Is Walmart our best hope for food policy reform?
Photo: Code PoetTwo years into the Obama administration, most of the energy around food-policy reform resides in the East Wing, in the form of the first lady’s Let’s Move! campaign. So far, Let’s Move has been about Michelle Obama pursuing what I have called a “soft power” campaign — that is, using her stature to nudge private companies to reform their ways in the absence of real policy change.
So far, the centerpiece of Let’s Move! has been a non-binding deal the first lady and her staff worked out with Walmart in January, in which the retail giant vowed to push down the prices of the fruits and vegetables it sells as well as push its processed-food suppliers to cut down on added sugars and fats. (Walmart wields tremendous power in the U.S. food system — it owns a commanding 25 16 percent share of the U.S. grocery market.) [See correction on Walmart’s grocery market share below.]
The Let’s Move! crew remains enthusiastic about the Walmart deal. At The Atlantic‘s “food summit” this week, Sam Kass, the White House chef and food-policy guru who spearheads Let’s Move, was asked what facet of the program would have the greatest impact going forward. He replied:
Certainly the Walmart commitments around reducing the cost of fruits and vegetables and making sure that the healthy items are at least as close to being the same price as less healthy items, for example wheat bread versus white bread. Why should whole wheat bread be any more expensive than white bread? They’re really going to try to work to make those prices the same. As well as reducing sodium and sugar where possible, [in] some pretty dramatic numbers. We feel really good about that.
As I’ve written before, I’ve got no problem with the globe’s biggest retailer using its market power to make junk food less junky, or fresh produce more affordable — so long as the latter isn’t achieved by further squeezing farmers’ wire-thin profit margins. But the Walmart “commitment” is purely voluntary — and thus very much secondary to another commitment, this one legally binding: the need to maximize profit for shareholders.
In a recent interview with The Wall Street Journal, Walmart CEO William Simon spoke bluntly about that commitment. The retail behemoth’s share price has been dropping of late; in the interview, Simon is addressing not East Wing do-gooders but rather hard-hearted investors looking for return on capital invested. Get this exchange:
WSJ: Is Wal-Mart as focused as it needs to be on offering the lowest possible prices?
Mr. Simon: A lot of things have distracted us from our pricing mission. We got enamored with presentation as an example. We walked people through our [remodeled] stores and they were gorgeous.
But they cost more. And if you spend more on your building, your prices can’t be as low as you want them to be. “Every Day Low Price” can’t come from the supplier because they have to make money too. “Every Day Low Price” has to come from every day low cost, which means we have to operate for less. Sustainability and some of these other initiatives can be distracting if they don’t add to every day low cost. [Emphasis added.]
In other words, when push comes to shove on the profits front, “sustainability and some of these other initiatives” start to look pretty inconvenient from the corner suites of Bentonville, Ark. Simon’s remark made me think of a statement by another Walmart exec, Vice President of Corporate Affairs Leslie Dach, at the time of the company’s Let’s Move announcement. From a February The New York Times article:
By lowering prices on fresh fruits and vegetables, Wal-Mart says it will cut into its own profits but hopes to make up for it in sales volume. “This is not about asking the farmers to accept less for their crops,” he [Dach] said. [Emphasis added.]
You have to wonder, as Walmart struggles to keep its share price moving upward under tough economic conditions, if the company will adhere to Dach’s non-binding pledge regarding farmers. If Walmart decides to push fruit and vegetable prices down by exerting pressure on farmers — as it has done to all of its suppliers since the glory days of Sam Walton — we could see yet more consolidation in the fruit-and-veg sector, more midsized veggie farms going out of business or scaling up to gargantuan size.
In general, I think that Walmart’s Let’s Move agreements might bring some slight improvements to a food system geared to churning out cheap junk, but they can’t and won’t be transformative. The creed of “Everyday Low Prices,” the zeal to churn out profit by maximizing sales volume and minimizing cost, lies at the root of our food-system dysfunction. Relentless cost-cutting means pressure to move environmental destruction off of corporate balance sheets, creating ecological sacrifice zones. It also drives companies to pay workers as little as possible, creating a vicious circle in which we need cheap, low-quality food in order to feed millions of low-wage workers.
In his WSJ interview, Walmart’s CEO, who commands our nation’s largest private labor force as well as Mexico’s, made this interesting statement: “We are watching our labor [costs] very carefully, from an expense standpoint, but it is not good business to cut your labor to the point that your shelf availability is not where you want it to be.”
It also bears noting that Walmart has thus far refused to sign the Coaltion of Immokalee Workers‘ pledge to pay an extra penny a pound for tomatoes, which would lift the wages of thousands of farm workers above the poverty line. Evidently, pinching pennies is still central to Walmart’s bottom-line success. As long as that’s true, it offers little real contribution to the effort to reform the food system.
[Correction: In the original version of theis post, I had Walmart’s market share at 25 percent, based on mistaken number crunching I did from data from this USDA report. The correct calculation is 16 percent market share. But Walmart’s market share is still significantly higher than any of its competitors — Kroger, the second-largest grocery vendor, has about a 10 percent share. So the adjective “commanding” still applies.]