NEW GOVERMENT STANDARDS
FOR ORGANIC FOODS
U.S. consumers, long besieged and sometimes bewildered by food makers' claims about "organic" products, are about to get a government seal of approval on their premium-priced groceries.
Companies ranging from giants like Kraft Foods Inc. and General Mills Inc. to independents such as Annie's Naturals and Honest Tea expect the new government labeling requirements, which take effect on Oct. 21, to level the playing field in the fastest-growing segment of the food industry.
"Manufacturers felt their natural-product market was being threatened by all types of claims," said Katherine DiMatteo, who heads the Greenfield, Massachusetts-based Organic Trade Association, a group representing U.S. manufacturers and growers. "There had to be consumer confidence in the label."
The U.S. Department of Agriculture is requiring food companies to adopt strict standards for organic foods, ensuring they are produced free of pesticides and genetically modified crops.
In the past, some 30 states and more than 50 certifiers, all with different standards and regulations, called their own shots on what could and couldn't be deemed organic.
The USDA, whose National Organic Standards Board has been working with food companies and growers since 1990 to develop the standards, is allowing three tiers of organic claims, with only the top tier permitted to carry a "USDA Organic" seal.
"Now you have a differentiation between products," said Steve Demos, president of White Wave, the Denver, Colorado-based soy milk division of Dean Foods Co.. "The consumer is now given the means to make a credible choice."
A HUGE OPPORTUNITY
Meeting the new USDA hurdles is worth the trouble, companies said, if it means keeping a stake in the organic category, which has been growing at about 20 percent annually.
Sales of organic foods are expected to reach $11 billion in 2003, according to the Organic Trade Association. Growth remains promising, as organics now account for only 2 percent of foods sold at retail.
"We see organics as a huge opportunity," said Margot McShane, director of marketing for Half Moon Bay, California-based juice company Odwalla Inc., part of soft drink giant Coca-Cola Co.'s Minute Maid juice company. As it becomes more available, at more attractive prices, consumers are showing they are interested, she said.
For now, the procedures required to grow, manufacturer and certify organic foods, coupled with limited supplies, mean that the foods often carry hefty premiums, ranging from 10 percent to 50 percent above conventional foods, industry experts said.
At about $2.39 per 15.2-ounce bottle, Odwalla's organic juices cost about 9 percent more than its regular line. H.J. Heinz Co.'s newly introduced Heinz Organic Ketchup sells at about $1.99 for a 14-ounce container, 30 percent more than regular Heinz.
A 15.2-ounce bottle of organic Naked Juice, made by Ultimate Juice Co. of Basking Ridge, New Jersey, retails at about $2.89, or about double the price of a 16-ounce carton of regular orange juice from Pepsi-Co Inc.'s Tropicana.
Some companies make up for the higher prices of organic ingredients by shrinking package sizes. Stonyfield Farm Inc.'s organic yogurt comes in a 6-ounce container that sells at the same price as an 8-ounce container of its regular yogurt.
Manufacturers expect that consumers' confidence in uniform processing standards will translate to more willingness to pay higher prices.
"That's one of the reasons companies like Heinz have entered this category," said Michael Vaszily, brand manager for Heinz's organic ketchup. "We're really hoping to make it more mainstream."
MEETING THE NEW STANDARD
Organic food makers have had nearly two years to prepare for the new USDA standards, investing millions to bring their sourcing, manufacturing and labeling into line. Most said their product formulations will meet the requirements for the top two USDA labeling tiers.
Products with 95 to 100 percent certified organic ingredients can carry a seal that says "USDA Organic."
Those with 70 percent to 94 percent organic ingredients can't use the seal, but their labels can say "made with organic ingredients." They can also list up to three of the organic ingredients or food groups.
Foods that are less than 70 percent organic can't carry the seal or use the word "organic" on their front labeling, but they can list organic ingredients on their ingredient panel.
Some products fall short of the top tier simply because certain added ingredients, such as calcium, are not available in organic form.
For example, none of Kraft's Boca line of soy-based vegetarian meat alternatives will carry the USDA seal because organic soy isolates are not readily available, a company spokeswoman said.
Under the new standards, about 50 USDA-approved third-party certifiers must oversee the entire production process, inspecting everything from farm to factory.
"They certify that the soil and the harvesting process is all natural and organic," said Heinz's Vaszily. "They review the whole supply chain."
Stonyfield Farm, based in Londonderry, New Hampshire, called its suppliers to a meeting with a USDA-certified inspector a year ago, training them on processing requirements that meet the USDA standards.
Since then, Stonyfield has been working to make changes to meet the new regulations, said Nancy Hirshberg, a Stonyfield vice president who works closely with the company's suppliers.
Logistics, too, can present a challenge, since packages with the new label can't be on store shelves until Oct. 21.
In the end, food makers said the changes are worth the effort.
"Right now, organics is a very nebulous word," said Seth Goldman, who started Honest Tea in the late 1990s with his former professor.
"The term organic is mushy and undefined and doesn't mean much to the consumer," he said. "But when you create one common standard and one common symbol ... people have a point of reference they can all understand."
Written by: Deborah Cohen and Jessica Wohl,
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