GlobeandMail

By Marc Gunther
Fortune

Paul Blank
WakeUpWalMart.com

The Associated Press
July 31, 2006                                  [back to top] 

One of Wal-Mart Stores Inc.'s most vociferous union-funded critics is taking its campaign against the world's largest retailer on the road with a cross-country bus tour from New York to Seattle with a stop in Connecticut.

The tour begins Tuesday and will feature several Democratic politicians.

WakeUpWalMart.com, launched last year by the United Food and Commercial Workers union, will visit 35 cities in 19 states for 35 days of rallies, town hall meetings and state fair visits to back its calls on Wal-Mart for higher pay and better health insurance for workers.

The tour plans to stop in Bridgeport on Wednesday with a rally on the steps of the City Hall annex. Among Connecticut Democratic politicians scheduled to appear are U.S. Rep. Rosa DeLauro, U.S. Sen. Joe Lieberman, U.S. Senate candidate Ned Lamont, gubernatorial candidate John DeStefano and Diana Farrell, a candidate for Congress.

Wal-Mart, based in Bentonville, Ark., dismissed the tour as a "political stunt" and said the group was attacking the wrong company.

"Wal-Mart offers associates $23 per month health plans, and in some places as low as $11 per month, creates tens of thousands of jobs per year and is selling more organic and environmentally friendly products," Wal-Mart spokesman David Tovar said.

Unions should let working families decide for themselves where to shop, Tovar said.

WakeUpWalMart.com said Democratic politicians appearing at some of the stops will include Lamont, Ohio U.S. Senate candidate Sherrod Brown, Iowa Gov. Tom Vilsack and former vice presidential candidate John Edwards.

The group approached Republicans as well but got no response, said Chris Kofinis, a spokesman for WakeUpWalMart.

Both sides have been sparring since WakeUpWalMart.com and Wal-Mart Watch launched separate campaigns last year to pressure Wal-Mart for change after failing for years to organize its stores. Wal-Mart Watch is backed by the Service Employees International Union. Both groups say they want to pressure Wal-Mart into becoming a better employer, not run it out of business.

In response, Wal-Mart hired a team of about 35 consultants at Edelman, which bills itself as the world's largest independently owned public relations company, as well as lobbyists in Washington, D.C.

The company has also launched a raft of initiatives, including adding more affordable health care plans for employees, adopting ambitious environmental goals and boosting diversity among employees and its suppliers.

Copyright (c) 2006, The Associated Press

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Wal-mart allows trade union

Wang Ping
CCTV.com
07-30-2006                   [back to top] 

Retail giant Wal-mart has established a trade union for its subsidiary in Jinjiang of southeastern China's Quanzhou city. This is the chain store's first trade union in China.

A week ago, 30 Wal-mart employees filed an application to the Trade Union of Quanzhou for membership and for the organization of a trade union of their own. The application conformed to China's trade union law and was approved.

Wal-mart China released a statement, saying it respected its employees' will and that it would assume relevant liabilities. The chained retailer entered the market of the Chinese mainland in 1996. So far, it has set up 59 subsidiaries in 30 cities, with over 23000 employees.

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What appalls Wal-Mart will improve America

Dominic Rushe
The Sunday Times
July 30, 2006                        [back to top] 

AMERICANS used to say “What’s good for General Motors (GM) is good for America”. These days Wal-Mart is the corporate body against which the country’s health is most often measured. The giant retailer is the largest single private employer in the US. It employs 1.7m people and accounts for $8.90 of every $100 spent in an American retail store. Last year Wal-Mart had sales of $316 billion (€250 billion). What affects Wal-Mart, affects America.

But unlike GM in its heyday, Wal-Mart is a divisive company. Millions love its low prices, millions hate the way it gets them.

Last week the company lost its fight against a proposal in Chicago to up the minimum wage that could have a significant impact on a move to raise the wage across America.

The measure requires retailers with more than $1 billion in annual sales and stores of at least 90,000 sq ft to pay workers at least $10 an hour in wages plus $3 in fringe benefits by mid-2010. The current minimum wage in Chicago’s state of Illinois is $6.50 an hour and the federal minimum is $5.15.

