How ‘Big Food’ Has Taken Over The ‘Organic’ Market
• Wikipedia on Organic Food
HAS ‘ORGANIC’ BEEN OVERSIZED?
WHAT HAPPENS WHEN BIG CORPORATIONS TAKE OVER GREEN COMPANIES
How ‘Big Food’ Has Taken Over The ‘Organic’ MarketJul 12
• Wikipedia on Organic Food
• Who Owns What In The Organic Food Industry
• 2009 Organic Industry Structure (pdf)
• Organic Distribution & Retail Structure (1998-2006)
• Top 30 Organic Food Producers In North America
• Infographics by Philip H. Howard
• What Happens When Big Corporations Take Over Green Companies
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HAS ‘ORGANIC’ BEEN OVERSIZED?
By Stephanie Strom
New York Times
July 7, 2012
Michael J. Potter is one of the last little big men left in organic food.
More than 40 years ago, Mr. Potter bought into a hippie cafe and “whole earth” grocery here that has since morphed into a major organic foods producer and wholesaler, Eden Foods.
But one morning last May, he hopped on his motorcycle and took off across the Plains to challenge what organic food — or as he might have it, so-called organic food — has become since his tie-dye days in the Haight district of San Francisco.
The fact is, organic food has become a wildly lucrative business for Big Food and a premium-price-means-premium-profit section of the grocery store. The industry’s image — contented cows grazing on the green hills of family-owned farms — is mostly pure fantasy. Or rather, pure marketing. Big Food, it turns out, has spawned what might be called Big Organic.
Bear Naked, Wholesome & Hearty, Kashi: all three and more actually belong to the cereals giant Kellogg. Naked Juice? That would be PepsiCo of Pepsi and Fritos fame. And behind the pastoral-sounding Walnut Acres, Health Valley and Spectrum Organics is none other than Hain Celestial, once affiliated with Heinz, the grand old name in ketchup.
Over the last decade, since federal organic standards have come to the fore, giant agri-food corporations like these and others — Coca-Cola, Cargill, ConAgra, General Mills, Kraft and M&M Mars among them — have gobbled up most of the nation’s organic food industry. Pure, locally produced ingredients from small family farms? Not so much anymore.
All of which riles Mr. Potter, 62. Which is why he took off in late May from here for Albuquerque, where the cardinals of the $30-billion-a-year organic food industry were meeting to decide which ingredients that didn’t exactly sound fresh from the farm should be blessed as allowed ingredients in “organic” products. Ingredients like carrageenan, a seaweed-derived thickener with a somewhat controversial health record. Or synthetic inositol, which is manufactured using chemical processes.
Mr. Potter was allowed to voice his objections to carrageenan for three minutes before the group, the National Organic Standards Board.
“Someone said, ‘Thank you,’ ” Mr. Potter recalls.
And that was that.
Two days later, the board voted 10 to 5 to keep carrageenan on the growing list of nonorganic ingredients that can be used in products with the coveted “certified organic” label. To organic purists like Mr. Potter, it was just another sign that Big Food has co-opted — or perhaps corrupted — the organic food business.
“The board is stacked,” Mr. Potter says. “Either they don’t have a clue, or their interest in making money is more important than their interest in maintaining the integrity of organics.”
He calls the certified-organic label a fraud and refuses to put it on Eden’s products.
Big businesses argue that the enormous demand for organic products requires a scale that only they can provide — and that there is no difference between big and small producers. “We’re all certified, and we all follow the same standards,” said Carmela Beck, who manages the organic program at Driscoll’s, which markets conventional and organic berries. “There is a growing need for organic products because the demand is greater than the supply.”
Many consumers may not realize the extent to which giant corporations have come to dominate organic food. Then again, giant corporations don’t exactly trumpet their role in the industry. Their financial motivation, however, is obvious. On Amazon.com, for instance, 12 six-ounce boxes of Kraft Organic Macaroni and Cheese sell for $25.32, while a dozen 7.25-ounce boxes of the company’s regular Macaroni and Cheese go for $19.64.
