One of the biggest reasons more farmers do not grow food organically is that they don’t have the resources to implement organic practices. Costco knows that its
customers want organic food, so the company has developed a program to help its suppliers buy equipment and land to organically grow food. Costco aims to keep customers happy with several organic food options.
This article is for Premium Members only. Please login below to read the rest of this article.
Not a Premium Member yet? Join today.
[login_form redirect=’https://www.ethanhathaway.com/costco-improves-organic-offerings-by-helping-farmers’]
[show_to accesslevel=’Premium Members’]
Situation: Costco’s Customers Want Organic Food
Writing for Forbes, Nancy Gagliardi reports that consumers want healthy, organic food and they’re willing to pay more for it. In fact, global sales of organic and other healthy foods are expected to reach $1 trillion by 2017. Costco realizes that this is the case for its consumers, too. Costco already offers hundreds of organic food items, but it’s hard for the wholesale giant to keep up with demand. That’s why Costco has decided to find ways to help its suppliers deliver more organic foods to customers.
Organic food is limited in the market because suppliers must transition from conventional farming methods to organic farming methods. This is an expensive and time-consuming process that requires additional training. The demand for organic food is rising, but suppliers aren’t transitioning fast enough. Many suppliers haven’t even considered the possibility of going organic yet.
Approach: Costco Loans Money to Suppliers
Costco has helped Andrew and Williamson Fresh Produce buy 1,200 acres of land in Baja, Mexico, along with equipment to grow organic produce. Currently, Costco is only working with this particular partner, but the company has plans to expand as the partnership proves successful. The idea is for Costco to stay ahead of the demand curve so that it can always deliver fresh, organic food to its customers. The company is looking to partner with other key suppliers.
Several other retailers have loan programs in place to help suppliers buy new farming equipment, but it’s unusual for a retailer to help farmers buy land, too. This initiative is one reason why Costco has bypassed competitor Whole Foods with $4 billion in annual sales of organic foods.
Impact and Advantage of Costco’s Initiatives
This isn’t the only initiative Costco has taken to ensure it can supply the products its customers want while staying ahead of demand. For instance, Costco also helps raise chickens at a poultry plant in Alabama, works with a Mexican vendor to ensure a steady supply of wild shrimp, and contracts with Nebraskan farmers to raise cattle organically. Costco isn’t afraid to take risks that other retailers normally wouldn’t take.
Costco Senior Vice President of Fresh Foods, Jeff Lyons, says that the company always asks the questions, “What do we see down the road that could be a challenge in terms of supply? And what can we put in place today to grow that particular scarce resource?” Then Costco seeks initiatives to stay ahead of demand.
One thing Costco does well is listen to its customers. Because shoppers want more organic foods, Costco has created an innovative way to deliver and sustain its supply of organic products well into the future.[/show_to]