The median hourly wage for a retail salesperson in the Chicago metropolitan area in 2005 was $9.41, according to the US Department of Labour’s Bureau of Labour Statistics. So the proposal isn’t so far off base.

But Wal-Mart never gives up without a fight. The company is appealing (pause for laughter).

“This vote sadly puts politics ahead of Chicago’s working men and women. It sends a message that Chicago is closed for business, closed for development and closed for job creation,” said Wal-Mart.

But there are other cities with living wage laws including San Francisco and Washington. Both look pretty much open.

The Chicago bill is one of several that Wal-Mart and other large retailers are fighting across the country. So far none has passed into law. Earlier this month a federal judge struck down a Maryland ruling that increased the minimum wage.

The Retail Industry Leaders Association (RILA), a trade group that sued to overturn the Maryland law, is fighting to overturn a similar law passed by Suffolk County on Long Island, New York.

“The ordinance . . . is a clear disincentive for more than a dozen retailers impacted by it to locate or expand their operations in the city of Chicago,” the RILA president, Sandy Kennedy, said in a statement last week.This is not a worry shared by Wal-Mart rival Costco. The average hourly wage of employees of the warehouse club operator is $16. After three years a typical full-time Costco worker makes about $42,000. The company also picks up 92% of its workers’ health insurance.

Costco is the largest warehouse club operator in the US, beating the Wal-Mart-owned Sam’s Club into second place. A 2004 Business Week study found Costco employees sell 50% more per square foot of sales space, and contribute to profits almost 25% higher than Sam’s Club.

If he’s watching, and he is, Lee Scott, Wal-Mart’s chief executive seems unconvinced. In a speech last year, the world’s most powerful retailer characteristically tackled the GM analogy head on.

“Critics believe that Wal-Mart should play the role General Motors played after the second world war . . . [and] establish the post-world war middle class that the country is so proud of. The facts are that retailing doesn’t perform that role in the economy. Retailing doesn’t perform that role in any country,” he said.

That may have been true in the past, but as the country’s largest employer does Wal-Mart have the clout to destroy America’s middle class?

The tide may be turning against Scott. Republicans anxious about midterm elections and their unpopular president are warming to a rise in the minimum wage. The $5.15 minimum has not been raised since 1997 and a $2 increase is being considered. If passed it will further weaken Wal-Mart’s case.

What’s good for America may not be good for Wal-Mart.

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Wal-Mart workers in China form first union

Servihoo
29 Jul 2006               [back to top] 

US retail giant Wal-Mart Stores saw its first trade union formed for workers at one its 60 shops in China where it started doing business in 1996.

Establishment of the union was the initiative of some 30 Wal-Mart employees in the southeast province of Fujian, Xinhua news agency said Saturday.

For the past two years the world's biggest retailer had resisted efforts to set up local unions, which are all affiliated with the All-China Federation of Trade Unions (ACFTU) which was established by the ruling Communist Party and claims some 150 million members.

Wal-Mart has always maintained its employees were free to set up unions if they wished and insisted it was "in total conformity with Chinese law".

But at the start of July, senior Chinese official Wang Zhaoguo, who is also president of ACFTU, singled out Wal-Mart for failing to establish unions at its stores while proposing to make it compulsory for foreign firms to set up unions for employees.

According to China's trade union law, all employees have the right to join ACFTU, the country's only legal trade union.

However joining the union offers no guarantee for staff against exploitation, with the ACFTU often criticised by international labor rights groups for favoring business interests over workers' rights.

The nation's trade union law outlaws workers from forming independent unions or organising collective bargaining activities outside the ACFTU.

Since it arrived in China in 1996, Wal-Mart has opened 60 stores in 29 cities and is said to employ more than 30,000 people across the country.

China is a leading source of cheap goods for Wal-Mart's US operations, with 18 billion dollars' worth of merchandise procured in the country in 2004.

Wal-Mart is keen for a bigger slice of foreign markets as it battles sluggish sales growth at home, lawsuits over its labour practices and an image for brutal cost-cutting at the expense of employees and suppliers.

