'Big Food' gobbling organic market as demand increases

Corporations setting standards

7/15/2012

ANN ARBOR -- 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 say, "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, Healthy Valley, and Spectrum Organics is none other than Hain Celestial, once affiliated with Heinz, the grand old name in ketchup.

Over the past 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 Ann Arbor 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 such as 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 10-5 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.

Meeting the need

Big businesses argue that only they can meet the enormous demand for organic products -- 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. Their financial motivation, however, is obvious. On Amazon.com, for instance, a dozen 6-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 email 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."

Following the trend

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 -- from Honest Tea to 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 & Co., 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.

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."