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SARASOTA HERALD-TRIBUNE
Demand for organic outruns supply
Devona Walker
28 Mar 2006
Even as organic milk rides a rising wave of consumer popularity, supply shortages are plaguing retailers, leaving empty shelves and droves of unhappy customers.
Boulder, Colo.-based Organic Dairy, for example, has been allocating its milk based on previous sales and has been unable to keep up with orders.
"We are having a challenge keeping it stocked, and demand is growing across the country," said Ann Hendricks, a spokeswoman for Lakeland-based Publix. "Organic food, across the board, seems to have a growing interest. There's a growing need.
"People are trying to eat healthier, better," Hendricks said.
The numbers bear her out.
The whole food market grew in 2004 by 20 percent, and there was a 34 percent increase in demand specifically for organic milk -- driven, in part, by health-conscious consumers looking to avoid additives like bovine growth hormone.
The industry sells about $1.385 billion worth of products each year with about $666 million, or nearly half of that revenue, coming from organic milk.
The chief hurdle among people looking to get into the game is that the process for converting from dairies to organic milk providers is lengthy: about three years, the Organic Trade Association reports.
Organic cows must be handled differently for about a year before being certified organic. Cattle feed also must be certified organic and calves must nurse with organic milk.
The association recognizes that it needs more organic milk producers to keep up with demand.
"You have to recruit more farmers, and it's not an immediate thing," said Barbara Haumann, the trade association's spokeswoman.
But the rewards could be big. Interest in organic products grows by the day.
Consider Wal-Mart's announcement last week that it planned to beef up its offering of organic products. The mega-retailer said it was putting new items on the shelf, from organic cotton baby clothes to ocean fish caught in ways that don't harm the environment.
Big players, big debate
With organic milk, the real supply problem is that it is primarily a region-specific product that is now having to meet national demand, said Marty Mesh, director of Florida Organic Growers.
"It used to be the consumer voted with their dollar -- buying organic foods was a reward to farmers for doing the right thing. Now, they are doing it for their own reasons, for health reasons," Mesh said.
As the demand becomes more mainstream, some critics worry that large corporate dairy operations are simply co-opting the organic brand to enter the market.
"If they are more interested in the marketing hype on the label than actual farming practices, we have a problem," said Mark Kastel, founder of Wisconsin-based Cornucopia Institute, which bills itself as a progressive farm policy research group.
Cornucopia recently released a report claiming that two of the nation's leading organic milk suppliers, Horizon Organic and Aurora Organic Dairy, do not adhere to proper farming practices.
The National Organic Standards Board recently filed a legal complaint against the U.S. Department of Agriculture for not enforcing organic regulations as they relate to Aurora and Horizon, which, with Organic Cow of Vermont and Alta Deana, comprise about 70 percent of the organic milk market.
Cornucopia and the standards board say Horizon operates a 10,000-cow feedlot farm in Idaho, where the company gets about half of its milk. They claim that all Aurora milk comes from feedlots rather than free-grazing cattle.
"These larger farms are profiteering at the expense of the family-scale farms who have worked so hard to build the reputation of the organic label," Kastel said.
Officials at Horizon or Aurora did not return phone calls seeking comment.
Despite the recent shortages, The Granary Natural Food Market in Sarasota had plenty of organic milk on a recent shopping day. It was of the Organic Valley label, which according to Cornucopia is supplied entirely by small family farmers.
Manager Jim Fulton said many of his customers are becoming more aware of the politics of food.
"We do get a lot of people who are aware, and they want to support the small family farmers," Fulton said. "But as the business gets bigger those little companies are getting eaten up. We're becoming the Wal-Mart generation."
Fulton said he anticipated the shortage and boosted his orders for organic milk, but acknowledged that with so many large grocery stores getting into the business, shortages are bound to happen.
Some have suggested that the large dairy companies could be the solution to the supply shortage.
Horizon, for example, offers financial assistance during the transition process to organic certification for farmers, and helps them navigate the process.
Others speculate that in order to keep with demand, the organic industry will have to adopt some industrial farming practices.
Kastel compares labeling milk organic that comes from a feedlot to slapping a Mercedes Benz emblem on a Volkswagen.
"It's fraud. It's misrepresentation."
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http://www.businessweek.com/ap/financialnews/D8GIAKAG5.htm?campaign_id=apn_home_down&chan=db
BUSINESS WEEK
Wal-Mart's organics could shake up retail
Marcus Kabel
24 Mar 2006
Wal-Mart Stores Inc. is throwing its weight behind organic products, a move that experts say could have the same lasting effect on environmental practices that Wal-Mart has had on prices by forcing suppliers and competitors to keep up.
Putting new items on the shelf this year, from organic cotton baby clothes to ocean fish caught in ways that don't harm the environment, is part of a broader green policy launched last year to meet consumer demand, cut costs for things like energy and packaging and burnish a battered reputation.
