Appetite for (Bigger) Change

04 Mar 2011 – Jennifer Biringer

Could ‘access’ become the newest market trend? There are encouraging signs that providing basic human needs like food and education to those that may not have them is being seen as a powerful business opportunity. University of the South recently announced plans to reduce its tuition by 10% in a bid to both increase access to a small liberal arts education and attract a more talented pool of applicants. (True though, a 10% reduction on a very pricey tuition is still pricey!) Meanwhile, on the food front, Walmart has announced a commitment to reduce the cost of healthier food while increasing the amount it pays to small and mid-sized farmers. Are these commitments early signs of a broader trend to redistribute value towards the consumer (and, in some instances, suppliers)?

That these efforts make good business sense is hard to dispute. Walmart is suffering with same-store U.S. sales falling for the second consecutive year while it simultaneously faces food price hikes and calls from stakeholders to honor its responsibility as the nation’s largest food retailer to meet the twin challenges of obesity and under-nutrition. Cutting prices to reach a section of consumers who couldn’t otherwise afford pricey healthier food brands helps Walmart retain loyalty within its existing consumer base and potentially grow it by wooing new consumers who may currently be paying more elsewhere.

But what about the societal impact of this food model? Surely health outcomes will improve if nutritious food is cheaper to consume. Some small and mid-sized farmers also win if they receive 10-15% more and are thereby able to cover the costs of managing their farms more sustainably. This latter commitment is impressive since most of Walmart’s sustainability goals to date have been met by leveraging what the retail giant does best – squeezing costs out of their supply chain (including redesigning their distribution networks, but also having suppliers foot the bill).

And yet for all the good of Walmart’s initiative, it is not addressing the systemic change that is needed to ultimately make more people healthier and to also put Walmart’s business on a more sustainable footing in the long term. Working within a model of hyper cost efficiency by necessity leads to cutting corners – continuing to ignore larger environmental and social externalities while working within a system of heavily subsidized, ever ‘cheaper’ commodities. In this sense, I wonder whether the extension of Walmart’s low-cost model to the sphere of nutrition really does represent another stage of Paul Roberts’ The End of Food. Food is not well matched with a capitalist model and the inertia against change is significant, says Roberts:

…transforming food production into something more sustainable isn’t simply a matter of exchanging one set of inputs for another or finding some new technology, but of developing a new way to think about food and food production. And given the political and intellectual inertia behind the existing system, what is becoming clearer all the time is that the battle over the next food economy will be as much about ideas as economics, and that the route to a truly sustainable food system isn’t likely to be the path of least resistance.

So how then can Walmart most meaningfully apply its heft? The answers are many, but a clear and timely one presents itself in the form of public policy reform with the reauthorization of the US Farm Bill next year. For Walmart to take a stand to help steer public dollars away from commodities with high embedded societal costs and towards more diverse, regenerative forms of agriculture – to allow healthy and nutritious ingredients to compete more fairly with their commodity counterparts, and thereby drive a more resilient source of inputs for the retailer – would be real change indeed.

Through our Appetite for Change project, SustainAbility is surveying executives and experts from the food sector and its partners (e.g. finance, venture capital, IT, government, and NGOs) to explore what emerging business models offer the most promise to create greater access to nutritious and sustainable food. What are your favorite examples? We look forward to sharing the results of our efforts on our website later this spring.