“As soon as a value-added aspect was established, it didn’t take long before corporate America came knocking,” Mr. Potter says. He says he gets at least one e-mail a week from someone seeking to buy Eden, which is based in Clinton, Mich., and does about $50 million a year in sales. “Companies, private equity, venture capital, even individuals,” Mr. Potter says. “The best offer I ever got came from two guys who had money from Super Glue.”
Between the time the Agriculture Department came up with its proposed regulations for the organic industry in 1997 and the time those rules became law in 2002, myriad small, independent organic companies — businesses like Cascadian Farm — were snapped up by corporate titans. Heinz and Hain together bought 19 organic brands.
Eden is one of the last remaining independent organic companies of any size, together with the Clif Bar & Company, Amy’s Kitchen, Lundberg Family Farms and a handful of others.
“In some ways, organic is a victim of its own success,” says Philip H. Howard, an assistant professor at Michigan State University, who has documented the remarkable consolidation of the organic industry. Organic food accounts for just 4 percent of all foods sold, but the industry is growing fast. “Big corporations see the trends and the opportunity to make money and profit,” he says.
BIG FOOD has also assumed a powerful role in setting the standards for organic foods. Major corporations have come to dominate the board that sets these standards.
As corporate membership on the board has increased, so, too, has the number of nonorganic materials approved for organic foods on what is called the National List. At first, the list was largely made up of things like baking soda, which is nonorganic but essential to making things like organic bread. Today, more than 250 nonorganic substances are on the list, up from 77 in 2002.
The board has 15 members, and a two-thirds majority is required to add a substance to the list. More and more, votes on adding substances break down along corporate-independent lines, with one swing vote. Six board members, for instance, voted in favor of adding ammonium nonanoate, a herbicide, to the accepted organic list in December. Those votes came from General Mills, Campbell’s Soup, Organic Valley, Whole Foods Market and Earthbound Farms, which had two votes at the time.
Big Organic lost that round. Had it prevailed, it would have been the first time a herbicide was put on the list.
Kathleen Merrigan, a deputy secretary of agriculture, disputes that corporate interests are behind the increase in nonorganic materials deemed acceptable in “organic” food. “The list is really very small,” says Ms. Merrigan. “It’s really very simplistic and headline-grabbing to throw out those sorts of critiques, but when you get down into the details, there are usually very rational and important reasons for the actions the board has taken.”
The expanding variety of organic products is partly behind the list’s growth, Ms. Merrigan says, adding that the Organic Foods Production Act of 1990, which governs certification, has tried to check the powers of board members. It requires, for instance, that the board reconsider each substance five years after the last approval of it — though only just a few have ever lost their status.
“Yes, there are some large organizations that make up a portion of the board, but they’re not at all a majority,” says Will Daniels, senior vice president for operations and organic integrity at Earthbound Farms Organic, one of the country’s largest organic produce processors. “Four of the 15 board members could be considered from a corporate structure, a number that means they don’t have power to do much of anything.”
Those four are Earthbound, Driscoll Strawberry Associates, Whole Foods and the Zirkle Fruit Company. Only one of them, Earthbound, has a fully organic business.
Critics say the system has never truly operated as intended. “It’s been neutered,” says Mark Kastel, director of the Cornucopia Institute, an advocacy group.
Cornucopia began taking a harder look at the history of the addition of carrageenan and other substances to the accepted organic list after a bruising battle last December over the addition of docosahexaenoic acid algae oil, or DHA, and arachidonic acid single cell oil, or ARA. Its research led to a paper titled “The Organic Watergate.”
“After DHA got onto the list, we decided to go back and look at all of the ingredients on the list,” Mr. Kastel says. “The average consumer has no idea that all these additives are going into the organic products they’re buying.”
Mr. Potter of Eden Foods was initially supportive of the government’s efforts to certify organic products. But he quickly became disenchanted. He has never sought a board appointment, for himself or anyone at Eden. “I bought into the swaddling clothes wrapped around it,” he said. “I had high hopes the law and the board would be good things because we needed standards.”
