Natural Niche
by Pamela Accetta Smith

The organic market continues to thrive, but not without debate.

Struggling to keep up with demand for its milk, Horizon Organic predicts 20 percent growth in the segment over the next few years. Organic yogurt pioneer Stonyfield Farm is in the midst of a plant expansion to increase capacity for its domestic production while exploring new opportunities abroad. Wal-Mart aims to bring down the price of organic milk to reach a greater number of consumers.
Overall, the fluid segment may be stagnant, but the world of organic milk is on fire.
As sales of organic products continue to grow at a steady pace in the United States, manufacturers, growing and marketing cooperatives and others are recognizing the need for additional producers to get on board.
According to the Organic Trade Association’s 2006 Manufacturer Survey released in June, U.S. sales of organic products grew 17 percent overall to reach $14.6 billion in retail sales in 2005.
“We anticipate our milk supply to grow significantly the next year, which should allow us to meet the fast-growing consumer demand,” says Caragh McLaughlin, Horizon Organic’s marketing director. “Horizon Organic has been here from the very beginning — 15 years ago we helped create the organic marketplace and we’re committed to making sure it grows responsibly.”
But is the ever-increasing demand for organic foods causing the definition of “organic” to be broadened beyond the scope of its earliest advocates?
By Department of Agriculture standards, the “USDA organic” seal means that at least 95 percent of the ingredients in the product are farmed without using chemicals, hormones, pesticides or any method regarded as harmful to the environment.
However, some organic farmers and activists say that in the United States the organic label has been cheapened over time into a gimmicky marketing tool. As mainstream supermarket chains increase their clutch on the lucrative organic industry, The Atlanta Journal-Constitution reports, these same critics contend that big business is developing a stranglehold on efforts to tighten national organic standards and regulations. Large corporations entering this growing market counter that, simply by doing so, they are benefiting both the environment and consumers.
USDA spokeswoman Joan Shaffer says the organic label is a “marketing program” that only specifies how the food was processed, but has no indication of food safety or nutrition. To that end, some organic advocates are reportedly citing concerns over loosening regulations, worried that the essence of organic will be lost if production elevates to a grand scale.
Case in point: Wal-Mart, the nation’s largest grocery retailer, is rolling out private label organic milk. Responding to the claims that organic is a niche for the privileged, the low-price mega retailer has pledged to keep its prices for milk and other organic products below the premiums commanded by high-end retailers.
Sold under its well-known Great Value label, Wal-Mart’s organic milk is produced by Boulder, Colo.-based Aurora Organic Dairy. Aurora also supplies Safeway, Costco, Target and Wild Oats with its store brands of organic milk.
But activist groups and some organic dairies have alleged that Aurora’s large factory farms are watering down the principles of organic agriculture. They allege that Aurora’s cows do not spend significant time roaming pastures and eating fresh grass.
Wal-Mart and its supplier have argued that Aurora’s two farms in Colorado and Texas are in full compliance with USDA standards for organic dairies.
Processors With a Mission
Horizon, too, has been accused of straying from a strict organic mission since its acquisition by dairy giant Dean Foods Co. But Horizon vigorously defends its commitment to organic foods and farming methods, and outlines its activities in great detail at its Web site, www.horizonorganic.com.
“Between those shipping milk to us today and those who are in transition, we partner with 580 family farmers nationwide,” McLaughlin says. “Organic farming provides an incredible, value-added opportunity for family farmers. Our business ensures we keep family farmers farming.”
Boulder, Colo.-based Horizon Organic boasts the nation’s leading brand of certified organic milk and a full line of USDA-certified organic dairy products. Founded in 1991, the company was the first certified organic dairy to distribute products nationally in the United States. The company purchases milk from certified organic dairy farms and delivers certified organic dairy products to natural foods retailers and supermarkets across the country.
Organic Dairy New Product Introductions
U.S. and Canada - January 2005-October 2006
 20052006Total
Butter549
Cheese201434
Cream & Creamers325
Milk283260
Yogurt & Probiotic Drinks18422
Total7456130
Source: Mintel Global New Products Database (GNPD)
Through the company’s HOPE (Horizon Organic Producer Education) program, Horizon Organic partners with 340 family farmers nationwide and is helping another 240 transition to organic, McLaughlin notes. “These farmers supply 80 percent of our milk,” she says. “The other 20 percent comes from two farms we own [in Idaho and Maryland].”
The HOPE program provides farmers with hands-on support as they navigate the organic certification process and provides significant financial assistance through the three-year transition. Horizon Organic is supporting the program by contributing up to $20 million over the next five years, McLaughlin says.
Perhaps even more visible is Stonyfield Farm Inc., the 24-year veteran organic yogurt maker. The No. 3 brand of yogurt in the United States, Londonderry, N.H.-based Stonyfield Farm has built a national reputation for its leadership in organics, natural nutrition and corporate environmental responsibility.
With the help of majority owner Groupe Danone, it’s now taking its mission worldwide, launching Stonyfield Europe with an interest in Ireland’s leading organic dairy, along with a new product line in France.
The company’s primary goal is to produce the healthiest, most delicious products possible. At the same time, it is committed to educating its customers about the ways business and industry can be financially and environmentally successful.
