Can Small Farms Do Business With The Worldâ€™s Largest Retailer?
January 14th, 2013
by Abbie Fentress Swanson
Columbia, MO — The worldâ€™s largest retailer is muscling in on one of the fastest growing segments of American agriculture – local food. Thereâ€™s no doubt this move has shaken up the food supply chain. But small family farms arenâ€™t necessarily seeing the benefits.[audio:https://kvnonews.com/wp-content/uploads/2013/01/1-14-13-HPM.mp3]
Wal-Mart says 11 percent of the produce sold in its stores nationwide comes from local farms, a large increase from the mere 4 percent it sold two years ago when the chain announced its intention to step up local sourcing as part of a larger sustainability platform and a commitment to buy from small businesses.
The produce consumers buy at Wal-Mart stores in central Missouri often comes from Herman Farrisâ€™ refrigerated delivery truck. The truck was empty when it left central Missouri, but just hours later was full of crates of produce bought from Produce Row in St. Louis, Mo.
â€œOnce I leave here, Iâ€™ll go pick up their bananas they need tonight, deliver them overnight and then theyâ€™ll have them first thing in the morning,â€ Farris said.
Farris, who wears glasses, a camouflage button-down and his long hair parted down the middle and pulled back in a ponytail, isnâ€™t a farmer. Heâ€™s a broker, and has been for 40 years. That means he purchases produce from wholesalers, auctions and farms for grocery stores.
Farris has been buying for Wal-Mart since the company began carrying fruits and vegetables in the early 1990s. Although he has other customers, including the Midwestern grocery store chain Hy-Vee, Wal-Mart is his biggest customer. So when he gets a call from Wal-Mart â€“ and he or his wife get several of them a week â€“ Farris always finds what theyâ€™re looking for, even if itâ€™s yucca root in the dead of winter.
â€œThey donâ€™t want to say no to anything,â€ Farris said. â€œThey donâ€™t want to say, â€˜No, we donâ€™t haveâ€™ or, â€˜No, we canâ€™t get.â€™ Itâ€™s â€˜We do have or weâ€™ll have it here real quick.â€™â€
The produce Farris buys in winter, though â€“ whether yucca root or a load of bananas â€“ isnâ€™t locally grown. But Farris says Wal-Mart asks him to buy local when he can. And during the summer and fall, nearly all the produce he delivers to the 20 Wal-Mart Supercenters that make up his turf is grown in Missouri. Thatâ€™s Wal-Martâ€™s definition of â€œlocal,â€ that produce is grown and sold in the same state.
Back in 2010, Wal-Mart pledged to double its local produce sales from 4 to 9 percent by 2015. While the chain has met its local sourcing goal, thereâ€™s little evidence of a widespread benefit to small farmers, at least in Missouri.
The challenges of becoming a Wal-Mart supplier
During the winter, the Columbia, Mo., farmers market is held inside an old two-story shopping mall called Parkade Plaza. On market days, three-dozen farmers and crafters sell meat, eggs, cheese, seasonal fruits and vegetables, jars of honey and preserves, baked goods and jewelry.
One Saturday morning, Jim Thomas, a small-scale organic vegetable grower wearing a baseball cap and overalls, said he hadnâ€™t heard of any farmer who has successfully sold to them.
â€œThey tend to try to force people into lower prices than feasible,â€ said Thomas, who owns Share Life Farms with his wife Rose. â€œAnd so thatâ€™s my only concern â€“ is that theyâ€™re willing to pay the price to get the quality that they get from local produce.â€
â€œAlways Low Pricesâ€ was, after all, Wal-Martâ€™s slogan until 2007. Now itâ€™s â€œSave Money. Live Better.â€ And the company says its local produce push is doing just that â€“ saving money for its customers who want to buy local foods and helping farmers live better too.
Despite repeated efforts to set up interviews with Wal-Mart, the retailer declined to be part of this story to talk about its local produce push. Testifying in front of Congress in March, though, Ron McCormick, Wal-Martâ€™s senior director of sustainable agriculture, claimed the emphasis on local has saved customers over $1 billion.
