Wal-Mart to Drop Wild Oats Organic Food Brand

ENLARGE

Wal-Mart is dropping its Wild Oats organic food brand, according to sources, two years after introducing it as a way to bring inexpensive organics to a larger audience. Photo: Michael Reynolds/European Pressphoto Agency

By Sarah Nassauer

Updated April 25, 2016 7:43 p.m. ET

Wal-Mart Stores Inc. is phasing out its Wild Oats organic food brand, according to people familiar with the matter, dropping a line of products introduced two years ago in an effort to bring inexpensive organics to the masses.

The world’s largest retailer has unwound a complicated deal with private-equity firm Yucaipa Cos. that allowed it to sell Wild Oats pasta sauces, cereals and other shelf-stable products, the people said. The products will disappear from Wal-Mart shelves in coming months, they added.

Two years ago, Wal-Mart turned to Yucaipa as a faster way to get more organic products on shelves as competitors such as Kroger Co. and Costco Wholesale Corp. reported skyrocketing sales of their own natural and organic store brands. Yucaipa, which is run by billionaire Ron Burkle, bought the Wild Oats brand after the grocery chain was sold to rival Whole Foods Market Inc.

Now Wal-Mart is switching tactics, hoping to add organic products to shelves in other ways, including selling more fresh produce and adding more organic food to its existing store brand, Great Value, these people said. Wal-Mart would have to further expand its own network of organic-food suppliers.

Spokespeople for Wal-Mart and Yucaipa declined to comment.

Wal-Mart’s move to drop Wild Oats is “an odd step to take when we know they are trying to increase private-label penetration and trying to target the higher-income consumer,” said Laura Kennedy, principal analyst at Kantar Retail, a research and consulting firm. But if Wal-Mart was “losing money to a middleman, well, this is not a time Wal-Mart wants to be losing anything.”

More grocers are using organic food to lure shoppers to stores, especially more desirable well-heeled customers.

Sales of food labeled organic rose 16.7% to $13.4 billion for the year ended April 2, according to Nielsen data. Sales of all food rose 1.6% to $468 billion during that time.

Wal-Mart is the country’s largest grocer, but has been slow to become an organic powerhouse on the same scale, stymied by the food’s often higher production costs and unique supply chain.

Overall, Wal-Mart has been battling slow-growing sales and a shift to online shopping. It recently closed more than 150 U.S. stores.

In recent months Wal-Mart executives have said they are making a renewed push to increase organic-food sales. Adding food perceived as healthier is “not our affluent-customer strategy, its broad-based strategy, but it’s a key piece to being relevant with that customer base,” Wal-Mart Chief Merchandising Officer Steve Bratspies said in a November interview. Wal-Mart is adding more organic fresh produce and small organic brands to shelves, executives said.

Some Wild Oats products sold well at Wal-Mart, particularly staples such as pasta sauce priced at about $2 a jar, the same as nonorganic brands like Prego and Ragu, the people familiar with the matter said. But the brand didn’t grow as quickly as some at Wal-Mart hoped, in part because the products weren’t in every store and weren’t called out on Wal-Mart’s shelves at the time, these people added.

Last year, Wal-Mart began adding purple signage to shelves to help shoppers notice organic items, Mr. Bratspies said in November. “That is one thing I would say we haven’t done a good enough job on,” generally.

Wild Oats started out as a chain of natural-food markets and was purchased by Whole Foods in 2007. After a challenge from antitrust authorities and long court battle, Whole Foods agreed to sell dozens of Wild Oats stores and the rights to the brand name.

Mr. Burkle’s Los Angeles-based Yucaipa bought the brand around 2012, licensing it to Wal-Mart.

When Wild Oats hit Wal-Mart shelves in 2014, the retailer touted it as a watershed moment that created a new price position for organic food, about 25% lower than national brands, making the food accessible to all.

Write to Sarah Nassauer at sarah.nassauer