Nowhere is more enticing for foreign retailers than China, where booming consumer spending led by a growing middle class accounted for one-third of the country's economic growth last year.

Wal-Mart employs 1.7 million people worldwide, including 1.3 million in the United States, making it easily the world's largest retailer.

But in China, the group has lagged behind Carrefour of France, which has 78 stores. Britain's Tesco group has 31 stores in China and plans to open another 15 this year. German group Metro is another major foreign player.

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FRANKFURT, GERMANY: Wal-Mart will bail out, leaving it crying in its bier

THE NEWS TRIBUNE
July 29th, 2006                         [back to top] 

Wal-Mart Stores, admitting defeat in Germany’s giant but cutthroat retail market, announced Friday that it would sell its 85 stores in the country to a German retailer, incurring a loss of $1 billion. The decision to sell out to the Metro Group came two months after Wal-Mart sold its stores in South Korea. It amounts to a marked retreat by the world’s largest retailer from its breakneck global expansion.

In Germany, analysts say, Wal-Mart never got traction in a market characterized by unrelenting price competition, well-established discounters and the cultural resistance of shoppers to giant stores where vegetables and lawn mowers might be only aisles apart.

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Retailer Metro says it plans to buy out Wal-Mart's stores in Germany

MELISSA EDDY
July 28, 2006                [back to top] 

BERLIN (AP) - Wal-Mart Stores Inc. said Friday it will sell its 85 stores in Germany to Metro AG, a move that effectively ends a nearly decade-long effort by the world's largest retailer to crack the market in Europe's biggest economy.

It is the U.S.-based company's second international withdrawal this year, after Wal-Mart pulled out of the highly competitive South Korean market in May. The retailer is instead concentrating its growth efforts on China and Central America.

"As we focus our efforts on where we can have the greatest impact on our growth and return on investment strategies, it has become increasingly clear that in Germany's business environment it would be difficult for us to obtain the scale and results we desire," Michael Duke, a vice-chairman of Bentonville, Ark.-based Wal-Mart, said in a statement.

The deal with Metro, under which the German retailer will take over 19 pieces of Wal-Mart real estate and lease the rest of the other locations, remains subject to approval by authorities. Financial terms were not disclosed.

Duesseldorf-based Metro said it would book a one-time gain from the acquisition as the assets are worth more than the purchase price. The stores, which had sales near two billion euros ($2.55 billion US) in 2005, will be incorporated into Metro's Real Hypermarket brand.

Wal-Mart, which has more than 6,500 stores in 14 other countries and serves 176 million customers per week, expects to incur a pretax loss related to the transaction of approximately $1 billion for the second quarter of fiscal year 2007.

The company entered the German market in 1997 with the acquisition of the Wertkauf and Interspar hypermarket chains. But Wal-Mart's German stores, which employ 11,000 people, have struggled to break into the local market.

Sy Schlueter, chief executive of investment house Copernicus in Hamburg, said Wal-Mart had trouble winning over German consumers, who tend to be very price-focused and would rather drive to a different store if they know they can buy something cheaper.

National discounters such as Lidl GmbH and Aldi Einkauf GmbH put the heat on Wal-Mart's sales, he said, by having the same merchandise at prices that were often just as competitive.

Furthermore, Schlueter said consumers rejected some of Wal-Mart's signature features, like stores outside town centres, employees required to smile and heartily greet customers, or baggers at checkouts.

"These guys are businessmen," Schlueter said.

"The business had turnover, but if you lose money for 10 years, you get out. Wal-Mart wasn't here to prove their business model works, they were here to make money," Schlueter said. "Apparently even their patience is not unlimited."

At its annual meeting last month, Wal-Mart trumpeted its expansion abroad. Net sales for Wal-Mart last year amounted to $312 billion, with its international division seeing net sales and operating income rise 11.4 per cent.

But Germany is not the first foreign country where Wal-Mart has struggled. Analysts said the sophistication of South Korea's $26-billion discount market proved difficult for Wal-Mart, as the company failed to attract customers to the stores and housewives were dissatisfied with food and beverage offerings.

