Costco Moves Into Organic Investments to Ensure Supply

Costco is a retailer that believes paying its workers well and providing real benefits are profitable business practices. Now, the company is looking at working directly with farmers to ensure an ongoing supply of something that's in higher and higher demand from consumers – organics.

The idea is this: If Costco can invest in producers to help them transition to organic, then the retailer can rely on them through “first buyer” agreements and get more organic food for its stores. From the Seattle Times:

"Costco is loaning money to help San Diego-based Andrew and Williamson Fresh Produce buy equipment and 1,200 acres of land in the Mexican state of Baja California. But Costco is looking at expanding the initiative. The idea is to ensure a greater supply of organic foods at a time when demand is soaring but supply has not kept up.”

Costco is not alone in this. Chipotle (before the recent scandals) looked into running its own farms to ensure a ready supply of organic meat, a problem most recently highlighted when it had to stop selling pork for weeks at several stores late last year. In New York City, farmers markers are literally at capacity, unable to expand or bring in more fresh produce to meet unceasing demand.

Nationally, organics are booming. Sales of organic food jumped from $11.13 billion in 2004 to $35.95 billion in 2014, according to the Organic Trade Association. That is astounding growth, about 10 percent a year, far greater than the 2 percent for the food industry overall. And the fact is: If there was more organic produce, that number could be much, much higher.

Part of this is due to larger, structural issues – namely the vast control of agriculture by big companies, such as Tyson (chicken) or Monsanto (seeds). We've built a system that relies on monoculture, mass-produced, pesticide-heavy food, and transitioning that system into sustainable, organic agriculture is tough. Moreover, the vast majority of government incentives do not go to organic producers, but to the aforementioned mass farms.

Costco's move shows that companies have to play a more active role in their supply chains if they are to not only ensure ample supplies of ethical inputs, but also to meet consumer demand. If Costco can, through its investment, provide a larger supply of organics than its competitors, then you can bet this will show up on its bottom line.

Another thing Costco, Whole Foods and other retailers could do: Push for government policies that promote organics, through subsidy equality and an accounting system that incorporates organics' lower ecological footprints into pricing. Then the planet, consumers, and forward-thinking companies like Costco and its suppliers would all be better off.

Image credit: Stu pendousmat via Wikimedia