’ isn’t elitist, it’s fact. Farms subsidies (welfare by another name) allow crops to be sold below the actual cost of production. If the farm is the first link in the food chain, all subsequent links benefit from the lowest starting price – hence the intense pressure to keep farm and commodity prices low. If you were to ‘responsibly’ price food and take into account what it actually costs to produce you would see a higher starting price, which would ripple outward.

    More importantly Thom throws out the idea of ‘organic-lite.’ In a sense, this already exists – it’s called ‘natural’ or ‘fair trade,’ or a multitude of other marketing names. There are no laws governing what you can call ‘natural.’ Have you noticed all the natural products you can now get? I had natural Cheetos lately that weren’t half bad.

    The problem with this suggestion is ‘USDA Organic’ is a law, it’s not in ‘the eye of the beholder.’ The law is codified, people can look up what it means. It’s like suggesting we have Citizenship-lite (wait, is that the Guest Worker program?).

    I applaud organics going mainstream, I think everyone should be able to eat food that is good for them rather than that which is laced with pesticides and fillers. I think this food should be affordable and available to the masses. As more organic food is required, more land will be farmed organically which will benefit the environment and the planet.

    Organic isn’t about excluding, it’s more about control – control of your purchase, control of what goes into its’ manufacture, control of where your money goes. It’s about choosing something for reasons other than ‘cheap.’ After all, you get what you pay for.
    I don’t see mainstreaming as the problem, I see further watering down of the Organic Standards as the problem. What Mr. Lambert is suggesting is exactly that.

Trackbacks and Pingbacks:

  1. The Writing On The Wal » Blog Archive » Organic Food Is Not Political - June 12, 2006

    […] Why then, does University of Missouri Law Professor Tom Lambert write this?: Regarding Wal-Mart’s plan to sell organics at a small mark-up over conventionally grown food, Pollan writes: “To say you can sell organic food for 10 percent more than you sell irresponsibly priced food suggests that you don’t really get it.â€? […]