Whole Foods, Wild Oats promote locals; farmers, producers gain

Dairy general manager Matt Lucas began bringing the glass bottles himself from the Morning Fresh farm in Bellevue, Colo., 60 miles north of Denver. Until then, Morning Fresh had long made its name on home deliveries.

Since his Whole Foods deliveries began in 2004, Lucas estimated, his dairy’s sales have increased 20 percent. Morning Fresh now sells at least 1,000 gallons a week to supply a Whole Foods distribution center serving 10 stores.

"It’s a breath of fresh air to get involved with a group like that. They were so excited to get our product in their stores,” Lucas said.

By strengthening — or, as some farmers say, returning to — their commitment to local products, Austin, Texas-based Whole Foods and Boulder-based Wild Oats Markets Inc. are fending off big chains like Wal-Mart Stores Inc., Kroger Co. and Safeway Inc., which have expanded their own organic offerings and put pressure on the smaller "natural” grocers.

"With Wal-Mart barging into the lower-end organic sales, this is a way these other retailers can differentiate from what Wal-Mart is doing,” said Dan Hobbs, a cooperative development specialist with the Rocky Mountain Farmers Union.

Nutrition Business Journal valued the natural foods market at $23 billion in 2005, up 14 percent from the year before. Whole Foods Market Inc. is in the process of a takeover of Wild Oats and expects to close its purchase in May.

Chains have long sought local suppliers to keep distribution costs down. But the influence of top chefs, farmers markets, Michael Pollan’s book "The Omnivore’s Dilemma,” and concerns about the environmental effects of shipping food long distances have raised shoppers’ interest in buying local. The U.S. Department of Agriculture listed 4,385 farmers markets nationwide in 2006, up 18 percent from 3,706 in 2004.

Small local growers often cannot offer lower prices than large-scale operations that benefit from economies of scale and cheaper labor.

But fuel costs for shipping food are less for shorter trips, which in turn often require less packaging to preserve food. Buying local also shortens the time it takes produce to get to market, preserving nutrients and freshness, the Center for Food & Justice said in a December report.

The center is part of the Urban & Environmental Policy Institute based at Occidental College in Los Angeles.

Farmers say there are other benefits, too.

"Money gets recycled within the local economy. ... You can support your own communities and your own people very well,” said Steve Ela, who runs the 100-year-old Ela Family Farms in Hotchkiss, Colo. The farm about 160 miles southwest of Denver supplies organic fruit and applesauce to Whole Foods.

The grocery chain has launched a program to loan $10 million annually to help independent local producers around the country expand. Whole Foods holds seminars around the country to teach producers how to get products onto shelves — and how to command premium prices by emphasizing their local roots.

When it held its first seminar in Colorado in February, it expected 70 growers to attend. Instead, about 130 came, said spokeswoman Cathy Cochran-Lewis.

"It’s a good opportunity for a lot of producers in this environment where the big chains have pushed prices with their buying power,” said Marilyn Wentz of Prairie Natural Lamb in the plains town of Strasburg. "They have pushed prices so low, it’s really hard for smaller and medium-sized producers. This is one hope they have.”

Lucas estimated his profit margin would be 12 percent dealing with a mainstream grocery chain. "At Whole Foods, we can get 30 percent, which is wonderful for us,” he said.

Dressed in fleece vests and shorts, Whole Foods executives emphasized that barcodes that became required as Whole Foods grew are no longer needed; the company provides separate codes. Grower-producers, they said, can choose to supply a single store or a whole region.

"That’s absolutely huge for growers,” said Hobbs, a farmer with 15 acres in Avondale. He noted that was a major change from several years ago, when a cooperative was told by Whole Foods it would have to ship goods to a distribution center in Texas to sell to Colorado stores.

Whole Foods spokeswoman Ashley Hawkins said the company’s $565 million takeover of Wild Oats, which last summer launched its own program promoting local items, shouldn’t affect its local growers program.

Safeway and Kroger representatives did not respond to messages seeking comment for this story. Wal-Mart said it seeks local suppliers whenever possible.

"Our focus is the same as it’s always been: to make sure we have the quality products our customers want at a value,” Wal-Mart spokeswoman Karen A. Burk said.

Whole Foods defines a local product as having traveled less than seven hours to get to the store.

It sells more than 200 produce and floral items from more than 60 local growers in the region covering Colorado, New Mexico, Kansas and Missouri. Overall, it does business with more than 2,400 independent farms.

Customers’ desire for fresh produce year-round means not everything can be local, just as farmers markets tend to be seasonal.

"We are the farmers markets eight months of the year,” said Paul McLean, regional vice president of purchasing.

Whole Foods counted $5.6 billion in sales in fiscal 2006 at 186 stores, while Wild Oats had annual sales of about $1.2 billion and 115 stores. By comparison, Kroger Co. reported $66.1 billion in sales in 2,468 stores.

As Whole Foods grows, it is bringing along some of its local suppliers.

Morning Fresh, with its 400 head of cows, does enough business with Whole Foods now that Lucas doesn’t deliver there anymore. Instead, Whole Foods visits the farm twice a week.

"Here’s this itty bitty farm with a nationwide company backing into our dock,” Lucas said.

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On the Net:

http://www.wildoats.com

http://www.wholefoods.com