From The Fall 2002 Issue of Natural Grocery Buyer

Organics Climb Out of Niche Market

Read the fine print to clean up for the USDA organic seal

Elaine Lipson

There are some very good reasons for retailers to welcome the U.S. Department of Agriculture organic seal and the full implementation of the national organic standard on Oct. 21. With a consistent meaning for the organic label and USDA-accredited certification of all but the smallest producers, consumers are likely to have growing confidence in buying organic. The niche market that's been growing at 20 percent or more for years now is likely to keep on growing, in contrast to the somewhat stagnant sales of the more mature conventional food industry. New organic products will arrive, and old favorites may be able to improve distribution, providing greater access in the marketplace.

Yet retailers who haven't prepared to meet their responsibilities under USDA's National Organic Program will discover there's more to organic retailing than they've assumed. John Foster, an organic certification specialist, likens it to the pain of a frog thrown into boiling water. "The frog in the pan of cold water brought to boiling won't notice, but the retailer who waits until October to worry about [organic retailing requirements] will be the frog [thrown] in the boiling water."

Foster, who works with organic certifiers, retailers and manufacturers from his McMinnville, Ore., base and is on the board of directors of the Organic Materials Review Institute, has been advising clients on USDA's compliance requirements since the organic rule was finalized in 2001. "Those who took the time to read the regulations saw that retailers are exempt," Foster says. "Those who read a little further found that retailers who process ingredients and turn them into products for sale on the premises are excluded from certification but are still required to abide by other specific features of the rule, like prevention of commingling and contamination, and very specific labeling requirements.

"Now that's really as far as most retailers got. They saw 'exempt' or 'excluded' and thought they didn't need to do anything, and that's just not the case."

Katherine DiMatteo, executive director of the Organic Trade Association in Greenfield, Mass., sounds a similar warning. "The truth is, retailers are only exempted from certification aspects," she says. "As handlers, they are required to follow the requirements for segregation and production of the organic product [to prevent] commingling and contamination, and also [for] proper labeling. There are requirements for verification of the audit trail and certification of the products they receive in their stores. I think many retailers aren't aware that they need to at least know what's particular to the organic requirements, implement them and train their employees about them."

And it's not all academic. A retailer who knowingly sells product as organic that is not organic according to USDA standards is subject to fines up to $10,000 per violation.

Maximizing Benefits
Resources are available to help retailers understand and meet their requirements, including OTA's "Good Organic Retailing Program" manual, independent consultants, accredited certifying organizations and information from the Food Marketing Institute. The full text of the national organic standard is available online (see Resources
).

"OTA will probably not be pressuring for [mandatory] certification of retailers at this time, but rather a clear understanding of who in the government oversight inspection system will be asked to take on the role of checking retailers for noncompliance."

Even a grasp of the mechanical requirements of the rule may not be enough, however, for retailers hoping to maximize rewards from organic products. Bob Scowcroft, executive director of the Organic Farming Research Foundation based in Santa Cruz, Calif., recommends dedicating a staff member who can build expertise and a network of knowledgeable contacts. "A good retailer will assign a staff person the responsibility of having more than a rudimentary understanding of the organic rule, particularly as a resource to answer customer questions," Scowcroft says. "It's a business, and in fairness, thousands of retailers can't be expected to know where the i's are dotted and the t's are crossed in a multi-hundred-page organic rule, especially one that is still evolving through the NOSB [National Organic Standards Board].

"But if you believe in service to your customers, you do need to have an employee, relatively senior, who understands the principles and can quickly access the organizations that have the answers. Here at OFRF, we say, if we can't answer your question, we know who can and we'll see that they do. That's really what a retailer has got to do."

That kind of commitment, says OTA's DiMatteo, is one of the ways that mainstream retailers can echo the success of natural foods chains. "The greatest lesson retailers can learn from the natural products industry is that if you really value organic products as a key component of your success as a retailer, then organics will deliver that for you," she says. "Organic can be a very successful part of the store if managed well and viewed as being important, not just as 'well, if we put the product in there, we won't have to do anything more than that to sell it or make it desirable.' "

Should You Be Certified?
Though retailers who sell only prepackaged organic products, or who process and sell items labeled organic on-site (such as in a juice bar or deli) are exempt from certification, they may still voluntarily choose to become "certified organic retailers." This means working with a USDA-accredited certifier who will verify and monitor your organic handling practices and locate any areas of noncompliance. There are costs involved, of course, but "there are robust reasons for a retailer to choose to become certified," Foster says. "If I were in retailing, I would try to be one of the first."

