Wal-Mart’s Vow to Buy More Local Produce Won’t Affect Supply Chain, Experts Say

This story appears in the Nov. 8 print edition of Transport Topics.

Wal-Mart Stores Inc.’s vow to double sales of locally grown produce by 2015 should win favor with U.S. consumers but won’t have much effect on the world’s largest retailer’s supply chain, experts said.

Wal-Mart’s initiative, announced on Oct. 14, is part of a global effort to boost direct purchases from farmers and invest $1 billion in the global fresh food supply chain.

“The big question is the extent of this measure and how far they will go,” said James McWilliams, a professor of agricultural history at Texas State University in San Marcos. “They won’t disrupt a really efficient supply chain network just because they have seen the light on local agriculture.”

Ephraim Leibtag, senior economist at the Department of Agriculture’s Economic Research Service, told Transport Topics local buying gives Wal-Mart “an advantage from having increased goodwill and stronger consumer sentiment in their favor.”

From an overall cost standpoint, he said, locally grown produce might cost more for Wal-Mart to buy, but supply-chain efficiencies should offset that expense and keep prices low.

In a USDA report released in October, Leibtag found that prices at Wal-Mart and other nontraditional vendors, such as club stores, average 7.5% below traditional grocers.

However, the amount of produce Wal-Mart currently buys locally isn’t known, Leibtag said. Wal-Mart spokesman Dan Fogleman declined to disclose that information.

Wal-Mart began local produce sourcing two years ago, sparked by a company official’s recognition that apples were grown just eight miles from the Bentonville, Ark, headquarters.

“Through sustainable agriculture, Wal-Mart is uniquely positioned to make a positive difference in food production — for farmers, communities and customers,” CEO Mike Duke said as he announced the new program.

Calling it a “great marketing tool,” McWilliams said Wal-Mart wasn’t alone in touting its emphasis on local produce, citing food sellers such as Whole Foods.

“The other thing that is overlooked constantly in these discussions is that consumers are only going to adapt their purchasing habits so far,” McWilliams said. “If we were to make a transition to a meaningful percentage of locally sourced food, consumers would have to change the way they eat.”

A produce trucker said that won’t happen.

“Mother Nature controls what you grow and when you grow [food],” said Joel “Bud” Wallace, president of Wallace Cascade Transport, Planada, Calif.

“There is so much seasonality in the business,” he said. “If you want grapes in February, they are going to come from Chile. You can grow local tomatoes in Kansas and Iowa, but eight or nine months a year, they have to come from some other place.”

Wallace said that it was “a nice thought” to increase local produce purchasing, but he noted that other grocers such as Safeway already have taken that approach.

“I think Wal-Mart’s goal is achievable,” said Jude Capper, an associate professor at Washington State University, Pullman, Wash. “It’s clearly better if we can move 24,000 dozen eggs over 100 miles or 200 miles instead of 800 miles.”

Capper did note that, in general, long-distance produce shipments typically are the most cost-effective cost-delivery method, based on a logistics study she co-wrote.

“Ultimately, it is about producing and sourcing food where we make the best use of resources,” she explained. “It also depends on how much value we put on locally grown food.

“Given the number of people who are undernourished or have incomes below the national average, those local foods only make sense when they are as cheap as other, similar products,” she said.

“Wal-Mart’s plan has promise, because anything that will help the productivity and prosperity of small farmers is good for them,” said Fletcher Hall, president of F.R. Hall Associates, Potomac, Md.

Hall, the former head of American Trucking Associations’ Agricultural and Food Transporters Conference, said farmers benefit because they gain an outlet without having to do any marketing.