Alfalfa Sprouts, Aisle 78

Wal-Mart's move into organic foods has small farmers and the health-conscious bristling

Organic is hot. You might think this would make small organic farmers happy. Well, they're not. Giants such as Kraft Foods Inc. (KFT ) and Dean Foods Co. (DF ) have grabbed a large chunk of the market, and now retail juggernaut Wal-Mart Stores Inc. (WMT ) plans to double its selection of organic offerings. "Wal-Mart has the reputation of beating up on its suppliers," says Richard DeWilde, an organic farmer who grows Swiss chard, parsnips, turnips, and kale on 100 acres in Wisconsin. "I certainly don't see 'selling at a lower price' as an opportunity."

Price pressure isn't the only thing that worries DeWilde. He and other farmers fear that the corporate giants could try to water down the standards for what is classified as organic food, which would facilitate more imports. "Wal-Mart already sources a majority of its products from China. Why not foods?" asks Ronnie Cummins, director of the Organic Consumers Assn. (OCA), a nonprofit group that promotes natural and organic food.

Wal-Mart didn't return phone calls seeking comment. But CEO Lee Scott has been clear about his company's goals. "We don't think you should have to have a lot of money to feed your family organic foods," he said at the company's annual meeting last year.

It's easy to see why the big boys are salivating over the organic market. It has grown 20% annually for five years, compared with 3% to 4% for the industry as a whole. And it's highly profitable. According to an OCA study, consumers are willing to pay 50% more for foods that have not been genetically modified.

Import worries are not unfounded. Cummins estimates that 10% of organic foods like meat and citrus come from abroad. Dallas-based Dean Foods, the biggest U.S. milk producer, buys organic soybeans from China and Brazil to make its best-selling Silk-brand soy milk.

Anxiety about standards is also legit. Large companies have already flexed their muscles in Washington. Last fall, the Organic Trade Assn., which represents companies like Kraft and Dean, lobbied to allow certain synthetic food substances in the preparation, processing, and packaging of organic foods. That outraged organic activists. Nevertheless, the bill was approved, and the new standards will go into effect later this year.

By Pallavi Gogoi

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