By 1996, he realized that the National Organic Program was heading in a direction he did not like. He said as much at a National Organic Standards Board meeting in Indianapolis that year, earning the permanent opprobrium of the broader organic industry. “They think I’m liberal, immature, a radical,” Mr. Potter says. “But I’m not the one debating whether organics should use genetically modified additives or nanotechnology, which is what I’d call radical.”
Charlotte Vallaeys, director of farm and food policy at Cornucopia, found that two large companies, General Mills and Dean Foods, and the vast cooperative Cropp, which sells produce under the Organic Valley brand, “have held nearly continuous influence on the board.”
Such influence is not always obvious. For instance, early members of the board from Cascadian Farms, Muir Glen and Small Planet Foods were the chief advocates for allowing synthetics into organic production. By the time synthetics made it into the final rules, passed in 2002, all three had been swallowed up by General Mills. Tracy Favre, newly appointed to the standards board, works for Holistic Management International, a nonprofit that advises clients on sustainable agriculture. Holistic Management has done work for Dean Foods to help it address criticism of production practices for its Horizon organic milk brand.
Ms. Favre referred calls to the Agriculture Department.
Cornucopia has also lodged complaints about the board’s composition with the secretary of agriculture and the department’s inspector general. Based on one of the complaints, the inspector general is looking into how materials are added to the list.
Cornucopia has challenged the appointment of Ms. Beck, the national organic program manager at Driscoll’s, to a seat that is, by law, supposed to be occupied by a farmer. Officially, “farmer” means someone who “owns or operates an organic farm.”
The Organic Foods Act calls for a board consisting of four farmers, three conservationists, three consumer representatives, a scientist, a retailer, a certification agent and two “handlers,” or representatives of companies that process organic food.
Ms. Beck works with Driscoll’s organic farmers here as well as in Mexico and Chile, helping them develop and maintain their organic systems plans. “I work with growers from as few as a couple of acres to up to hundreds of acres,” she says.
But Ms. Beck does not own or operate a farm.
In contrast, Dominic Marchese, who produces organic beef in Ohio, has tried and failed three times to win a board appointment as a farmer. “I don’t have anything against her,” Mr. Marchese says, referring to Ms. Beck. “She’s probably very smart. But how do you select someone who’s not an organic farmer to represent organic farmers?”
Driscoll’s nominated Ms. Beck for one of the handler seats — but Tom Vilsack, the agriculture secretary, appointed her to one of the seats reserved for farmers.
Similarly, the three consumer seats have never been filled by anyone from a traditional consumer advocacy group like the Organic Consumers Association or the Consumers Union. Instead, those seats have largely gone to academics with agricultural expertise and to corporate executives.
“If you fill the slots earmarked by Congress for independent voices with corporate voices, you greatly mitigate the safeguards built into the supermajority requirement of the law,” Mr. Kastel says.
MILES V. McEVOY, deputy administrator of the National Organic Program, says that all appointments are cleared with the Agriculture Department’s general counsel. “The board is designed to have interests and for the members to have biases and represent their particular interest groups,” he said. “We are trying to make sure the board represents the diversity of the American public and of organic agriculture.”
Alexis Baden-Mayer, political director at the Organic Consumers Association, says her group has no quibbles with that goal: “I understand that there are very few 100 percent organic businesses left. But to add someone from a company like General Mills that has such a big interest in promoting genetic engineering, promoting nanotechnology, promoting a variety of things that are so antithetical to organic principles, is that really necessary to achieve diversity?”
She was referring to Katrina Heinze, a General Mills executive who was appointed to serve as a consumer representative on the board in December 2005 by Mike Johanns, the agriculture secretary at the time. The outcry over her appointment by advocates and independent organic consumers was so intense that she resigned in February 2006 — but rejoined the board late that year after Mr. Johanns appointed her to the seat designated by law for an expert in toxicology, ecology or biochemistry. During her second stint on the board, which ended last December, critics said they were shocked when she did not recuse herself from the vote to add DHA to the list, since its manufacturer sometimes uses technology licensed from General Mills in making it.
Ms. Heinze is responsible for food safety and regulatory matters at General Mills and has degrees in chemistry. She referred calls to General Mills, which in turn referred questions to the National Organic Program.
