Saturday, February 27, 2016

Move Over, Whole Foods: Costco Is the New King of Organic Groceries

The membership-based grocery chain has been leading the surge in big box going all-natural.

Organic produce and $1.50 hot dogs: That’s what Costco does.
According to an analysis released Wednesday by financial firm BMO Capital Markets, the free-sample-slinging grocery chain is projected to sell just over $4 billion in organic products this year, edging out $3.6 billion by Whole Foods to take the national lead. To be fair, Costco is the second-biggest retailer in America overall—Walmart is the perennial champion there—so its percentage of organic to nonorganic foods is likely much lower than Whole Foods’. But volume and product diversity are just some of the perks that come with each store being the size of an airplane hangar. 

Still, Costco didn’t conquer the organic market accidentally. Expanding its offerings has been part of a calculated effort to capture younger consumers and lure them away from other retailers. The membership-based chain has increased its organic sales by about $1 billion in just six months, and it plans to push even harder. 

So, Why Should You Care? That big-box retailers are adding more organic options signifies that American food demands are changing. Not only are organic foods healthier for your body—they tend to have more antioxidants and lack the pesticide residue of traditionally produced food—but they’re also healthier for the environment. According to the U.S. Department of Agriculture, “The principal guidelines for organic production are to use materials and practices that enhance the ecological balance of natural systems.”

The market for organics increased 12 percent from 2013 to 2014 and is projected to jump double digits again going into 2015. The increase in demand has directly led to an increase in supply.

“While the challenges in terms of supply are still out there, they’re becoming less formidable because there are more organic suppliers and producers,” Richard Galanti, Costco’s vice president and CFO, said in a conference call with the analysts. “We’re working with them to commit more to it.”

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