“In eight years, we went from handling only conventional produce to 50 percent organics. Retailers would tell us that customers wanted more options, so we started converting acreage to organic. Now they’re outpacing conventional sales,” Munger shares. “Our top commodities are Brussels sprouts, green beans, spinach, sugar snap peas, and cilantro. We carry over 100 organic SKUs. We work with retailers so they can purchase everything they need even in smaller quantities.”
On the Rise, Regardless of Pricing
With the economy more stable than in years past, the higher cost of organic produce is of less importance to many consumers. The majority of U.S. suppliers have observed increasing demand for organic fruits and vegetables, but the need has not yet been met by producers so prices remain high. “With organic farming, the yield is about 50 percent of conventional crops,” Wilson explains. “The difference in yield is the reason for the additional mark up.”
Shane Stephens, organic buyer for Spokane Produce, Inc., a wholesaler in Washington state says, “Sales of organics are on the rise and even though prices are higher than conventional produce, they have become more reasonable in recent years.” And while it is certainly true pricing has leveled out on some items, tight availability still dictates prices on a broad range of items. Just such an examp
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Organic food is a source of passionate debate. Proponents believe there are ethical and health reasons to grow and consume organically produced fruits and vegetables; others believe certification and more complex farming practices are unnecessary burdens for growers, creating undo expense for consumers. What can’t be disputed is over $39 billion in retail sales for organic food products in 2015—and how they have become a fundamental part of many consumers’ shopping habits.
This is especially true for millennials. As Bob Scaman, president of Goodness Greeness, Inc., an organic produce distributor in Chicago observes, “Millennials, who have been brought up on organics, are the first generation to expect them as the norm.”
Organics, once just a sliver of food and other sales, are here to stay. Explore the growing regions, trends, challenges, and more behind this intriguing category.
Sources Expanding
To ensure a steady supply of fresh organic fruits and vegetables, distributors and wholesalers shop the world. Janice Honigberg, president of Sun Belle, Inc., a marketer and shipper located in Chicago, sources both conventional and organic berries. Blueberries, for example, come from Chile as well as Florida, Georgia, North Carolina, Michigan, Mississippi, and the Pacific Northwest. “Mexican and Peruvian production is also growing,” she notes, adding, “all of these regions have become significant sources of organic berries as well.”
“Until a few years ago,” explains Scaman, “organic was U.S.-centric; our imports versus domestic are about fifty-fifty. With the emergence of growers in Mexico, it’s amazing how much production has increased south and north of the border—Chile, Argentina, Peru, Costa Rica, Canada, as well as New Zealand, Israel, and Holland. When it comes to organics, it’s a world market.”
Nelly Czajkowski is the organic category manager at DiSilva Fruit, a division of Arrow Farms, Inc. located in Chelsea, MA. “We still source mostly from U.S growers in California and Florida,” she notes. “We handle avocados from California and Mexico depending on the season. For crops like potatoes and onions, we work with East Coast growers whenever possible. Most of our sources are domestic, but we do business with Canada and Peru to keep supplied all year.”
Market Expansion
Although the modern organic movement has been around since the 1970s, there are still roadblocks from field to fork. Not only is organic growing an expensive process, but it’s very labor intensive, herbicides and most pesticides are prohibited, and yields are lower than conventional growing. Government regulation, documentation, and certification can also be arduous. Yet with climbing demand, more growers across the country are taking the plunge—and conventional growers are adopting many of the same practices but stopping short of organic certification.
Chris Pitsikoulis, in buying and sales for Fruits et Legumes Gaetan Bono, Inc., an importer, exporter, and shipper located in Montreal with a big commitment to organics, says, “Like many of our producers, we believe that within ten years there will be virtually no difference between organic and conventional produce. The difference in cost is becoming narrower and as people demand healthier fruits and vegetables, growers across the board are providing the best, cleanest produce they possibly can.”
David Weinstein of Heath & Lejeune, Inc. in Los Angeles says, “Our company is built on the fact that people want to eat organic produce and are willing to make economic sacrifices to do so. It’s no longer just the realm of healthfood stores. Mainstream retailers such as Walmart, Kroger, and Target are directing their buyers to make a commitment to organics.”
