Self-Sown Organic Food Marketplace Booming Federal Rules Needed But A Little Belated

A funny thing happened during the seven years it took to develop a national definition for “organic” foods.

While bureaucrats bickered and negotiated, the real world of farmers and markets and consumers just went about their business. Sales of organic foods boomed.

So last month, when the U.S. Department of Agriculture finally proposed federal standards for foods produced “organically,” it was playing catch-up to reality. Uniform regulations will certainly help promote further growth for the industry, but they’re no longer driving the marketplace.

“The market isn’t waiting for rules,” says Harvey Hartman, president of Hartman & New Hope, a Bellevue, Wash., market-research firm that has extensively studied the organic industry. “The market is moving at an exceptional pace. It’s the competitive juices that are flowing now.”

Organic producers have matured and grown more sophisticated, learning how to pack, distribute and market attractive, high-quality fruits and vegetables, just like the conventional big boys. And the arrival of packaged, processed organic foods - like canned tomatoes and frozen organic dinners - gave farmers a market for their ugliest-duckling produce.

At the same time, the expansion of large natural-food stores such as the Fresh Fields/Whole Foods chain helped create a steady demand.

As a result, in 1996, the organic industry raked in $3.5 billion in sales - tiny when compared with last year’s $421.8 billion in conventional food-store sales, but a huge leap for an industry that was selling $1 billion worth of goods annually just seven years earlier.

Hartman maintains that “the companies waiting for rules to drive the market will be losers.” That’s why some companies, including big mainstream players, aren’t waiting.

General Mills, for example, just started test-marketing a certified-organic version of its Gold Medal flour in Seattle and Portland. “We wanted to be on the front end of the trend,” says Jim Murphy, marketing manager for Gold Medal.

In October, Gerber Products Co. rolled out Tender Harvest, a line of organic baby food. A year earlier, the Heinz Co. bought Earth’s Best baby food, an organic company established in 1987. Deb Magness, a Heinz spokeswoman, said that “usually it’s federal standards that dictate to consumers what’s happening in the marketplace,” but that in this case, “consumer interest in organics was ahead of the curve.”

So what will federal standards mean to consumers, if anything? Deceptive labeling hasn’t really been a big problem.

“It’s fair to say that the industry has been self-governing and has, by and large, done a good job,” says Gene Kahn, a charter member of the National Organic Standards Board and president and chief executive officer of Cascadian Farm, an organic-food company based in Sedro-Woolley, Wash.

But Kahn and Magness of Heinz agree that uniform standards will clarify certain labeling on processed foods. They will prevent manufacturers of multi-ingredient products from claiming they are “organic” unless they contain at least 95 percent organic ingredients. “The problem was that you could have a product that wasn’t fully organic and put ‘organic’ on the label,” says Magness. (The proposal permits manufacturers to say their products are “made with certain organic ingredients,” if they are 50 to 94 percent organic.)

A USDA-certified-organic seal on food packages could bolster consumer trust. But it won’t necessarily help shoppers understand the meaning of “organic.”

To a large extent, what people are buying when they purchase organic foods is an “organic sensibility,” says Hartman. “They’re buying a lifestyle, a marketing aesthetic. They don’t really know what organic is. And you know what? They don’t really care.” xxxx