Being the largest retailer in the world with revenue over $400 billion and over 2 million associates worldwide, Walmart faces internal pressure (from supply chain and procurement departments) and external pressure (from governments, NGOs, and consumer activists) to create sustainable, scalable, and replicable agriculture value chain programs around the world. Specifically since the estimated world population is going to exceed 9 billion by 2050, we need to increase 70% of food production to support the world's population. As the world's largest grocer, Walmart's "direct farm" program is intended to increase farming productivity and farmer's income by directly connecting farmers with markets, taking food waste out of the supply chain, motivating farmers to produce more with fewer inputs, and sourcing key agricultural products responsibly.
Under the direct farm program, local farmers would be asked by Walmart to grow a certain type of crop under conditions deemed acceptable to Wal-Mart. In return, these farmers would be provided with modern training and methods as well as initial startup materials such as seeds. More importantly, Walmart would purchase the entire production at a set price directly from the farmers, thereby setting – but also guaranteeing – price and demand to the farmers. This way, the farmers can sell more (due to higher yield) at a higher price due to direct selling (see video). At the same time, Walmart can secure its supply of affordable, high-quality, and fresh food worldwide.
After launching the direct farm program in China, over 800,000 farmers participated in Walmart's "direct Farm" program and increased their earnings more than 10 times by the end of 2010. As many direct farm partners are celebrating their success in China, I wonder if this program will be successful in Brazil and India.* Only time will tell…
* For details about Walmart's direct farm program in China and elsewhere, see: Yeh and Tang, "Wal-Mart Direct Farm And Heritage Agriculture: A "Fresh" Take On China And U.S. Supply Chain," UCLA Anderson School Teaching Case, 2013.
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