You probably caught the headlines a few months back about Wal-Mart entering the market for local food (defining it as food produced and sold within the same state, an arbitrary definition at best). Today's New York Times features an article about the store's plan to make food healthier. One of the plans is to drop the price for fresh fruits and vegetables.
Using fresh food as a loss leader is ludicrous as a solution to getting more fruits and vegetables into the mouths of Americans. In fact, it misses the mark entirely and potentially has harmful repercussions for the quality and amount of fresh food available to us. It might be a little counterintuitive, but let's think this through.
As the perceived value of fruits and vegetables increases, your willingness to pay for them increases. If you're willing to pay more, the price the farmer gets increases. As the price to the farmer goes up, his incentive to grow that food for you also goes up. When he grows more, supply of fresh food in the market increases and, all else being equal, lowers the market price of that food. Basic needs, flavors, and headlines all influence demand for fresh food, and as you see more value, you probably eat more fresh food and push the market price upward (again, all else being equal).
Wal-Mart is trying to artificially diminish the perceived value of fruits and vegetables. By lowering consumers' expectations about what they should have to pay to eat fresh food, Wal-Mart fools the market and gives farmers no reason to continue growing fruit and vegetable crops. By dropping prices on fruits and vegetables, Wal-Mart isn't making more fruits and vegetables accessible to people who think they can't afford to eat well; it's making it less appealing for farmers to grow specialty crops. If Wal-Mart's approach takes hold, we will see fewer farmers choosing to grow non-commodity crops, and instead of more people being able to eat fresh foods, fewer of us will (even those of us who can afford to pay full price for it). Wal-Mart has chosen the wrong point to press on to serve demand for fresh food and get people to eat better.
Leslie Dach, of Wal-Mart's corporate affairs group, is quoted as saying, "This is not about asking the farmers to accept less for their crops." But how can it not be? It is not in the farmers' interest to have their crops devalued, even if the wholesale price they're getting from Wal-Mart is a fair one. Farmers who sell to Wal-Mart are forced to "accept less" because Wal-Mart is sending a message to the world that no one should have to pay much to eat their food. You'll notice there are no quotations in the article from farmers who supply Wal-Mart.
I contend that there's a better way for farmers and for eaters, and that way does not include a behemoth controlling the interaction between the two. In a post I wrote a few months ago, I mentioned that when you buy fresh food, you're now paying intermediaries far more than you pay the farmer. Do you really value the trucking and storing and advertising and grocery store cashier more than you do the soil, the water, the sweat that went into producing your food? You don't buy food because you think the wholesaler that got the food to you did a really great job; you buy it because you think it's going to meet your taste, nutritional, maybe even emotional needs. The farmer imbues your food with those qualities, not the grocer or anyone else. So, why not start paying the farmer an amount that reflects the value they provide you?
Plovgh is developing a way for you to do that. We get that it's not always easy to pay the farmer because to do so, you have to find her. We want to pull down the barrier between people and farmers so that you have more control over who feeds you. It doesn't solve everything to put the farmer and the eating people into direct relationships, but it certainly upholds balance and eliminates the forces that keep the makers of fresh food separate from the people who need it.
This article is also posted at Plovgh.
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Now lets look at Wal-Mart and Farmer John. If Farmer John has 100,000 eggplants to sell, and Wal-Mart wants to sell them for $1 each, and is willing to pay Farmer John $.50, he makes $50,000. If Whole Foods is selling them for $2 each and is willing to pay Farmer John $1 each, he makes $100,000. Why would he sell to Wal-Mart? If the market exists to make $1 an eggplant he will sell them for that.
I don't buy produce at places like Whole Foods, you know why? Too expensive. I have a grocery budget, and I personally feel veggies are overpriced, everywhere. If Wal-Mart sells them for less, guess what, I will buy their fresh veggies instead of frozen.