Wal-Mart also has struggled in Japan, known for its finicky consumers, but has lately boosted its investment there. In the last year, the company finished its push to gain a majority share of Seiyu Ltd. in Japan, as well as acquiring stores in Brazil and entering a partnership with a retail chain in Central America.

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Wal-Mart: 'Auf Wiedersehen' Germany, Hello India

Exiting Germany and South Korea a 'brilliant' move that will allow the No. 1 retailer to enter India and expand faster in China, analysts say.

By Parija B. Kavilanz,
CNNMoney.com
July 28 2006                          [back to top] 

NEW YORK (CNNMoney.com) -- Wal-Mart, a company that doesn't like to admit defeat, did so for the second time in months when it announced Friday that it would exit the German market where it's been hard-pressed to find success.

In May, Wal-Mart (Charts) announced it was pulling out of another challenging market - South Korea - where it operated 16 stores.

These setbacks may be humbling to the world's largest retailer, but some retail industry watchers say Wal-Mart is making some very clever moves at the same time.

"It's a brilliant decision by Wal-Mart," said Love Goel, CEO of Growth Ventures Group, an investment firm focused on retailers. "Korea and Germany's retail market is too competitive. Secondly, consumers there really aren't aligned with Wal-Mart's core value proposition of offering bottom-barrel prices."

Freed of having to worry about cracking the difficult German and Korean markets, Wal-Mart will probably now aggressively forge ahead with its plans to enter and expand into more lucrative markets -- primarily India and China, Goel and others think.

This is more a necessity than a "would-like" for Wal-Mart given that the retailer is keen to capture international growth opportunities as it faces market saturation in the United States, where it already operates close to 4,000 stores.

In that regard, "Let's fish where the fish are biting," is becoming Wal-Mart's modus operandi, said Craig Johnson, president of retail consulting group Customer Growth Partners.

"Even for the largest retailer in the world, you're not going to hit a home run everywhere you play," Johnson said. "If it's not working in Germany and South Korea you have to redeploy your resources to a faster-growing situation with more opportunity."

India and China, he said, are the two biggest growth engines of the future for Wal-Mart. "Leaving Germany is smart. It takes just as much management attention to butt your head against the wall in Germany and Korea as it does to crank up the engine in China and India," he said, implying that Wal-Mart can't afford to do both.

A retail nirvana in the east According to Goel, China and India have among the world's most lucrative retail markets, valued at $700 billion and $300 billion each.

China is ahead of India with 20 percent of its market characterized as "organized" with established retail chains, versus only 3 percent for India. India's remaining 97 percent is comprised of 12 million mom-and-pop shops.

"The $1 trillion Indian and Chinese retail sectors are much larger than Germany, Korea or even all of Europe put together," Goel said. Further, he estimates the retail sector in both countries will grow by at least 30 percent annually for the next decade.

Wal-Mart already operates more than 55 stores in China and is ramping up its growth strategy in the face of stiff competition from European supermarket operators such as French supermarket chain Carrefour and Germany's largest retailer Metro, which are expanding at a fast clip.

India plans The retailer isn't yet in India, but it could be getting close.

India's complex foreign direct investment, or FDI, regulations, currently bar international retailers from directly entering the market. In other words, international retailers who have set up shop in India have opted for franchising deals with local partners or entered into joint-venture partnerships with Indian companies.

The Indian government did somewhat relax its FDI rules earlier this year, allowing "single-brand" retailers such as Nike or Gucci to own 51 percent of their business operations in India. However, this still precludes Wal-Mart, since the retailer sells a variety of brands in its stores.

Wal-Mart spokeswoman Amy Wyatt told CNNMoney that the company recently won approval to set up a "liaison" office in Bangalore through which it plans to quickly study the India market.

She also agreed that Wal-Mart's exit from South Korea and Germany allowed the retailer to "focus on other opportunities like China and India."

Media reports in the Indian press earlier this month said Wal-Mart was in discussions with a leading Indian real estate firm DLF Universal Ltd. for a franchise deal. The reports suggested DLF plans to develop a number of malls around the country over the next five years with Wal-Mart stores located in a select number of locations.

