M&M West Coast Produce, Inc. became a certified organic distributor and broker about four years ago. “We saw the direction the market was heading and wanted to brand ourselves as an organic house,” explains Ray Del Toro, president. About 20 percent of M&M West Coast’s operation is devoted to organics, including domestically-sourced vegetables like kale and broccoli, and avocados from Mexico. The company packs organic vegetables under its own label and exports to Japan, Taiwan, and Canada.
At 4Earth Farms, LLC, in Los Angeles, organics represent slightly more than half of total sales. The company started carrying organic produce about eight years ago in a measurable way and became certified as a handler. “We were not growing organic ourselves, but we saw strong opportunity—so we started our own operations,” says Mark Munger, vice president of sales and marketing at 4Earth Farms. “We have a nice balance of organic produce we grow ourselves and partnerships with organic growers.”
Alternative Growing Venues Fertile fields are not the only place growing organic produce—greenhouses, vertical farms in warehouses, and container farms have been cropping up across the nation. About 20 percent of greenhouse growers are engaged in organic, with greens as the highest revenue generating crop at these operations.
According to a survey by Agrilyst, greens bring in $64 per square foot or about $2.8 million per acre. Revenue is driven by not only year-round production, but better consistency in yields and premium retail pricing.
Transitioning To Organic “Becoming a certified organic grower and producing a product is difficult,” shares Rick Lejeune, CEO of Heath & Lejeune, Inc., a Los Angeles distributor dedicated to organic produce. The company has been selling organics for nearly 30 years. “Domestic sources are under greater pressure from the high cost of land, water, and labor than foreign sources,” he notes.
Most growers rely on untreated conventional seed, which is permitted under federal requirements when organic seed is not commercially available. “Organic seed is a huge area of discussion,” says Lejeune. “It’s difficult to procure.”
Purists believe organically grown seed is essential to organic integrity. “There should be a strong program to develop and maintain organic seed banks,” Lejeune points out, adding, “there are organizations working to preserve the integrity of organic seed.”
Yields of organic crops average about 20 percent lower than conventional yields. At the same time, labor costs are usually higher. Hand labor for weed management in high-value organic vegetable crops can cost up to $1,500 per acre, according to the USDA’s Agricultural Research Service. And, like their conventional counterparts, organic growers are struggling with the labor shortage.
From juice bars to superfoods, fruits and vegetables are trending. Consumers, especially millennials, are seeking out more organic foods. Manufacturers, retailers, and restauranteurs have taken notice, and organics are riding the crest of a growing wave toward healthy alternatives. Snacks offered today include pulse-based crackers and chips infused with beets, spinach, and other vegetables.
Wider Availability Once only the domain of natural food stores, community supported agriculture groups, and farmers’ markets, fresh organic produce can be found in big-box retailers and conventional grocers—where half of all organic food is now sold—as well as even convenience stores. Amid the country’s retailers, club chain Costco is the largest seller of organics, having cornered about 10 percent of the U.S. market.
It will come as no surprise that California leads the nation in organic sales by a wide margin, followed by Washington state, then a mix of states including Pennsylvania, Oregon, Wisconsin, Texas, New York, Colorado, Michigan, and Iowa. These states combined are responsible for three-quarters of all organic sales in the United States.
What might surprise some suppliers and consumers are the top produce-themed organic bestsellers in terms of weekly retail dollar sales. In a review of 2016’s top ten products, bagged salad mixes were number-one according to United Fresh Produce Association’s “FreshFacts” report compiled by
Chicago, IL-based Nielsen Perishables Group. Next came berries; apples; herbs, spices, and seasonings; carrots; then blended beverages; bananas; various value-added vegetable products; lettuce; and finally, tomatoes.
“Organics continue to be a growth opportunity for many produce commodities and are now a valued part of most retail programs,” confirms Tom Stenzel, president and CEO of the United Fresh Produce Association. “Produce marketers are now able to offer consumers choices in both conventional and organic produce to ensure we’re meeting demand and growing consumption overall.”
Restaurateurs are also stepping up to the plate. A 2016 National Restaurant Association survey reported that 71 percent of fine dining, 46 percent of casual dining, 35 percent of fast casual, 33 percent of quick service, and 29 percent of family dining restaurant operators “offer food grown or raised in an organic or environmentally sustainable way.”