Driscoll’s was the only company that allowed an employee serving on the board to talk to The New York Times. The rest — even Cropp, the 1,400-farmer cooperative that sells more than $700 million in products, many under the Organic Valley brand — had more senior executives do the talking.
Organic purists would consider Cropp’s board representative, Wendy Fulwider, as one of the corporate executives on the board. During her tenure, Ms. Fulwider, Organic Valley’s animal-husbandry specialist, has voted almost in lock step with its corporate members, even though her vote may be supporting something Organic Valley does not allow its own members to do.
“Wendy’s a public citizen on that group and is supposed to vote what her own integrity is and not what our company’s view is,” said George Siemon, Cropp’s top executive and a former member of the organic standards board.
Ms. Fulwider surprised many observers at a board meeting in May by voting in favor of keeping carrageenan on the organic list. Before that meeting, Organic Valley was saying that it planned to find an alternative to the additive, and there is a long and active list of consumer complaints on its Web site about the cooperative’s use of it in things like heavy cream and chocolate milk.
Ms. Fuldwider has also voted to let organic egg producers give their chickens just two square feet of living space, when Cropp requires its own farmers to provide five.
Most controversially, she voted to add DHA and ARA to the list for use in baby formulas. Milk fortified with DHA commands premium prices, and Mr. Siemon said Organic Valley had to have a version of its milk with the additive “because that’s what the consumer wants.”
He said, however, that Organic Valley uses DHA derived from fish, not the variety Ms. Fulwider approved for the list. “For us, algae didn’t seem like the real deal. It’s almost like a wannabe,” Mr. Siemon says. “But hey, what do I know? I’m told all the studies showing the benefits of DHA are based on the type from fish oil, so we use the type from fish oil.”
Mr. Siemon says Organic Valley’s goal is to eliminate all additives from its products. The cooperative, for instance, is working to find a substitute for carrageenan, which it uses to prevent separation in products like cream and chocolate milk.
AMID such issues, Mr. Potter has tasked his daughter, Yvonne Sturt, to find a way to preserve Eden’s independence after he’s gone. Four of his children are now involved in the business and, he says, they must earn any control of the family company.
“People keep telling me that all the work we’re doing with organic farming and agriculture and processing, some of that could be deemed charitable work,” he says. “Maybe we should start a church.”
WHAT HAPPENS WHEN BIG CORPORATIONS TAKE OVER GREEN COMPANIES
July 28, 2009
It is a fairly familiar story in business. Someone has an idea, a passion. He or she builds a spectacular small business around that idea, builds a reputation for creating something really unique, and people love the business.
Then, the owner sells the company to a large corporation.
Now there are lots of reasons why an owner might sell out. Maybe he/she faces cash flow problems and couldn’t keep the doors open otherwise. Maybe the owner is getting ready to retire. Often, the company has grown too large for the original management team to handle.
Unfortunately, the events after the buyout follow a predictable pattern. At first, the acquiring company leaves everything alone. After all, the company they bought was usually profitable, growing, and had a loyal customer base. Why mess with success? Usually, all that happens is the top manager, or some members of the management team, travel to the corporate offices a few times a year, and explain what is going on. Often, the big company will give support, like buying new equipment. For a while, everyone is happy. But then, something happens. Maybe the acquired company misses profit targets, maybe some members of the original management team leave, and the big company starts to exert its control. They start to send consultants, there is a lot of talk about “synergy”, “integration” and “efficiencies”. Often, the first executives to arrive from corporate are HR and Finance.
Gradually, everyone who shared the vision of the founder leaves, and the ethic of the parent company starts to take over. For most large, publicly traded that means focusing on squeezing another penny per share earnings out at any cost, using cheaper ingredients, scrimping on customer service, and soon, whatever made the company special in the first place is gone.
When this happens in the organic market, we find it particularly disturbing since many people with an interest in natural and organic foods rely on the reputation of the manufacturer. When companies start to cut corners, many people won’t even notice, relying on the reputation of the old company.
Many people who buy organic and natural products are particularly interested in supporting small companies, and family farms. They want to feel connected to their food, and know that they companies producing it feel the same way. Knowing this, many large companies hide the fact that they own many of the top organic brands…