The Seattle Times is reporting that Costco has started investing in farmers to increase the supply of organic foods and keep pace with consumer demand.
“While other retailers might have loan programs for suppliers to upgrade equipment or offer financial incentives such as advance payments or long-term contracts, helping farmers buy land to grow organics appears to be unusual in the industry,” reporter Janet Tu writes.
The warehouse giant has struggled to supply its customers seeking organic products, one of the fastest-growing categories in food sales.
“We cannot get enough organics to stay in business day in and day out,” CEO Craig Jelinek reportedly told a shareholder meeting.
It is lending money to farmers for land and equipment to go into organic production.
Last year it bought cattle and is contracting with owners of organic fields in Nebraska to raise them to supply its organic ground-beef program.
While organic-food sales reached nearly five per cent of total food sales last year, organic farmland makes up only about 1 per cent of U.S. farm acreage, the newspaper reports.
“We’re not seeing the level of growth we need in domestic supply to meet demand,” Jagiello is quoted as saying. “It’s the No. 1 strategic issue facing the industry.”
Tu writes that Costco isn’t the first to take this step. Other organic suppliers, including Nature’s Path and Pacific Foods have purchased their own land and are raising crops and livestock.
The Times story cited statistics that say Costco’s sale of organic products exceeded $4 billion annually.
Demand for organic food is increasing at rate of eight to 11 per cent per year, compared to two to 2.5 per cent for food sales overall, he said.