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Walmart’s Organic Food Push Faces a Setback

Wal-Mart Dominates U.S. Retail EconomyWal-Mart Dominates U.S. Retail Economy
An employee restocks a shelf in the grocery section of a Wal-Mart Supercenter in Ohio.Photograph by Chris Hondros — Getty Images

Walmart is reportedly phasing out the Wild Oats organic food brand from the retailer’s store shelves, a move that comes just two years after it first made a big bet on the brand.

The Wall Street Journal has reported the Wild Oats products will be phased out in the coming months, citing sources familiar with the matter, and instead focus on bringing in organic food items by focusing on the store brand Great Value and fresh produce.

This pivot is important for a few reasons. Walmart is the nation’s largest grocery chain, but a move away from Wild Oats after just a few years of backing this initiative indicates it hasn’t yet figured out how best to sell organic products to consumers that are spending lot more on the category. Globally, organic food sales are expected to post double-digit gains over the next several years.

But retailers haven’t yet figured out the perfect formula. Walmart still is clearly tinkering with the formula. Target is also planning to transform its food category this year to better compete in the space. For a while, it seemed that Whole Foods Market (WFM) had successfully pegged the market, but recently sales have slowed as Walmart, Target and others bet big on organics, resulting in weaker pricing power for Whole Foods. Now, Whole Foods is launching a new chain with lower prices.

The grocery business is a challenging segment of consumer goods. Margins are razor thin, and competition is high when considering the vast amount of options available to consumers, including increased interest in buying foods from e-commerce businesses.

At Walmart, Wild Oats staples like jars of sauce were selling well. But the brand just didn’t meet expectations, WSJ reports, even though it seems executives concede the retailer didn’t execute as well as it could have when it comes to distribution and marketing for those goods.