The Atlantic Online
February 10, 2011
by Hank Cardello
As reported here by Corby Kummer, last month Walmart announced its commitment to aggressively market better-for-you products, make healthier choices more affordable, reduce levels of sodium, sugars, and trans fats, and address food deserts by building more inner-city stores. This is a first for the retail food trade and represents a new (and welcome) model.
This "cuddle capitalism" recognizes that corporations will be better served if they take into account the needs of their constituencies. In this case, Walmart is helping the public health community tackle the availability of nutritious foods and the elimination of suspect ingredients, while assisting its shoppers in the selection of healthier fare.
Whether the folks at Walmart really believe that eliminating trans fats or addressing food deserts is a societal imperative or not, one thing is certain: They have recognized the intersection of a marketing opportunity with a societal need.
What we're seeing here is the application of free-market forces to solving one of our most difficult societal problems. To date, no amount of consumer cajoling or regulatory pronouncement has improved the way we eat or reversed rising obesity rates. As I have written here before, it's time to unleash market forces to take on the problem.
Walmart is applying the lessons learned from its efforts to ameliorate environmental waste. Innovations such as concentrated detergents, which require less packaging, were born out of Walmart's demands to its suppliers. In this new case, the profit motive is at work to improve the nutritional quality of the American diet.
Translating sustainability success to food and nutrition represents enlightened self-interest at its best, and I am all for it ... because it will help drive a real solution to America's eating malaise as opposed to an ideological one.
Let's explore more closely some business reasons why Walmart's actions make sense for the company:
• A means to gain access to inner cities. Walmart historically has met fierce resistance when announcing plans to build stores in cities such as Chicago and New York. By leading the charge to offer more affordable nutritious foods and gaining White House support, Walmart now can serve as the white knight to solve the problem of food deserts. An A+ solution to a long-term sticky problem.
• Increased competitive advantage. Walmart has always been the low-price leader. Its size gives it the clout to squeeze its vendors so it can charge customers less. By taking the lead on providing more affordable healthy foods, Walmart elevates its image from purely the "price" brand to one that meets the requirements of a broader group of shoppers. This move effectively neuters the "mass appeal" grocery chains who typically compete on price (although not as low as Walmart) and offer higher perceived quality. Since Walmart's competitors have already lost the low price battle, now they risk capitulating on wellness. Expect to see Walmart's share of U.S. grocery sales increase from its already commanding 33 percent.
• A strategy to build the Great Value megabrand. By extending their Great Value brand to mean more than just price and value, Walmart has created a platform that it can use to potentially replace some national brands with its own. By setting minimum acceptable nutrition criteria for foods that it sells, the company puts heat on well-known brands to revamp their products or lose valuable shelf space.
It's time for other food corporations and retailers to take a lesson from Walmart: There is profit in fixing America's obesity mess.
Hank Cardello is a Hudson Institute Senior Fellow and Director of the Obesity Solutions Initiative.
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