A spokesman for Delhi-based DLF, who did not want to be identified, told CNNMoney that the company was in discussions with Wal-Mart but declined to offer details because the company is in a "quiet period" ahead of its upcoming IPO.

Wyatt declined to comment on the matter.

Given Wal-Mart's supply chain and distribution expertise coupled with its extensive merchandise mix and lack of competition in India, Goel said that if the retail behemoth gets its business off the ground there, it could "easily sustain triple-digit or high double-digit growth annually over the next 5 to 10 years."

Moreover, he also has an idea about how Wal-Mart could potentially bypass India's FDI roadblock.

"There is nothing stopping multi-brand, multi-channel retailers like Wal-Mart, Target, J.C. Penney, Best Buy or Home Depot from entering India tomorrow," he said.

How?

"The most optimal, capital-efficient way to enter the India retail market is through a multi-channel, direct-to-consumer model involving the Internet, TV, catalogs and mobile phones supported by warehouses to stock inventory and fulfill orders," he said. "This eschews the high real-estate costs for retail stores. India is also one of the largest Internet user populations in the world and twice as many cellphones as landlines."

"Best of all, this model circumvents current FDI regulations," he said.

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FDIC delays decision on Wal-Mart banking rules

India Daily
Jul. 28, 2006

The Federal Deposit Insurance Corp. on Friday said it was placing a six-month moratorium on applications for ownership changes for industrial loan companies, more commonly known as the Wal-Mart Stores Inc. case.

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Wal-Mart a victim of its own success

Stephen Ellis
GREENBACK
July 27, 2006                  [back to top] 

WHEN you are five times the size of your nearest rival, dominate the market and have annual sales of $US321 billion ($425 billion), where is there left to go? That is what Wall Street is asking about Wal-Mart, despite the retailer's buoyant financial results. Over the past year, Wal-Mart has tried to reinvigorate its share price by paring its famously low inventories even further, cutting labour costs, and depending less heavily on price competition by edging up its market. All this has lifted gross margins, which previously had been falling as sales grew too slowly to keep pace with operating costs. Yet, Wal-Mart's share price has recently drifted back down towards five-year lows touched last September.

International expansion remains the most plausible growth story that the world's largest retailer (and second-largest company, by revenue) can tell investors. Despite struggles in markets such as Germany and more recently Britain, foreign sales are growing at 30 per cent and now account for a fifth of Wal-Mart's revenues.

But it is the other four-fifths of the business that has Wall Street fretting, and where Wal-Mart is under most pressure to tinker with its winning formula - low prices, superb logistics and inventory management, a cheap non-union workforce and use of its buying power to crunch suppliers.

Wal-Mart's US same-store sales growth slowed to about 3 per cent in each of the past two years, half the level of the 1990s and lagging growth in US consumer spending.

During that period, smaller rivals such as Target were more successful at broadening their appeal beyond basic wares and attracting more affluent consumers. Meanwhile, "dollar store" retailers at the low end of the market also managed to grow faster than Wal-Mart by specialising in that niche.

Given its vast size compared to its rivals, more sluggish growth prompted investors to question whether Wal-Mart had maxed-out its "share of wallet" among the low and moderate income earners it largely serves.

Wal-Mart responded almost a year ago by launching its campaign to trim inventories and costs, and to lift sales by offering a smaller number of items per store, and focusing more space and attention on better-selling goods tailored for that store.

It also launched an ambitious 18-month program to remodel 1800 of its US stores to make them more physically attractive and hopefully induce affluent customers to stay longer and buy items such as clothing or electrical goods as well as basic groceries.

While the firm's efforts to cut costs appear to have paid off, and boosted gross margins and its bottom line, the strategy to lift top-line revenues in the US has been less successful - monthly same-store sales are still growing only half as fast as those at competitors.

Ironically, the store remodelling program itself is now seen by many as yet another factor holding back revenue growth, although it may pay off down the line.

As it attempts to regain momentum, Wal-Mart also faces political distractions that its rivals do not - ranging from an attempt in Maryland to pass a law forcing it to spend 8 per cent of its wages bill on worker health insurance, to skirmishes with unions in the US and Canada, and the ceaseless battle against reflexive local opposition whenever it tries to build a new store.

