The Industry

The U.S. organic industry grew 21% to reach $17.7 billion in consumer sales in 2006. The term organic as defined by the Organic Trade Association is, commitment to agricultural (including processing) practices that strive for a balance with nature using methods and materials which are of low impact to the environment. Organic is a labeling term that denotes products produced under the authority of the Organic Foods Protection Act. The principle guidelines for organic production are to use materials and practices that enhance the ecological balance of natural systems and integrate the parts of the farming system into the ecological whole. Organic agricultural practices cannot ensure that products are completely free of residues. However, methods are used to minimize pollution from air, soil and water. Organic food handlers, processors and retailers adhere to standards that maintain the integrity or organic agricultural products. The primary goal of organic agriculture is to optimize the health and productivity of interdependent communities of soil life, plants, animals and people. All organic production is regulated by the USDA under the National Organic Program (Title 7 CFR205). The NOP went into effect in October 2002 and it leveled the playing field. It regulated organic producers and Organic handlers. The Organic Certification agencies accredited by the USDA --95 currently, are listed on the USDA website (www.ams.usda.gov.nop). They must adhere to NOP regulations and must accept each others certifications.

Organic producers/growers have to follow preset guidelines which include:

- Ground must be without synthetic pesticides and fertilizers for a 3-year period and be documented.
- Ground is “certified transitional” in the interim.
- Organic crops must be grown without the use of:
- Synthetic fertilizers.
- Synthetic pesticides.
- Sewage sludge
- GMO’s.
- Treated seeds.
- Any applied materials must be on the National List (OMRI)
- Must use organic seeds if “commercially available”
- Must be certified by a USDA accredited certifying organization as complying with NOP regulations.

There are very specific labeling requirements for each organic product category:

- “100% Organic” - must be made with all organic ingredients.
- “Organic” - must contain minimum 95% organic ingredients.
- “Made with Organic ingredients” - must contain a minimum of 70% organic ingredients.
- “Some Organic Ingredients” - may contain less than 70% organic ingredients.

In our view, it is important to note the major difference between organic and natural. Organic production is regulated and natural is not. The USDA has a legal definition for "natural", but it applies only to meat and poultry. The National Organic Program (run by the USDA) is in charge of the legal definition of organic in the United States and does organic certification. It administers the Organic Seal to products and producers that meet strict requirements.

Organic foods are the largest segment of organic products—reaching $16.7 billion in consumer sales and making up over 95% of all organic product sales. Organic foods is one of the fastest growing market segments within the food industry, with sales growing at an annual rate of 20.9% in 2006. Organic food sales have enjoyed double-digit growth for the past 17 years. Fruits and Vegetables have grown 24% over the past year to $8 billion in sales, Dairy has grown 25% to sales of $3.2 billion and Bread and Grains have grown 23% to sales of $2 billion.

Organic food sales have grown to over 3% of total food sales in the U.S. marketplace. Although some of the larger packaged-goods companies may have been hesitant to enter the Organics arena in the past, currently most large companies have committed to organics in a major way. Some examples of large-company organic brand commitments are: Coke-Odwalla, M&M Mars-Seeds of Change, Pepsi-Tostito Organic, Tyson-Natures Farm, Con Agra-Hunt’s Organic, Lightlife, Orville Redenbacher’s Organic, Dole-Dole Organic, Campbell Soup-Campbell’s Organic, Cargil-French Meadow, Cadbury Schweppes Nantucket Nectars Organic, Green & Blacks, General Mills-Cascadian Farms, Muir Glen, Gold Medal Organic, Sunrise Organic, Danone-Stonyfield Farm, Unilever-Ragu Organic, Ben & jerry’s Organic, Kellog-Mornigstar Farms Natural, Kashi, Dean Foods-Horizon, Alta Dena, The Organic Cow of Vermont Kraft Foods-Back to Nature, Boca Foods, Heinz-Heinz Organic, Hain Celestial, Earths Best, Nile Spice, Farm, Foods, Garden of Eden, DeBolee’s, Arrowhead Mills, Health Valley, Breadshop, Casbah, Imagine Rice Dream Soy, Celestial Seasonings.

It is apparent that packaged goods companies have become so dependent on introducing new items to drive their growth that it is difficult to keep up with all the new organic items being introduced. To quote one corporate ingredients buyer, “This is driving our ingredient sourcing people crazy trying to source enough organic ingredients!”

U.S. sales of non-food organic products grew from $744 million in 2005 to $938 million in 2006, reflecting a 26% growth rate. Non-food categories include organic supplements, personal care products, household products and cleaners, pet food and flowers and fiber products such as linens and clothing. In comparison, the organic food category grew to close to $20 billion at the end of 2007.

The Organic Trade Association’s 2007 Manufacturers Survey anticipates growth of approximately 18% annually through 2010 for organic food products. Non-food product sales are anticipated to grow on average from 16 % (organic flowers) to 40% (organic fiber and clothing) annually during this same period.