Supply Growing, Demand Growing Faster Today, there are nearly 22,000 certified organic operations in the United States and about 2,000 in transition. Although organics represent just 5 percent of all food sold in the country, and 10 percent of produce dollars, demand continues to outpace production.
M&M West Coast Produce, Inc. became a certified organic distributor and broker about four years ago. “We saw the direction the market was heading and wanted to brand ourselves as an organic house,” explains Ray Del Toro, president. About 20 percent of M&M West Coast’s operation is devoted to organics, including domestically-sourced vegetables like kale and broccoli, and avocados from Mexico. The company packs organic vegetables under its own label and exports to Japan, Taiwan, and Canada.
At 4Earth Farms, LLC, in Los Angeles, organics represent slightly more than half of total sales. The company started carrying organic produce about eight years ago in a measurable way and became certified as a handler. “We were not growing organic ourselves, but we saw strong opportunity—so we started our own operations,” says Mark Munger, vice president of sales and marketing at 4Earth Farms. “We have a nice balance of organic produce we grow ourselves and partnerships with organic growers.”
Alternative Growing Venues Fertile fields are not the only place growing organic produce—greenhouses, vertical farms in warehouses, and container farms have been cropping up across the nation. About 20 percent of greenhouse growers are engaged in organic, with greens as the highest revenue generating crop at these operations.
According to a survey by Agrilyst, greens bring in $64 per square foot or about $2.8 million per acre. Revenue is driven by not only year-round production, but better consistency in yields and premium retail pricing.
Transitioning To Organic “Becoming a certified organic grower and producing a product is difficult,” shares Rick Lejeune, CEO of Heath & Lejeune, Inc., a Los Angeles distributor dedicated to organic produce. The company has been selling organics for nearly 30 years. “Domestic sources are under greater pressure from the high cost of land, water, and labor than foreign sources,” he notes.
Most growers rely on untreated conventional seed, which is permitted under federal requirements when organic seed is not commercially available. “Organic seed is a huge area of discussion,” says Lejeune. “It’s difficult to procure.”
Purists believe organically grown seed is essential to organic integrity. “There should be a strong program to develop and maintain organic seed banks,” Lejeune points out, adding, “there are organizations working to preserve the integrity of organic seed.”
Yields of organic crops average about 20 percent lower than conventional yields. At the same time, labor costs are usually higher. Hand labor for weed management in high-value organic vegetable crops can cost up to $1,500 per acre, according to the USDA’s Agricultural Research Service. And, like their conventional counterparts, organic growers are struggling with the labor shortage.
Maintaining Integrity Protecting organic integrity from contamination can also be a challenge. Fields require buffer zones and segregated areas for harvests and handling. With respect to complying, “It’s all about training and ensuring you have a team well versed on the importance of not compromising the integrity of the product,” Munger says.
Consumer demand for convenience has spurred the growth of fresh-cut organic products. “Customers are definitely asking for it,” Del Toro says. But there are pitfalls and logistical challenges, especially for exports when it takes 10 days to get to the customer and a few more days to get to the consumer’s table.
Worldwide Appeal Globally, the United States is the largest market for organics, followed by Germany, France, China, and Canada. Sales are also climbing in Mexico, but the country’s organic exports have soared, primarily due to the North American Free Trade Agreement (known as NAFTA).
An estimated 85 percent of certified organic foods grown in Mexico are exported, mostly to its border mate, the United States. Work on a Mexico-U.S. equivalency arrangement—enabling organic products certified in each country to be sold as organic in the other—will reduce the cost of duplicative certifications, fees, and inspections. The United States currently has equivalency arrangements with Canada, the European Union, Japan, Korea, and Switzerland.
Despite the costs and requirements of certification and related food safety issues, Lejeune is a believer in the value of organic agriculture and its potential role in dealing with climate change. “Through organic practices, we can help mitigate the production of greenhouse gases and turn around some of their effects on the atmosphere.”
Pricing Pressure While there are risks to organic farming, there are financial rewards—specifically, the premium price fresh organic produce can fetch. “It’s definitely more costly to grow organics, but we make up for that with the prices we can get,” comments Munger.