The certification process gives a retailer an ongoing relationship with an experienced organic organization. "Certifiers and inspectors have a really deep wealth of knowledge about what it takes to maintain organic integrity," Foster says. Certification also may help retailers fully participate in the wave of media coverage likely to greet the USDA organic seal. "Right when consumers are inundated with this message about organics, I'd want to be able to put a placard in the front door saying I'm certified organic," Foster says.

Finally, certification may help mainstream retailers close what Foster calls a credibility gap. "Among consumers who are at least aware of the term organic, the national natural foods chains don't have a credibility gap," he says. "With mainstream chains, consumers may not have as much confidence that these stores know what they're talking about when they talk about organic. With the naturals markets, there's already a perception that they know what they're doing."

Action Plans
To build your knowledge base, Scowcroft of the Organic Farming Research Foundation recommends that retailers, or an assigned staff person, begin by learning a little about the history of the organic movement. Then, add to your organic Rolodex the certification programs operating in your state, whether governmental, private or both (both may be accredited under USDA). "They can look that up on our database at www.ofrf.org, and check accreditation at the USDA's National Organic Program Web site," he says.

The Organic Trade Association offers a retailer training program and manual that DiMatteo says "were written to be a clear presentation of requirements in the Organic Foods Production Act and the National Organic Program regulations for retailers," and she also encourages retailers to keep up to date on OTA's Web site, www.ota.com.

"The role we'll play, at least initially, is to inform the retailers of their responsibilities and to continue to pressure USDA to make a statement that would clarify how retailer requirements will be enforced," DiMatteo says, noting this is a gray area in the law. "OTA will probably not be pressuring for [mandatory] certification of retailers at this time, but rather a clear understanding of who in the government oversight inspection system will be asked to take on the role of checking retailers for noncompliance."

Those who choose to become certified should look for a good "personality" fit with their store, Foster says. "Costs also vary, and not all certifiers are adept at retail experiences even if accredited," he adds. "In a nutshell, the certifier should have a very clear understanding of the retail experience, which can be in contrast to the experience of farms, ranches and processors."

Future For Organic Retailing
While it may seem natural products stores have an advantage in selling organics, there's plenty for the organic industry to learn from its new or growing partnerships with mainstream retailers. "There are lessons about quality control and packaging, merchandising, and also about how widespread the interest in organics is in the mainstream population," DiMatteo says. "We'll be able to check some of the assumptions we've made about organic consumers and the pool of customers that might be converted to organic, and also about price and that relationship to quality."

As the organic industry answers those questions and begins to explore new ones, consumers are likely to have questions, too, including whether organic food is more nutritious. "If not the No. 1 question, it is the constant thread of what the retailer will be asked to address," Scowcroft says. "Unless you're 100 percent organic, you'll have to do some internal soul searching. Our position is that there are some intriguing signposts out there, but it requires millions of dollars and many years of additional research to properly address the question."

Right now, however, there is no doubt organic farming offers environmental benefits and can bring high-quality food to your operation—two elements that are very attractive to many consumers. Just be sure you're ready to welcome them with open arms.

Resources
USDA National Organic Program, www.ams.usda.gov/nop (includes full text of the rule, fact sheets and Q&A sections updated regularly)

Organic Trade Association, www.ota.com (includes information on Good Organic Retailing Practices program)

Organic Farming Research Foundation, www.ofrf.org (for National Certifiers Directory and general information about organic foods and organic farming research)

Food Marketing Institute, www.fmi.org (retailer information available)

Sidebars:
Keeping It Organic Under the Law

Elaine Lipson (Elorganic@aol.com) is a contributing editor for organics for Natural Grocery Buyer and author of The Organic Foods Sourcebook (McGraw-Hill Contemporary, 2001), a consumer guide that answers the most-asked questions about organics.