The firm also ran into well-orchestrated opposition from US banks to its recent bid to gain regulatory approval to offer a broader range of financial services, the outcome of which is still pending. Wal-Mart already has a large business offering services such as cheque cashing to the "underbanked" - low-income groups without bank relationships. While it denies plans to offer anything resembling "branch banking", financial services is potentially an important growth area - if it can gain approval.

Its struggle with the banks is symptomatic of a larger and puzzling problem for Wal-Mart - largely because of its immense success, it has become a focal point for whining from all sorts of US interests, some of it well-organised and well-funded. Unions moan over its employment practices and skimpy benefits, small and mid-size retailers complain over unfair prices, local politicians and self-proclaimed resident action groups vehemently oppose its new stores, and even upstream suppliers mutter about the tough deals they are forced into.

Media coverage of all this has rubbed off. Polling suggests around a third of Americans have a negative view of Wal-Mart. Investors fear that this too may harm growth, given the more affluent consumers it must attract to broaden its market may be among those most attuned to its critics.

Wal-Mart is undeniably competitive and ruthless, but most of the complaints against it are tenuous. In particular, the idea that it destroys good jobs and actually increases prices over time are likely wrong.

Studies by neutral economists suggest Wal-Mart creates about three jobs for each one it destroys, and its arrival in a market leads to a long-term fall of roughly 10 per cent in the prices of packaged consumer goods, such as toothpaste or laundry detergent, as high prices at the businesses so loudly opposed to its entry are forced down.

And while the firm clearly relies upon fairly inexpensive labour, it also generates a lot of jobs - globally, it employs 1.4 million people. Even the griping about benefits has become less true, as Wal-Mart attempts to offer more health coverage.

All this, if understood and accepted, may therefore silence the politicians and gladden the economists - but it doesn't do much for Wal-Mart's shareholders. While China, Brazil and India are great prospects in the long-term, investors will continue to ask a tougher question: where is US sales growth going to come from in the near-term?

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Wal-Mart loses battle in labour dispute

GlobeandMail                  [back to top] 

Wal-Mart Canada Corp. has lost its battle to have the Saskatchewan Labour Relations Board prohibited from hearing cases related to efforts to unionize stores in the province. In a written decision, Court of Queen's Bench Mr. Justice Frank Gerein said there was "absolutely no evidence" of attempts to interfere with the operations of the labour board or to require members of the board to read certain union documents that were highly critical of Wal-Mart. Wal-Mart had tried to argue the board is biased and should be prohibited from dealing with cases related to the chain. The United Food and Commercial Workers Union has applied to the labour relations board for certification to represent workers at Wal-Mart stores in Weyburn, North Battleford and Moose Jaw. Andrew Pelletier, vice-president of corporate affairs with Wal-Mart Canada, said the company is reviewing the decision. CP

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Organic for everyone, the Wal-Mart way

America's biggest company is also the world's biggest purchaser of organic cotton.

By Marc Gunther
Fortune                                 [back to top] 

NEW YORK (Fortune) -- The $300-billion global cotton industry uses more pesticides and synthetic fertilizers than any other crop. Cotton Inc., the industry trade group, says that's nothing to worry about, but you don't have to be a scientist to know that applying tons and tons of pesticides to the soil - more than 50 million pounds in the United States alone - probably isn't a good thing.

Just ask H. Lee Scott, the chief executive of Wal-Mart Stores (Charts), which in the last couple of years has become the world's biggest purchaser of organic cotton.

"We will not be measured by our aspirations," says Wal-Mart CEO Lee Scott. "We will be measured by our actions."

Wal-Mart saves the planet Well, not quite. But CEO Lee Scott's green campaign, which started as PR, is becoming a force of nature. (Read the story from Fortune.) Wal-Mart's unsentimental reasons for promoting sustainable fishing

"Those toxins don't stop at the field, but can leach into the waterways, and may eventually find their way into animals, food and children," Scott said in a speech last year.

You probably know by now that Wal-Mart has launched a sweeping drive to adopt business practices that are good for the environment. You may have heard that Wal-Mart has been selling organic cotton. This is the story behind the story - how and why the company got involved, and how it's changing an industry.

