http://www.fool.com/investing/value/2008/07/02/love-thy-neighbor-the-farmer.aspx
Some consumers have long seen the benefits of buying locally grown produce, only to suffer the humiliation of having their peers arbitrarily and unfairly brand them as hippies. Now, many large companies are seeing the wisdom of the idea. Wal-Mart (NYSE: WMT) is the latest retailer to think that maybe produce should be a little bit closer to home.
Go American
The press-release headline read, "Wal-Mart Commits to America's Farmers as Produce Aisles Go Local." Now, naturally, there's a profit motive here, before you think Wal-Mart has decided to don the tie-dye and head off to Woodstock. After all, it's easy to see how the cost of energy to ship produce all over the country -- or the world, for that matter -- makes it much more cost-efficient to seek local produce.
So the move fits in nicely with Wal-Mart's low-price vows. The company says the initiative will help it keep the retail prices of fruits and veggies down, in part by reducing what it calls "food miles," or "the distance food travels from farm to fork." Produce in the U.S. travels an average of 1,500 miles to get to consumers' kitchens, and the company says that through "better logistics planning, better packing of trucks, and local sourcing, Wal-Mart expects to save millions of food miles each year" with its commitment to local fruits and veggies. This is a good example of how Wal-Mart can move the needle in major ways, when it sets its mind to it.
Although Wal-Mart has faced some criticism about its emphasis on Chinese products in recent years (Wal-Mart's "Made in America" theme from days of yore seems like a long time ago), the press release also touted its support of U.S. agriculture. The megaretailer points out that over the past two years, it has increased partnerships with local farmers by 50%, and it says it purchases more than 70% of its produce from U.S.-based suppliers. That makes it the biggest customer of American agriculture.
Wal-Mart is smart to trumpet such initiatives, but it's not the only one to make a recent announcement of this nature. Chipotle Mexican Grill (NYSE: CMG) (NYSE: CMG-B) has also recently announced that it will seek out more locally grown ingredients for its restaurants. That makes sense, given Chipotle's long-standing devotion to naturally raised meats -- not to mention its motto of "Food With Integrity."
Chipotle said it will purchase 25% of at least one type of produce from small- and mid-sized farms within 200 miles of its stores. An Associated Press article on the matter pointed out what's really interesting about the move: It's unheard of in the fast-food niche.
Mom, I'm not playing with my food! I'm contemplating it.
Proponents of food ethics, an idea that ties in with the organic movement, have long touted the benefits of buying from local farmers. Buying local produce reduces carbon footprints. It means eating food that's fresh and in season for one's own region. It's a very natural way of doing things. And, of course, there's a sense of accountability and community. If you can't grow a garden in your own backyard, it's good to support a close-by Farmer Jack or Old McDonald, as opposed to huge, faceless entities in agribusiness.
One company's been on the cutting edge of the philosophical elements of food, where it comes from, and what's in it. That's Whole Foods Market (Nasdaq: WFMI). Two years ago, the organic retailer publicly pledged to support small farms.
If Wal-Mart's now talking about two years of progress on its initiative, I'd venture to guess that it got the idea from somebody else. That's among the reasons I'm still a long-term optimist on Whole Foods Market, despite the stock's downward spiral. The company has historically been way ahead of the curve on many important and exciting shifts in food philosophy. I think it's a mistake to underestimate the foresight of John Mackey and other Whole Foods leaders, in terms of their ability to innovate in the future of food.
Ch-ch-ch-ch-changes
Several years ago, the implications of decisions like these could easily be filed under "ethics" or "philosophy." Many people once pooh-poohed the idea of making conservationist, sustainable purchasing choices as just a bunch of granola-crunchy nonsense. Now, rising energy costs have redefined some of these issues as "getting back to basics" or "just plain common sense."
I recently wrote about the shifts in consumption of oil and water -- SUVs aren't so cool anymore, and many consumers are suddenly remembering that water comes from taps as well as bottles in the grocery store. The newfound mass appeal of local produce strikes me as a similar situation. The marketplace is in a correction mode, all right.
The playing field is shifting. Both consumers and corporations will have to innovate, reassess, and sometimes change their ways, and investors will have a lot to weigh in this transforming landscape. Such changes do yield opportunities for savvy investors, though. Bon appetit.
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