Investment, research boost organic category

by Keith Nunes
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Demand for certified organic products is leading to greater investment in the market.

The good news swirling around the organic food and beverage category in recent months has been abundant. Federal spending on a variety of organic programs was increased under the auspices of the 2014 farm act, and a recent meta-analysis has identified several nutritional differences between products grown in an organic fashion vs. those grown conventionally.

The news comes at a time when food and beverage companies are shying away from marketing products as natural. A lack of a federal definition of the term combined with a rise in the number of lawsuits challenging whether a product may be marketed as natural has companies considering other options that may communicate the health halo that may be associated with natural.

Fewer consumers today buy into “natural” claims, possibly out of skepticism, said Yasemin Ozdemir, a market analyst with Innova Market Insights, Duiven, The Netherlands. Ms. Ozdemir spoke during the Institute of Food Technologists’ annual meeting and food exposition, held this past June in New Orleans, and said 34% of U.S. consumers in 2012 considered a natural claim important when buying food, down from 41% in 2008. Moreover, the number of products launched with a natural claim has stabilized over the past three years, as companies explore other ways to convey a clean label.

One way to communicate a clean label is by using ingredients certified as organic. One such company doing this is the Campbell Soup Co., Camden, N.J. During a meeting with financial analysts on July 21, Ed Carolan, president of U.S. retail for the Campbell Soup Co., defined organic, and a new line of soups the company is launching, as “all about elevating health and wellness.”

“Organic food consumption is significant and growing,” Mr. Carolan said. “Sales of organic food reached $6.7 billion in 2013 and has had a three-year annual compound growth of 11.5%. We’ve been active in this area for some time, launching organic broth in 2004 and offering Wolfgang Puck soups since 2008. More recently, recognizing the growth opportunity, we added Plum Organics to the portfolio.

“We believe there is a significant opportunity to step-change growth of the organic segment within the soup category as it currently accounts for $190 million in sales each year and is growing at nearly 9%.”

Mr. Carolan said Campbell plans to accelerate its growth in the category with the introduction of Campbell’s-branded certified organic soups.

“The selection of six varieties are packaged in fresh-looking, contemporary cartons and include flavors such as chicken tortilla, garden vegetable and tomato and basil,” he said. “The new line will be shelved in the soup aisle right alongside the Campbell portfolio.”

Ingredient manufacturers are striving to capitalize on demand for organic products as well. Milk Specialties Global, Eden Prairie, Minn., announced July 22 its certification to manufacture organic whey proteins.

“We currently have customers using our organic milk proteins, and they see the benefits and selling power of organic,” said Dustin Cosgrove, director of business development. “This buzz and excitement led to a demand for organic whey products, which we are excited to be able to bring to our customers.”

The company currently has three plants certified organic in Visalia, Calif.; Mountain Lake, Minn.; and Norfolk, Neb.

Balancing supply and demand

A challenge facing the manufacturers of organic food and beverage products is consumer demand is outpacing production investment. Overall, acreage used for organic agriculture accounted for 0.6% of all U.S. farmland in 2011, according to the U.S. Department of Agriculture’s Economic Research Service.

In the July issue of U.S.D.A.’s Amber Waves publication, Catherine Greene, an agricultural economist with the E.R.S., wrote an article titled “Support of organic sector expands in the 2014 farm act” and noted that certified organic farmland has expanded, although not as fast as organic sales, and growth in certified organic cropland has slowed for a number of crops in recent years.

“Fruit and vegetable growers and producers in other high-value, market-driven sectors have adopted organic management systems much more widely than producers of other crops,” Ms. Greene wrote. “The shortage in domestic supplies is primarily for organic corn, soybeans, and other crops that are primarily used as feed grains.

“These crops have the lowest adoption levels among U.S organic farming systems. While over 10% of U.S. vegetable acreage for carrots and lettuce and about 5% of fruit acreage was under organic management in 2011, only 0.3% of U.S. corn and 0.2% of soybeans were grown under certified organic farming systems.”

The import of organic products is helping bridge the gap between supply and demand, Ms. Greene said. In 2013, the value of U.S. organic imports tracked by the U.S. Department of Commerce totaled $1.4 billion. The top imports in terms of value included bananas, coffee, olive oil and mangos, products that are not produced in great quantities in the United States. But soybeans are another top organic import, and organic grain and oilseed imports are helping fill domestic production gaps.

The 2014 farm act includes several programs designed to increase organic production. For example, $13 million has been set aside to assist producers interested in achieving organic certification enter into a cost-share agreement with the U.S.D.A.

“Consumer demand for organic products is surging across the country,” said Agriculture Secretary Tom Vilsack. “To meet this demand, we need to make sure that small farmers who choose to grow organic products can afford to get certified. Organic food is now a multi-billion dollar industry, and helping this sector continue to grow creates jobs across the country.”

In 2012, the U.S.D.A. issued close to 10,000 cost-share reimbursements totaling over $6.5 million.

Organic vs. conventional production

On July 10 a study was published on-line by the British Journal of Nutrition that showed organic crops have higher levels of some antioxidants and lower levels of pesticide residues than conventionally grown crops. The study, a meta-analysis of 343 peer-reviewed studies, is another component in the effort to determine if organically grown crops are nutritionally superior to their conventionally grown counterparts.

Specifically, the Newcastle study found that concentrations of antioxidants such as polyphenolics were 18% to 69% higher in organically grown crops. Lower concentrations of cadmium also were detected in crops produced organically. The study also found pesticide residues were four times more likely to be found in conventional crops than organic ones.

While the study is promising, it should not be considered conclusive, according to the researchers involved in the meta-analysis.

“This study demonstrates that choosing food produced according to organic standards can lead to increased intake of nutritionally desirable antioxidants and reduced exposure to toxic heavy metals,” said Carlo Leifert, a professor of ecological agriculture at Newcastle University who led the study. “This constitutes an important addition to the information currently available to consumers, which until now has been confusing and in many cases is conflicting.”

The Newcastle study’s findings were not consistent with earlier studies that have found there were not substantial differences or nutritional benefits from organic food, most notably a 2009 study by the United Kingdom’s Food Standards Agency (F.S.A.).

The F.S.A. study based its conclusions on 46 publications covering crops, meat and dairy, while the Newcastle meta-analysis is based on data from 343 publications on composition difference between organic and conventional crops now available.

“The main difference between the two studies is time,” Mr. Leifert said. “Research in this area has been slow to take off the ground, and we have far more data available to us now than five years ago.

“But this study should just be a starting point. We have shown without doubt there are composition differences between organic and conventional crops, now there is an urgent need to carry out well-controlled human dietary intervention and cohort studies specifically designed to identify and quantify the health impacts of switching to organic food.”
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