Stonyfield Farm’s products include all-natural and certified organic yogurt and smoothies; organic milk, ice cream and frozen yogurt; and cultured soy. The company created such products as its YoBaby line of organic yogurts and drinkable yogurt for babies and toddlers, and a range of naturally sweetened light yogurts and smoothies.
Led by president Gary Hirshberg, the company advocates the idea that healthy food can only come from a healthy planet. Stonyfield Farm was the nation’s first dairy processor to pay farmers not to treat cows with synthetic bovine growth hormones. The company donates 10 percent of its profits to environmental causes, was America’s first manufacturer to offset 100 percent of its CO2 emissions from its facility energy use, and recently installed the fifth largest solar array in New England to help power its production plant — all efforts to reduce global warming.
The booming demand for their products is proof that such an attitude is profitable.
“What we do matters,” says Horizon’s McLaughlin. “We want to provide healthy organic choices to as many people as possible. By doing so we provide greater benefits to the environment, converting more acres to organic production and decreasing the use of pesticides and harmful chemicals, treat our animals with compassion, and promote and sustain the livelihoods of hundreds of family farmers.”
Further, McLaughlin says, Horizon strives to make sure it provides nutritious organic milk to families while also maintaining the letter and spirit of the organic regulations. “As a company, we believe it’s critical that the regulations be strengthened and that we grow the organic milk supply responsibly,” she says. “The organic standards are scale neutral. We believe that every acre that we transition to organic is better for the land, water and animals — as well as our overall health. The more this industry grows the better off we’ll all be.”
Consumer Insight
ealth benefits, taste and effect on the environment are top three reasons Internet “bloggers” cite for buying organic, according to a second-quarter study of consumer attitudes and trends in organic food purchasing conducted by Umbria Inc., a market intelligence company that specializes in research of Weblogs and consumer-generated media (CGM) for market insight. Health and wellness are popular discussion issues among bloggers, Umbria reports.
Notable in this recent study was the dominance and passion of female bloggers across all age groups for this topic, driven most markedly by what the company calls “Gen Y females.” Bloggers in this demographic talked about the attraction of organic retailers offering luxury items such as premium juices and prepared sushi. They also discussed how in-store free samples often brought them to the store and contributed to their return. Consumers blogging about organic foods are also concerned with animal welfare and ethical issues surrounding the capture of wild seafood and treatment of cows, the Umbria study reports.  
A Different Take
Warren Taylor, a self-described “dairy evangelist” and owner of Pomeroy, Ohio-based Snowville Creamery LLC, is passionate about milk. The following are excerpts from his response to our query about the progress and future of organic dairy:
“It all depends on whether there are adjustments within the dairy industry which continue to contain and marginalize organic production and marketing, or whether those restrictive market forces are lifted so that free market forces can allow organic milk to grow and be responsive to consumer demand.
“Organic milk, and its ever-growing market, has done much good. Dairy farms have reduced or eliminated their pesticides, artificial hormone and antibiotic use. Organics success may lead to rBST coming out of all this nations’ milk. Unfortunately, at twice the price of grocery store milk, organic milk still only enjoys about 10 percent of the market.  At Snowville Creamery our motto is ‘Good Food for All.’ That means the consumer shouldn’t have to pay twice as much for the privilege of drinking good, fresh milk.
“Certified organic standards have been the decisive tool in bringing a returned marketplace value for the greater cost of production necessary for a variety of foods.  But perhaps fluid milk is certified organic’s greatest failure. Who can persuasively defend the current American organic dairy industry fragmentation, dissidence and generally older and more heat-treated product?
“The local dairy farmer practicing particularly exemplary dairying practices provides an alternative to certified organic milks. Organic feed can be unreasonably expensive and of lower quality due to extended transportation and limited options. Better to use the very best fresh locally available feeds and give the consumer a better value.  
“When the goal is producing the very finest dairy products possible in a sustainable and efficient manner, this may not always meet certified organic standards. Is it possible that the dairy industry is so unique and complex that its own industry group might better safeguard the American milk supply by policing the holistic comprehensive operation of milk production and distribution?
“The Same Day Dairy brand of Snowville Creamery holds the goal of producing the finest and freshest milk practical as primary.  We believe people will consume more only if we give them a better product. Organics take the eye off the prize of producing the very finest and freshest milk and make the goal producing milk to a rigid organic standard at the lowest cost possible. We all see the results.
“With on-farm processing, energy and transportation costs are minimized and the freshest milk is available at a cost comparable to any other milk available. Let’s concentrate on the total holistic quality of milk, and the commitment to bring it to the consumer at its finest.  
“It’s hard to see organic milk with its current limitations ever achieving 25 percent of the fresh fluid market. If we really want to change the world, we need 50 percent of it.
“If there is a time when organics bubble will burst, it will be when the issue is no longer organics but local sustainable efficient production of particularly wholesome and particularly fresh milk. We advocate for the ‘same day’ principle of processing and packaging for retail the same day the cow is milked. That dairy farmer can then provide that milk directly to the most efficient and highest volume mover of fluid milk, the local major grocery stores. When that happens, people will have a better alternative to organic at a lower price. The organic bubble will not burst. It will disappear along with ‘commodity fluid milk.’”  
For another view on organic dairy, read Health Watch, “Facing Organic Perceptions,” in our February 2006 issue, archived at www.dairyfield.com