It may come as a surprise that Costco is one of the largest distributors of organic food products in the United States. In fact, according to CEO Craig Jelinek, Costco sells so much organic produce that they can’t keep up with their customer’s demand for it.
“We cannot get enough organics to stay in business day in and day out,” Jelinek told investors during a shareholder meeting.
In order to tackle the problem of not having enough produce, Costco came up with an innovative idea: To buy land and equipment for farmers so they could start growing organic produce for them.
The project is still in the beginning phases. So far, Costco has only worked with one partner, the San Diego-based produce wholesaler Andrew & Williamson Fresh Produce. They loaned money to the organic farmers so that they could buy equipment and 1,200 acres of land in the Mexican state of Baja California.
Although other retailers have helped farmers financially with similar loan programs, this is one of the only initiatives that is meant to encourage farmers to go organic.
The reason retailers encouraging suppliers to go organic is so rare in the food industry is because it can take many years and lots of money to transition from conventional to organic farming. Land that is needed to grow organic food is scarce and usually very expensive, making Costco’s initiative even more impressive.
This project came about as a response to the increased demand for organic products. According to the Organic Trade Association, sales of organic food jumped up from $11.3 billion in 2004 to $35.98 billion in 2014.
“Demand is increasing. But we’re not seeing the same level of farmland,” says association spokeswoman Angela Jagiello. “We’re not seeing the level of growth we need in domestic supply to meet demand.”
This is not the first time Costco has spent money to increase their supply of organic food. Costco has been buying cattle for the last year and is contracting with owners of organic fields in Nebraska to have ranchers there raise livestock for their organic ground-beef program.
Costco’s projects to help local farmers grow organic produce will boost their supply so it can meet this new increased demand for organic food. It will also help local farmers thrive and reduce the need for imported food products, which have been found on multiple occasions to contain high levels of pesticides, antibiotics and harmful bacteria.