For Organic Farmers, Costco is the Future

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Warehouse retailer Costco is big business for organics. With just under 700 locations, the chain cleared $4 billion in sales last year—just from organic produce. That’s nearly 25 percent of what Whole Foods Market earned in 2015 across all categories. Organic food is changing the landscape of Costco so dramatically that the chain has just done something pretty incredible: it began lending money to organic farmers.

“We cannot get enough organics to stay in business day in and day out,” Costco CEO Craig Jelinek told investors at the company’s annual shareholder meeting in Bellevue, Washington, earlier this year.

So, rather than try to steer its customers back toward the bulk junk food it was once best known for, Costco looked in the other direction—to the farmers.

With loans that help farmers buy more land and equipment to grow organic food, Costco is seeing a return on its investment.

“By helping [farmers] with financing, we got access to and purchased about 145,000 cases of organic raspberries that we normally would not have access to,” Jeff Lyons, Costco’s senior vice president of fresh foods, told the Seattle Times.

“Because they normally would not have done the deal or could not have done it. Or, if they could have, we may not have gotten first dibs.”
Demand for organic food is on the rise in all channels, but it still only makes up about 5 percent of total food sales. But only 1 percent of all U.S. farmland is certified organic. You don’t need a calculator to see the issue: America needs more organic farmland.

While Costco’s lending program is still in development, it’s ripe with possibility.

“The challenge for the farmer is: ‘We may go down this road and what happens if something bad happens?’ We have to make sure we don’t get them in a position of financial trouble,” Lyons told the Times. “We need to make sure the loans are totally secure.”

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Costco cart image via Shutterstock

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