Organic products are one lure for the more affluent shoppers Wal-Mart is trying to woo away from rivals like Target Corp., said Alice Peterson, president of Chicago-based consultancy Syrus Global.
A new Supercenter that opened this week in the Dallas suburb of Plano features over 400 organic foods as part of an experiment to see what kinds of products and interior decor can grab the interest of upscale shoppers.
"Like many big companies, they have figured out it is just good marketing and good reputation building to be in favor of things that Americans are increasingly interested in," Peterson said.
Wal-Mart's Lee Scott is not the first chief executive to advocate sustainability, a term for the corporate ethos of doing business in a way that benefits the environment. Industrial giant General Electric Co., for example, last year launched a program called"Ecomagination" to bring green technologies like wind power to market.
What makes Wal-Mart's efforts unique, sustainability experts say, is the retailer's sheer size and the power that gives it in relations with suppliers. Wal-Mart works closely with suppliers to shape their goods, if they want them on the shelves of Wal-Mart's nearly 4,000 U.S. stores and over 2,200 internationally.
"They have huge potential because it's not just Wal-Mart we're talking about, it's their entire supply chain," said Jeff Erikson, U.S. director of London-based consultancy and research group SustainAbility. The group says it does not do any consulting work for Wal-Mart.
Erikson said Wal-Mart could bring the same pressure it has exerted over the years on prices and apply that to pushing manufacturers and competitors to adopt more sustainable business practices and larger organic offerings.
"We love to see companies like Wal-Mart taking a big step and making pronouncements as they have, because their tentacles are so large," Erikson said.
Wal-Mart plans to double its organic grocery offerings in the next month and continue looking for more products to offer in areas such as grocery, apparel, paper and electronics.
Stephen Quinn, vice president of marketing, told an analysts' conference this month that Wal-Mart would have 400 organic food items in stores this summer "at the Wal-Mart price."
Some Wal-Mart critics call the effort just a public relations job. But others say Wal-Mart could make a real difference if the retailer brings a critical mass of organic products to market and pushes enough suppliers to adopt green practices.
Sierra Club executive director Carl Pope, who is a board member of the union-backed group Wal-Mart Watch that criticizes the retailer, said it is too soon to tell if Wal-Mart will deliver but that the impact could be good for the environment.
"I think the direction they've said is a positive direction. The question is, `Are they are going to go there strongly enough?'" Pope said.
Some of the new items will be seafood caught in the wild. Wal-Mart last month announced a plan to have all its wild-caught fish, which accounts for about a third of seafood sales, certified by the Marine Stewardship Council as caught in a sustainable way.
The London-based MSC, founded in 1997 as a venture of the conservation group World Wildlife Fund and global consumer products company Unilever, issues the certificates to let consumers know which fisheries avoid overfishing and use methods that don't damage the ocean environment.
Sustainability experts say what makes this program interesting is that Wal-Mart will work with its suppliers to get more fisheries around the globe certified by MSC, instead of just buying up the existing stock of certified fish.
Wal-Mart says this means there will be more sustainable fish that will also be available to Wal-Mart's competitors, such as Whole Foods Market, which already sells about 18 MSC certified items, according to the MSC Web site. Wal-Mart plans to offer between 200 and 250 items.
The way Wal-Mart hatched the fish plan is typical of how it operates.
Peter Redmond, vice president and divisional merchandise manager in charge of deli and seafood, said he conceived the idea after meeting MSC board chairman Will Martin last fall. Wal-Mart and MSC worked out details and then Wal-Mart called in its 25 to 30 fish wholesalers in January to tell them it was switching to MSC certified seafood.
Wal-Mart developed a plan to work with its suppliers to encourage fisheries to adopt MSC practices. The plan includes barring its suppliers from switching fisheries in the first year to 18 months, giving the suppliers more reason to promote the changes.
"We don't want to walk away from a fishery just because it is in fairly poor shape or poor shape," Redmond said. "We want to try and recover that (non-certified) fishery to where it becomes a sustainable fishery. Our point being that if we just go for sustainable fisheries, it won't be enough at the end of the day unless we recover a lot of these that are in trouble now," he added.
The term fishery refers to a particular species of fish and the fleet that harvests them. Redmond said about 60 percent of the fisheries that Wal-Mart buys from now can be brought up to MSC standards within a year or two, and the remainder may need three to five years to change.
Redmond says the decision to go with sustainable fish came after Lee Scott launched the environmental policy last fall and fits Scott's maxim of "doing well by doing good".
"The environmental piece is a company (policy) plank. Secondly and probably the main reason is, when I look at seafood now and how many dollars it does now and how many dollars it's going to do in four years, I'm extremely concerned that that product is simply not going to be there."
"So we have to take the position that if I want to have hake five or six years from now, we as a company have to get involved and do something because I don't think it'll be there for us otherwise," Redmond said.
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