the new horizon for organics: a market outlook of the effects of wal-mart on the international...
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The New Horizon for Organics: A Market Outlook of the Effects of Wal-Mart on the International
Organic Market
Georgia ClarkParr Rosson
Flynn AdcockDwi Susanto
Texas A&M UniversityTexas Cooperative Extension
Center for North American Studies
Wal-Mart• Large, global retailer• Market access as well as market control• 45% of US consumers shop at Wal-Mart• Conventional supermarkets account for
half of all organic sales• Wal-Mart aids companies in determining
what will be in demand• Aims for 10% mark-up on organics• Creates business expansion and
encourages mergers• ‘Bidding war’ has begun amongst organic
suppliers to meet Wal-Mart’s demand
Organic Supply and Demand• USDA certification program increased
awareness, demand• Wal-Mart creates own market niche
for organics and brings more awareness
• US supply can not meet demand – 10% of consumption comes from imports
• Long wait to gain certification• Large farms not yet established to
cater to large retailers en masse
Total Certified Acreage (1000 Hectares)
0
1000
2000
3000
4000
5000
6000
7000
China Brazil Mexico US
Total Organic Food Market Size
0
50
100
150
200
250
300
China Brazil Mexico
US
$ (M
illio
ns)
Total Production
Total Production for Export
• Short-run: High demand and low supply• Long-run: Lower prices due to supply and demand
reaching equilibrium• Milk, butter, fruit, vegetables, and durable goods are all
secure prospects for Wal-Mart• Beef and fragile goods are not a viable option• Organic canned goods, textiles will certainly be imported
Price Premium
Milk, Butter 50-100%
Fruit 0-50%
Vegetables 50-150%
Beef, Chicken 100-150%
Corn, Soybeans 100-150%
Average Price Premium for Organic Foods in the United States
Future of Organics• Loosening Regulations• Easier market access• Large-scale production• Incorporation of organic practices
into farming, not total immersion• New technology, innovations, and
products