Wal-Mart goes organic

updated 4:42 p.m. ET March 26, 2006

BENTONVILLE, Ark. - Wal-Mart Stores Inc. is throwing its weight behind organic products, a move that experts say could have the same lasting effect on environmental practices that Wal-Mart has had on prices by forcing suppliers and competitors to keep up.

Putting new items on the shelf this year, from organic cotton baby clothes to ocean fish caught in ways that don't harm the environment, is part of a broader green policy launched last year to meet consumer demand, cut costs for things like energy and packaging and burnish a battered reputation.

Organic products are one lure for the more affluent shoppers Wal-Mart is trying to woo away from rivals like Target Corp., said Alice Peterson, president of Chicago-based consultancy Syrus Global.

A new Supercenter that opened this week in the Dallas suburb of Plano features over 400 organic foods as part of an experiment to see what kinds of products and interior decor can grab the interest of upscale shoppers.

"Like many big companies, they have figured out it is just good marketing and good reputation building to be in favor of things that Americans are increasingly interested in," Peterson said.

Wal-Mart's Lee Scott is not the first chief executive to advocate sustainability, a term for the corporate ethos of doing business in a way that benefits the environment. Industrial giant General Electric Co., for example, last year launched a program called "Ecomagination" to bring green technologies like wind power to market.

What makes Wal-Mart's efforts unique, sustainability experts say, is the retailer's sheer size and the power that gives it in relations with suppliers. Wal-Mart works closely with suppliers to shape their goods, if they want them on the shelves of Wal-Mart's nearly 4,000 U.S. stores and over 2,200 internationally.

"They have huge potential because it's not just Wal-Mart we're talking about, it's their entire supply chain," said Jeff Erikson, U.S. director of London-based consultancy and research group SustainAbility. The group says it does not do any consulting work for Wal-Mart.

Erikson said Wal-Mart could bring the same pressure it has exerted over the years on prices and apply that to pushing manufacturers and competitors to adopt more sustainable business practices and larger organic offerings.

"We love to see companies like Wal-Mart taking a big step and making pronouncements as they have, because their tentacles are so large," Erikson said.

Wal-Mart plans to double its organic grocery offerings in the next month and continue looking for more products to offer in areas such as grocery, apparel, paper and electronics.

Stephen Quinn, vice president of marketing, told an analysts' conference this month that Wal-Mart would have 400 organic food items in stores this summer "at the Wal-Mart price."

Some Wal-Mart critics call the effort just a public relations job. But others say Wal-Mart could make a real difference if the retailer brings a critical mass of organic products to market and pushes enough suppliers to adopt green practices.

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