[OKC] Winston Blog: Wal-Mart Plays With Our Food

Thu Feb 3 12:08:36 PST 2011

Jennifer Alig

**My email has changed to Jennifer.Alig at deq.ok.gov.**

From: Shields, Susie 
Sent: Thursday, February 03, 2011 12:09 PM
Subject: Winston Blog: Wal-Mart Plays With Our Food

Winston Blog: Wal-Mart Plays With Our Food
<http://www.andrewwinston.com/blog/>  

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Wal-Mart Plays With Our Food
<http://feedproxy.google.com/~r/eco-advantage/~3/3uwGVS-l4N8/walmart_pla
ys_with_our_food.php?utm_source=feedburner&utm_medium=email>  

Posted: 31 Jan 2011 06:07 AM PST

Every week, 140 million people - about the population of England and
Germany combined - shop in a Wal-Mart store. Soon, all of these people
will be eating healthier, and the environmental impact of their food
will be lessened.

Wal-Mart%20Food%20bank%20%28for%20blog%20jan%202011%29%2C%205348776469_6
7db141001_m.jpg
<http://www.andrewwinston.com/blog/Wal-Mart%20Food%20bank%20%28for%20blo
g%20jan%202011%29%2C%205348776469_67db141001_m.jpg> 

That's because in recent months, the world's largest grocer (and
company) has started to fundamentally change the food on its shelves.
Wal-Mart's recent announcements continue a five-year campaign to green
the supply chain, but they add in some interesting new twists as well.
The entire agricultural sector, and everyone who, well, eats, will feel
the ripples of these moves.

Some of Wal-Mart's initiatives increase profitability while hitting
sustainability goals; for others, the societal benefits are real, but
the business benefits are not as clear, at least on the surface.

Three initiatives in particular demonstrate a strategic focus on food
sustainability.

(1) In October, Wal-Mart announced that it would double the amount of
locally-sourced produce on its shelves
<http://www.nytimes.com/2010/10/15/business/15walmart.html?_r=2&scp=1&sq
=wal> . There's some legitimate debate
<http://melbourneurbanist.wordpress.com/2010/07/11/is-local-food-more-su
stainable/>  about whether shortening distances alone really reduces the
environmental footprint (a fascinating new study
<http://pubs.acs.org/doi/full/10.1021/es702969f>  says that cutting back
on meat is far more effective in lowering impact than buying local). But
Wal-Mart says the initiative will reduce spoilage and increase
shelf-life. Those changes, by reducing the total amount of food needed,
will certainly reduce overall environmental impacts throughout the value
chain.

As is the case with most of Wal-Mart's sustainability initiatives, this
one fits the company's mission and strategy perfectly. It will reduce
environmental impacts, but also reduce logistics and supply chain costs
(in part because what's noticeably absent from this announcement is
anything about increasing sales of organic food, which usually costs
more). Wal-Mart can pass on these operating savings to customers, so it
all fits nicely within the company's normal business model.

But some more recent announcements are not as clear-cut on the business
side.

(2) Last week, Wal-Mart said it will both lower the prices of fruit and
vegetables (saving customers $1 billion) and reduce the amount
<http://online.wsj.com/article/SB100014240527487048813045760938721783742
58.html?mod=WSJ_hp_LEFTWhatsNewsCollection>  of saturated fat, sugar,
and salt in its private label products. On the latter point, Wal-Mart
was not the first to the table, with companies such as Kraft
<http://www.usatoday.com/money/industries/food/2010-03-17-kraft-sodium_N
.htm>  and Pepsi
<http://www.reuters.com/article/2010/03/21/us-pepsico-idUSTRE62K25220100
321>  setting similar goals last year.

It's more of a stretch to fit this announcement neatly into a
sustainable/profitable business framework. The sustainability benefits
are real - on the green side, reducing ingredients like sugar should
have sizable ripple effects up the supply chain in saved energy and
water. The business benefits are in there also, but are fuzzier.

Improving health of course fits a social goal, but it also demonstrates
caring for your customers, which can drive loyalty, sales, and brand
value. It's also not purely cheeky to suggest that keeping your
customers alive longer, and healthier, will help your bottom line.

(3) The third recent announcement falls much more clearly in the pure
corporate social responsibility world. In a fascinating display of smart
philanthropy, Wal-Mart is helping the hungry by helping food banks lower
their energy bills. The company donated $2 million to 16 food banks to,
in the company's words
<http://www.greenretaildecisions.com/news/2011/01/20/walmart-foundation-
gives-2-million-to-help-food-banks-go-green> , "upgrade their lighting,
refrigeration or heating and air conditioning with equipment that
performs better, uses less energy and costs less to operate."

Wal-Mart estimates annual energy savings of $625,000, which will buy
300,000 more meals every year from now on. The $2 million donation is in
reality dwarfed by Wal-Mart's own $2 billion of cash and in-kind
donations to reduce hunger. But I hope that this extremely clever model
of philanthropy - where you give a gift that keeps on giving - will take
hold even more. Lowering the footprint and operating costs for
non-profits is pure win-win.

In short, as is always the case, sustainability initiatives do not fit
neatly into one box within a company. Are they for social good or to
make money? The answer is, invariably, yes. Again, pressing its supply
chain to do more, faster, is what Wal-Mart has always done, but in
recent years the pressure has been focused on sustainability. All these
food initiatives expand on that approach, but also show Wal-Mart
"walking the walk" and finding opportunities for smart philanthropy to
round out the story. It's a robust strategy for covering many angles on
the sustainable food movement.

The benefits to all possible bottom lines are substantial. If Wal-Mart
and the other companies in its supply chain succeed in reducing fat,
sugar, and salt in food; improving access to food for the poor; and
sourcing it locally and using less energy to do so, both the planet and
its inhabitants will be healthier.

(This post first appeared at Harvard Business Online
<http://blogs.hbr.org/winston/> .)

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