Labeling Confusion Clarified
What’s the difference between products labeled ‘organic’ or ‘natural’? Buyers should be wary of false claims on labels and packaging. Following are several definitions from organic regulators at the U.S. Department of Agriculture (USDA), spelling out what ‘organic,’ ‘natural,’ and ‘sustainable’ mean when found on a certified USDA or National Organic Program label.
• 100 Percent Organic – foods with a single ingredient; includes fruits, vegetables, eggs, and other individual ingredients.
• Organic – packaged foods or foods with more than one ingredient; for this label the ingredients must be 95 to 100 percent organic by weight. The remaining ingredients are not available organically, but have been approved by the USDA’s National Organic Program (NOP).
• Made with Organic Ingredients – foods with more than one ingredient, of which 70 percent or more are organic.
• Contains Organic Ingredients – foods with a total of less than 70 percent organic ingredients.
• Natural, Sustainable, Local, or Pesticide-Free – these terms do not have enforceable standards or definitions and may contain chemical pesticides, fertilizers, or genetically modified organisms.
“The selection of organics at retail is growing,” Honigberg confirms, and more importantly, “when consumers have a choice, they’ll often choose organics.” Sun Belle sells blueberries, raspberries, and cranberries under the organic ‘Green Belle’ label, which she says has experienced major growth over the last five years.
Mark Munger is another supplier who saw the writing on the wall. He is vice president of sales and marketing at 4 Earth Farms, Inc. in Los Angeles, CA, a vertically-integrated grower, shipper, processor, and importer.
“In eight years, we went from handling only conventional produce to 50 percent organics. Retailers would tell us that customers wanted more options, so we started converting acreage to organic. Now they’re outpacing conventional sales,” Munger shares. “Our top commodities are Brussels sprouts, green beans, spinach, sugar snap peas, and cilantro. We carry over 100 organic SKUs. We work with retailers so they can purchase everything they need even in smaller quantities.”
On the Rise, Regardless of Pricing
With the economy more stable than in years past, the higher cost of organic produce is of less importance to many consumers. The majority of U.S. suppliers have observed increasing demand for organic fruits and vegetables, but the need has not yet been met by producers so prices remain high. “With organic farming, the yield is about 50 percent of conventional crops,” Wilson explains. “The difference in yield is the reason for the additional mark up.”
Shane Stephens, organic buyer for Spokane Produce, Inc., a wholesaler in Washington state says, “Sales of organics are on the rise and even though prices are higher than conventional produce, they have become more reasonable in recent years.” And while it is certainly true pricing has leveled out on some items, tight availability still dictates prices on a broad range of items. Just such an example can be found with a few apple varieties.
“Everyone wants organic Honeycrisp apples, which are usually considerably higher in price than conventionally grown Honeycrisps,” cites Mike Jardina, president of receiver J.J. Jardina Company, Inc. in Atlanta, GA. On the other hand, there are pears. “Organic pears are just a few dollars higher per box than conventionally grown pears.”
What About Greenhouses and Hydroponics?
The role of greenhouse and hydroponic grown organic produce—which some people believe are synonymous—remains somewhat limited, but is expanding. While many greenhouse growers are hydroponic, they are not organic due to use of some chemicals.
The National Organics Standards Board, which advises the USDA’s National Organic Program states that, with very few exceptions, “Potting mixtures devoid of or deficient in organic matter capable of supporting a natural and diverse soil ecology are prohibited. For this reason, hydroponic and aeroponic systems are prohibited.”
Nevertheless, Goodness Greeness’ Scaman explains, “Controlled environments have increased production. For example, colored bell peppers have increased four-fold over the last ten years. Turning a greenhouse organic is easier than outside acreage.” Still, for many growers, cultivating organic fruits and vegetables in soil is the only option.
Tom Wilson manages sales for Alderman Farms Sales Corp., which operates in Boyton Beach, FL. “For eleven years we’ve specialized in organic vine-ripened and grape tomatoes,” he states. “We grow everything outdoors the way Nature intended.”
Challenges and Opposition
Though there are many differences, organic growers face many of the same challenges that vex their conventional counterparts such as water use, labor, regulation, and the costs associated with owning any type of agribusiness.
“Farmers have to make difficult decisions in real time with real consequences,”says Heath and Lejeune’s Weinstein. “The value of agriculture has to be reflected in land use, taxes, immigration, and regulations. On top of that, in the last 30 years, acreage for agriculture has been shrinking, particularly in places like Orange County, CA.”