Carlos Ramirez is sales manager for E Foods, Inc., a distributor in Orlando, FL that sells mostly conventional produce. “Our organic specialty is tomatoes, and we’re selling organic juices from Florida.” The cost for something like apples is still too high, he believes, when adding in the cost of freight. “Prices will come down if there’s more supply,” he observes.
This, in fact, has already been occurring as big-box retailers have put pressure on the industry to lower prices. Some stores often sell organic items for nearly the same price or occasionally less than that of conventionally grown due to supply levels. “There are times of the year when prices aren’t much different,” confirms Del Toro.
“It’s distressing,” contends Lejeune, because ultimately the pricing pressure falls on growers. “As a seller of organic produce, we feel there are three needs customers want: service, quality, and price. The first two are the most important. We’re not afraid to charge the higher price if we can deliver service and quality. We want to keep farmers sustainable.”
Certification and Labeling Growers, processors, handlers, and others seeking a USDA organic seal must go through a vigorous process and keep extensive records. Lejeune is a strong believer in oversight and worries about diluting certification. “Now that organics have exploded into the mainstream, we have more and more companies that don’t have the background, depth of experience, or true belief in organic agriculture.”
Some stores and farmers’ markets misrepresent product as organic for higher prices. In addition to annual onsite visits and product testing, certification agencies, accredited by the USDA investigate complaints. Violations carry penalties of up to $11,000 and/or suspension or revocation of certification.
Between October 2015 and June 2016 the USDA’s National Organic Program received 324 complaints of deceptive practices, including misrepresentation of products as organic, use of prohibited substances and methods, and labeling complaints. Civil penalties totaled $947,250. Sellers using fraudulent certificates are also called out in NOP newsletters to notify suppliers and consumers about the misrepresentation.
Associated Costs Organic certification can cost several thousand dollars, depending on the size, type, and complexity of an operation. Fees cover the application, an assessment on annual production or sales, annual reviews, and inspections.
The USDA Farm Service Agency offers programs to offset the costs of growing and maintaining organic certification, and, for the first time this year, costs associated with transitioning to organics. Programs will reimburse up to 75 percent ($750 maximum) of certification costs paid from October 1, 2016, through September 30, 2017.
As a distributor, Heath & Lejeune takes advantage of the cost-share program every year when renewing its certification. “It’s not a huge amount of money,” admits Lejeune, but nevertheless, it’s an important program to assist small enterprises, in particular, who do not have the resources of larger growers.
There is also a ‘Certified Transitional’ designation in organic production. It identifies land that is free from prohibited materials for at least one year and meets all USDA organic production standards.
To avoid an “organic-light” market from developing, land eligible for organic certification can only enter the transitional certification program one more time. Some critics of the program worry this can create confusion among consumers, who already do not always understand the difference between organic, natural, and local foods.
Bioponic Operations Along this line, soilless hydroponics, aeroponics, and aquaponics are also eligible for organic certification. Opponents of such ‘bioponics’ claim soil-plant ecology is intrinsic to organic growing systems and point to a lack of detailed standards for water-based systems. A task force was created by the National Organic Standards Board to explore the issue.
Lejeune believes in transparency and thinks hydroponics should be clearly labeled, “so consumers can make the choice.”
Munger agrees “it would be nice to have clarity,” but adds, “it is very difficult to grow certain crops year-round.”
While 4Earth does not operate its own greenhouse, the company has relationships with growers that do. He says hot houses subscribe to all of the philosophies of organic growing and notes that a consistent year-round supply of organics—regardless of the environment—makes suppliers more competitive in the market.
Final Thoughts The growing demand for fresh organic produce is more than a passing fad. Organic produce is a supermarket staple and can also be found at restaurants across the country. Double-digit sales growth shows no signs of slowing down for the rest of the year.
For those who grow and ship these items, there are plenty of obstacles—both manmade and from nature—to get organic fruits and vegetables into the hands of consumers. Weather events, pests, and labor are but a few of the challenges growers face, along with the rigors of certification and food safety requirements.
Although maintaining safety and certification standards isn’t easy, these measures provide a stamp of approval consumers can trust to get what they pay for. And trust in the product is what certification is all about.