The story begins, not with Scott, but with a woman named Coral Rose. A native of southern California, Rose buys organic food, wears organic clothes and uses all-natural cleaning products for her home.

"I've lived an organic lifestyle for about 15 years," says Rose. Both her parents died of cancer; that'll get you thinking about chemicals in the air, water and food supply. Rose worked for the clothing chain Wet Seal before joining Sams Club, a division of Wal-Mart, as a ladies apparel buyer.

In the spring of 2004 - before Wal-Mart launched its sustainability initiative - she placed an order for organic cotton yoga outfits for Sams Club.

Although Sams Club is aimed at owners of small businesses, the stores stock a limited selection of women's clothes, as a "pick-me-up" for customers who are there to buy other stuff, Rose explains.

The pastel-colored yoga tops sold for less than $10, the loose-fitting pants for less than $14. They were a big hit - about 190,000 units sold out in 10 weeks.

That got Lee Scott's attention. "We gave our customers something they wanted, but something they might not have been able to afford at specialty stores," he said. It was an early sign that Wal-Mart's working-class and middle-income customers would be willing to buy "green" products, so long as they were affordable.

Wal-Mart began working with a nonprofit trade group called the Organic Exchange, which has been promoting the use of organic cotton around the world since 2002.

The company's buyers and suppliers toured organic cotton farms in Texas, California and Turkey, which is the world's biggest grower of organic cotton. One trip, to a farm near the town of Firebaugh, Ca., was especially memorable. They visited organic fields and then looked at a crop-dusting facility, to learn about chemicals and pesticides.

"There were crop dusters in the air the whole day. It was pretty intense," said Rebecca Calahan Klein, the founder and director of the Organic Exchange.

Today, Wal-Mart and Sams Club stock a range of organic cotton products - baby clothes under the Baby George brand, teenage fashion, and a line of bedsheets and towels. They've sold 5 million units of organic cotton ladies apparel in the last two years, insiders say.

In none of this was Wal-Mart an innovator. Patagonia converted its entire sportswear line to organic 10 years ago. Nike (Charts) promoted organic cotton, as did others, like Eileen Fisher and Timberland (Charts). Retail sales of organic cotton have doubled, from $245 million in 2001 to $583 million in 2005.

But the global supply was growing rapidly too, and some farmers who converted to organic methods, which can cost more, could not find buyers willing to pay a premium. They were forced to sell their crop into the conventional cotton market at lower prices.

Wal-Mart's entry has changed the game. Five years ago, global production of organic cotton amounted to about 6,400 metric tons. In 2006, Wal-Mart and Sams Club will use about 6,800 metric tons. "They will be the largest buyer, by far," says Klein.

Just as important, Wal-Mart has made a verbal five-year commitment to buy organic cotton, giving farmers the assurance they need to produce it.

Beyond that, Wal-Mart will bring visibility to organic cotton. "Wal-Mart has the biggest megaphone of every company in the world," Klein says. "As they have more organic products on their shelves, it will affect what consumers expect to see."

The Wal-Mart effect extends to the cotton-growing regions of Turkey. Kees Maris, a Dutchman who oversees a private organic cooperative of about 2,000 farmers called Mavideniz flew all the way to Wal-Mart's home office in Bentonville a couple of weeks ago to talk about organic cotton.

While other companies are also driving demand for organics - his farmers grow figs and apricots along with cotton - Wal-Mart is one of the few to get directly involved with the farmers. "Their approach is very positive," he told me.

To be sure, the organic cotton business remains small - less than 1 percent of the global cotton industry. Cotton Inc., by the way, argues that too much fuss is being made about pesticides and herbicides used by conventional methods.

"Farmers who live and work on their land have every personal and economic incentive to use fewer chemicals in production, not more," the organization says. You can find their point of view here.

The environmental case is put forth by the Organic Exchange and by an activist group called PANNA.

Make up your own mind, but know that the next time you shop, you are doing more than buying a T-shirt or a dress. You're voting with your dollars for one way of doing business, or another.

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Walmart to source up $30 million a year from India

NetIndia123
July 26, 2006                                   &n