business news in context, analysis with attitude

Fortune reports that Wal-Mart’s environmental initiatives may have gone a long way towards melting the frosty relationship between the retailer and Seventh Generation, one of the nation’s more prominent manufacturers of non-toxic products.

According to the story, Seventh Generation CEO Jeffrey Hollender once equated selling his products in Wal-Mart as akin to selling his company’s soul to the devil. Now, however, he is admitting to a change of heart…though no final decision on doing business with Wal-Mart has yet been reached, and Hollender isn’t even sure if the company has the capacity to service the Wal-Mart account.

“The change of heart, Hollender said, came as the result of the retailer's broad-based sustainability efforts, a private meeting he had with CEO Lee Scott late last year, and an internal review of 17 retailers that graded each on their commitment to greener business practices,” Fortune reports. Seventh Generation currently does business with companies ranging from Target to Walgreen.

“Such a move might also not go down well inside the company's Burlington, VT, headquarters,” Fortune> writes. “Some employees think Wal-Mart's largely lower-income clientele should have access to Seventh Generation's products, while others recoil at the idea of selling to a company whose public image is so tarnished.”

KC's View:
There also is the potential problem with Seventh Generation’s core consumer base, at least some of whom might boycott the company’s products if it does business with Wal-Mart.

However, what should be more worrisome to Hollender is the potential impact that such a business decision might have on the company’s infrastructure. Seventh Generation generates about $100 million a year in sales; Wal-Mart’s annual sales are more than $350 billion. Virtually overnight, Wal-Mart could account for a large percentage of Seventh Generation’s new business, and could also end up putting all sorts of pricing pressures on the company. In other words, it could transform Seventh Generation – but in ways that have nothing to do with commitment to environmental purity.

Tough decision … especially because there’s gold in them thar’ hills, and it is hard to leave that kind of revenue on the table. Even for a company that values its soul.