The Corporatization of Organic and Natural Foods

Organic is going mainstream: Organic food, available only at small health-food stores a few years ago, can now be found in many big-name supermarkets all over the country. In 1997, the organic industry grew 20% to 24% for the eighth consecutive year, while total supermarket dollar sales grew just 2.8%. "This is all happening because of Mothers & Others and other consumers demanding organic food," says Bob Scowcroft, executive director of the Organic Farming Research Foundation (OFRF).

While this growth means more availability for consumers, it's been accompanied by increased corporatization and consolidation. Organic and natural foods companies are merging, buying, selling, and going public, and conventional companies, seeing a good thing, are acquiring organics (see "Mergers, Sales and Acquisitions," right).

Many advocates question whether consolidation is necessary to make organic foods more mainstream. They fear that the organic industry may follow the conventional model, in which corporate agribusiness manufactures and markets over 95% of the food in the U.S., and controls over 80% of the land cultivated for export crops worldwide. "The history of the industrial agriculture model has been concentration, industrialization and the bottom falling out of prices," Scowcroft says.

If unchecked in the long run, corporate organics could spell bad news for farmers, workers and small companies. As Chantal Le Noallec writes in "Big Business is Big Business" (Le Monde, 1999), "What this [transformation] will mean is price-cutting...Cutting costs will mean cutting jobs and wages, increasing output, intensifying organic agriculture and creating an organic industry -- with the inevitable consequence of the disappearance of smaller producers." In the conventional system, farmers, for one, receive only ten cents or less of every food dollar.

For now, organic farmers are demanding and receiving a premium, because they "have the advantage of having a product that can be differentiated from conventional crops via a certified process and label," says Jim Horne, Ph.D., president of the Kerr Center for Sustainable Agriculture. And the mainstreaming of organic has encouraged farmers to put more land under organic cultivation. According to an OFRF study, 56% of organic farmers are expanding their acreage and the rest are staying the same, an effect Scowcroft attributes to consolidation.

Farmers, too, are being acquired. Horizon Organic Dairy brand is about one-half of the organic dairy market and posted 1998 record net sales of $49.4 million, up 67% from 1997. Horizon has been steadily acquiring dairies, including Organic Cow of Vermont, and just bought Rachel's Organic Dairy in Wales. Of concern to small dairy farmers generally is that "consolidation always results in falling prices," according to Ronald Morrissette, a former Vermont dairy farmer who serves on the board of Family Farm Defenders. "Milk producers who've been selling to Organic Cow are worried that they'll have to reduce their price after their contracts expire," Morrisette says.

Amy Barr, R.D., Horizon's director of corporate communications, counters, "We pay organic market prices." Barr adds that Horizon expanded because "natural products supermarket chains wanted our milk in all their stores."

Consolidation means more market share is controlled by fewer companies. But larger companies have the muscle to get organic into supermarkets. The Hain Food Group, for instance, can offer many more items to chains with their eight brands, whereas a single-item company might lack the leverage. Now, General Mills, the nation's second largest cereal maker, has entered organics with Sunrise Organic Cereal, introduced in March, spending $15 million on advertising. General Mills' Jack Sheehan, manager of corporate communications, says General Mills is responding to consumer demand.

"General Mills has an opportunity to both raise awareness of as well as expand the market for organic foods," says Lorraine Hood of Barbara's Bakery. Barbara's is a sister company of Canada's Wheatabix, which has been producing an organic cereal line for four years. Katherine DiMatteo of the Organic Trade Association concurs: "As the large companies spend the money to promote organics, it is the small companies who will benefit as well." Hood says she is concerned about increased competition for a limited supply of organic grains, but adds, "This might very well encourage more farmers to go organic."

At the consumer end, the proliferation of highly processed organic foods, such as candy and soda, is worth noting. Sales of organic snacks and candy bars rose 300% between 1996 and 1997. After all, organic principles have traditionally centered around the farm as "a holistic, agroecological unit, functioning as a self regulating, natural organism," as Kate Clancy and Fred Kirschenmann write. Processed foods are a far cry from the field, and cost more energy to produce.

While in the long term organic consolidation could replicate the conventional food system, with small-scale farmers and processors being squeezed out of business, it seems to be a lifeline for organics at this time. As consumers, we can help stop the industrialization of organic by buying, as much as possible, fresh, whole foods from small local businesses and farms.