â€œWal-Mart buys more U.S. agricultural products than any other retailer in the world â€¦â€ McCormick said. â€œWe operate 41 state-of-the-art grocery distribution centers across the country. The advantage here is that many of them are located in potentially productive agricultural areas. We work to source more produce from areas close to these centers, allowing us to cut costs from the supply chain and to sell a more affordable, fresher product to our customers.â€
But Wyatt Fraas, a project manager at the Center for Rural Affairs in Lyons, Neb., says heâ€™d like Wal-Mart to break down the $1 billion in cost savings and explain how it has gotten its local sourcing up to 11 percent. Especially since in most parts of the country â€“ including in the Midwest â€“ itâ€™s much more of a challenge to source local year-round than it is in, say, California or Florida.
â€œUnfortunately, thereâ€™s so little definition and transparency about how that happens that we donâ€™t really know if that happens or how that happens,â€ Fraas said. â€œItâ€™s their own numbers, their own record keeping, their own definition.â€
Fraas says farms have to be big to satisfy Wal-Martâ€™s needs. In fact, of the eight farms Wal-Mart highlights on its locally grown web site, five of them are classified as very large farms by the U.S. Department of Agricultureâ€™s definition, with annual sales in the millions of dollars.
And then thereâ€™s the question of volume. Jennifer Schutter, who works for the University of Missouri Extension and helps farmers sell produce to retailers and universities, says small-scale farmers in Northeast Missouri canâ€™t produce enough to sell to Wal-Mart.
â€œThe growers here do not have enough quantity to supply the Wal-Mart stores,â€ Schuttersaid in a phone interview from her office in Kirksville, Mo. â€œAnd they only have produce for four months out of the year. And Wal-Mart wants produce consistently from the same distributor pretty much all year long.â€
Schutter added farms must also consider the costs associated with becoming an approved Wal-Mart supplier, like passing strict food safety inspections, labeling, meeting refrigeration and packing requirements, and paying for equipment and labor to ramp-up production. All of these requirements can lead to tens of thousands of dollars in upfront costs.
Changing the business model to work with Wal-Mart
Doing business with Wal-Mart has been working for a handful of operations in the Midwest like Divine Gardens, a small tomato grower in western Kansas, and Missouri Vegetable Farm, a 200-acre farm 70 miles south of St. Louis.
â€œWeâ€™re the first and largest Missouri grower here,â€ said Jason Landers, the food safety director at Missouri Vegetable Farmâ€™s sister company, Proffer Wholesale Produce. â€œWe grow green peppers, jalapeÃ±os, poblanos, serranos, tomatillos, yellow and green zucchini squash, pumpkins, sweet cornâ€¦â€
Missouri Vegetable Farm was created two years ago to supply Wal-Mart. The farm is part of Proffer Produce, which was founded by Udell and Irene Proffer in 1964. Landers wouldnâ€™t break down the cost of becoming a grower for Wal-Mart, but he did say Missouri Vegetable Farm didnâ€™t have to pay for labels, refrigeration or equipment since Proffer Produce already had them.
Proffer Produce has a longstanding business relationship with Wal-Mart. The wholesaler has been a middleman for Wal-Mart since the 1990s and now delivers produce to Wal-Mart distribution centers in the 13 states surrounding Missouri. Overall, the company has sales of nearly $60 million a year.
Inside its 175,000-square-foot shipping facility as a line of workers in hairnets methodically separated green peppers by quality, size and weight, Landers said he thinks farms, regardless of their size, must adapt their business models to compete in the growing local foods market.
â€œA lot of farmers over the last few generations have seen that there is this huge growth in production and with the big push on the locally grown product â€¦ theyâ€™ve already trained themselves that if they want to continue to succeed, they have to modify their operations,â€ Landers said.
But LaDonna Redmond, who works for the Institute of Agriculture and Trade Policy, a Minneapolis, Minn., non-profit organization that advocates for family farms, said itâ€™s a slippery slope when farms start changing their business models to work with Wal-Mart.
â€œThatâ€™s the question: Will it actually benefit them or will the situation turn out to be one where the benefit really is transferred to Wal-Mart?â€ Redmond asked. â€œAnd not necessarily to â€¦ improving the income of small family farmers?â€
Redmond said until Wal-Mart builds the cost of producing local food into its prices, few small farms will truly benefit from the retailerâ€™s push to source more local food.
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