Costco is making a move that is rarely seen in the grocery industry. Demand for organic produce has increased so much that they've depleted their stocks and have come up with this solution: Lend money to farmers to help purchase land and equipment .
They loan farmer money, the farmer uses the money to buys land and Costco get paid back when the organic food is delivered to them. It's a win for both sides.
Whole Foods organic sales was recently surpassed by Costco, selling $4 billion in annual organic produce. Costco is now set to become the largest organic produce distributor in the U.S..
“We cannot get enough organics to stay in business day in and day out,” said Costco CEO Craig Jelinek.
The company has launched it's pilot program to resolve this situation. Costco has helped San Diego-based Andrew and Williamson Fresh Produce purchase 1,200 acres in Mexico along with the necessary equipment to farm it. The return on investment works by Costco getting first choice to purchase whatever Andrew and Williamson grow on the property.
Unfortunately there is no public plan to take the program further, though there have been many conversations going on behind closed doors about it. “The problem in the minds of farmer is: ‘We may go down this road and what happens if something bad happens?’" says Jeff Lyons, Costco’s senior vice president of fresh foods. "We have to make sure we don’t get them in a position of financial trouble. We need to make sure the loans are totally secure.”
An investment in organic food is probably one of the best things an individual can do. Seeing one of the largest food retailers in the world do this is unusual but also an amazing move.
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