In the Field
An area where conventional growers have an advantage is pest management. Organic growers have far fewer weapons for fighting viruses, diseases, and pests.
Unfortunately, sometimes this can lead to various worst-case scenarios. “When farmers can’t spray, sometimes they just have to lose the crop,” points out Mario Barone, division manager at Swedesboro, NJ-based Albert’s Organics, Inc.
Growing is also more labor-intensive than many conventional crops. Weeding is done by hand rather than with herbicides, which translates into more workers and hours in an industry with significant labor issues. Although Wilson has a stable workforce, there are still concerns. “Much of our workforce has been with us a long time and they’re aging,” he explains. “It is becoming hard to find replacements. Construction in Florida is rebounding and younger people are getting into higher paying construction jobs.”
Outside the Field
Another challenge is opposition to the category itself. Despite ongoing success and growth, many believe there is no enhanced nutritional value.
Research studies from health organizations and universities have produced mixed results, so there is no definitive answer. Some within the produce industry call the entire category “overrated.”
A distributor and broker in the South-east, who prefers to remain anonymous, commented on the price disparity and perception of better-for-you foods. “The organic designation is not beneficial to the customer,” he asserts. If these products were indeed more beneficial than conventional items, “why then should the affluent have better opportunities for good health?”
Another grower-shipper in the South-west also questions the health benefits of organics over conventionally-grown produce. “Environmental Protection Agency standards for pesticide residue is a few parts per billion. We don’t believe there have been studies over a long enough period of time to bear out the advantages of organics.”
The environmental argument, however, extends beyond perceived health benefits for consuming organic foods. For some buyers, it’s more about sustainable or earth-friendly growing practices than the organic items themselves.
Beyond Organic: Biodynamic Growing
A growing method similar to organics is biodynamic farming, developed in Austria in the 1920s. Defined as a holistic, ecological, and ethical approach to farming, food, and nutrition, its aim is to create a diversified and balanced ecosystem with the ultimate goal of enhancing ecological, social, and economic sustainability.
To help maintain this balance, biodynamic growers utilize fertilizers made from fermented manure, minerals, and herbs with the belief that they improve the nutrition, quality, and flavor of the food. One of the more unusual practices is to work in cooperation with “the influences of the wider cosmos.”
While not in wide use within the United States, more domestic suppliers are sourcing from biodynamic farms. Biodynamic produce is not certified by the U.S. government, but according to standards created by Demeter Trade Association, Inc.
What Is and What Isn’t Organic
Even today, with organic products gaining more shelf space in retailers across the nation, there is still some debate over what is and isn’t organic. The USDA describes organic agriculture as “A set of cultural, biological, and mechanical practices that support ecological balance and conserve biodiversity. These include maintaining or enhancing soil and water quality; conserving wetlands, woodlands, and wildlife; and avoiding use of synthetic fertilizers, sewage sludge, irradiation, and genetic engineering.”
Canada and Mexico each have their own regulations, but must meet USDA standards to export and sell their organic products in the United States. They must also meet standards set by the European Union if they wish to ship organics there, which are even more stringent than those required by U.S. regulators.
A Competitive Future
In little over a decade, sales of organic produce have nearly tripled from $3.5 billion to nearly $15 billion annually. Organics are no longer a lifestyle choice for a particular segment of consumers, but represent a broader swath of the population as more shoppers—from all age groups and ethnicities—opt for these products.
Recent polls support this supposition, finding most Americans will buy organic produce at least occasionally. Though this may be based more on availability or a sale price than ideology, it is still category growth. “Our organics business continues to develop, becoming more of a staple,” Barone explains. Better yet, as more growers become certified and augment supply, and additional retail space is reserved for organics, prices will fall. “We’re seeing more diversity and healthy competition,” he confirms, “resulting in more advantageous pricing for the consumer.”
Czajkowski agrees, adding, “We’ve been able to find new suppliers so more of our customers have a greater selection to offer on a consistent basis.”
Munger sums it up this way, “The future is hypercompetitive: costs will go up, labor is tougher to come by, water is a challenge, and urban encroachment a reality. But we’re fortunate to be in the business of selling health and nourishing people.”
Image: Shutterstock.com/mangostock
