Why Your Organic Food Isn't as Organic as It Used to Be
byJul 11th 2012 10:34AM
It used to be that organic food was a niche market. Cooks who wanted to put together a completely organic meal had to go out of their way to find a dedicated, organic supermarket like Whole Foods (WFM) or their local equivalent -- if one even existed.
Now, a stroll down the aisles of strip-mall stalwart Safeway (SWY) reveals a surprisingly strong and ever-increasing selection of organic foods. And even discounters such as Walmart (WMT), Costco (COST), and Target (TGT) are stocking their shelves with organic fare.
This might seem like a dream come true for organic devotees, but this increased availability highlights a new dilemma for organic-food purists: Organic food simply isn't as organic as it used to be.
Big Government, Meet Big Food
For food to receive the coveted "USDA Organic" seal of approval, it must meet specific requirements, one being that all nonorganic ingredients a producer wants to include must appear on a list of approved substances.
Why allow nonorganic ingredients in organic foods at all? In some cases, it's unavoidable. Take bread. As the Times reports, baking soda isn't organic, but you can't make bread -- organic or not -- without it. So baking soda is one of the approved nonorganic items on the list.
Better Foods, Bigger Profits
Organic food still counts for just 4% of food sales, but that percentage is growing as "big food" (as it's called by its detractors) establishes a presence in the natural food market. It's a tasty market for large corporations: As anyone who's shopped for it knows, organic food commands a higher price point and therefore more profit.
Big companies have been busily stocking their pantries with small, once-independent organic producers. And where they can't acquire an established company, they create their own organic brands to fill supermarket shelves. A niche market that was once small (all-natural) potatoes has turned into big business. Just take a look:
- Cascadian Farms and Muir Glen are owned by General Mills (GIS), which had $16.7 billion in sales in the past year.
- Kashi and Morningstar Farms are owned by Kellogg (K), which had revenue of $13.2 billion in the past year.
- Honest Tea is owned by Coca-Cola (KO), which had sales of $47.2 billion in the past year.
- Naked Juice is made by PepsiCo (PEP), which sold $67 billion in products in the past year.
- Boca Foods is owned by Kraft (KFT), which recorded $54.9 billion in sales in the past year.
Take Two Aspirin and Call the USDA in the Morning
As more companies get into the organics business, and more types of organic foods are produced, there are bound to be additions to the USDA's list of approved nonorganic ingredients.
Is this a bad thing? It's up to consumers to decide.
Take aspirin, for instance. Aspirin makes the list for treating inflammation in livestock, a worthy cause. But aspirin is definitively man-made. And while it's hard to make too much of a case against the use of baking soda, one could easily make the case against the use of aspirin.
So while it's not automatically a bad thing for new substances to make it onto the list, the jump from 77 approved nonorganic ingredients in 2002 to more than 250 today is alarming, especially considering the USDA's organic standards didn't exist before 1997.
For health-conscious consumers who go out of their way to buy organic, and who pay the extra money for the privilege, it's worth reevaluating the meaning of "organic" and whether or not the extra effort -- or the extra money -- is still worth it.
John Grgurich is a regular contributor to The Motley Fool, and owns no positions in any of the companies mentioned in this column. The Motley Fool owns shares of PepsiCo, Whole Foods, Costco, and Coca-Cola. Motley Fool newsletter services have recommended buying shares of Costco, PepsiCo, Coca-Cola, and Whole Foods, as well as creating a diagonal call position in PepsiCo and a bull call spread position in Walmart.