The transition from intention to action is often driven by urgency. Inertia overcome by necessity. The natural products industry saw the need for better definition of the “natural” label claim years ago as it watched exploitive companies throw the word on highly-processed foods, but the important players never came together to define the word that built their brands.
Now the urgency has arrived, and with it a call to action. Whether that call is answered looms among the biggest challenges the natural products industry has ever faced. An intersection of events and trends fueling a barrage of class-action suits chased natural off the label for brands legitimate and otherwise. The loss of natural hurts consumers who can’t afford farmers’ market prices but might squeeze their budget for food with better-than-Big-Ag ingredients. It hurts companies that are doing their best to make less-processed foods but fall short of USDA certified organic into a gray area often described as “nearganic.”
“If everybody is too scared to use the word natural, what incentive does a food company have to offer minimally processed foods without synthetic ingredients?” asks Daniel Williams, a Boulder-based lawyer at Faegre Baker Daniels specializing in food litigation.
It’s not that natural & organic product sales are hurting. NBJ estimates show the market growing 11.7% in 2013 to reach $56.8 billion in sales, and early estimates indicate another banner year in 2014 on 11.3% growth. Trending momentum was clear before Walmart announced the rebirth of a Wild Oats brand and Target built its Made to Matter collection. As the great migration toward natural products marches on, NBJ expects natural & organic to reach 13.5% of total food sales by 2020.
Setting the stage
However, growth—and the legitimacy and clout that follows—does not equal immunity. If anything, more money makes the industry more attractive to class-action lawyers. Brand by brand, anything short of the USDA organic seal appears vulnerable, and few foods can make it to functional or fortified without an ingredient a lawyer could point to as synthetic or processed beyond natural. “There is no limit to the creativity of the plaintiff’s bar,” Williams says. “They are trying to make as much money as they can.”
That’s the urgency, and it was born in the courts. Over the last several years, major brands began paying settlements rather than have their names and claims in the news, and thus a veritable litigation ATM was created with attorneys reportedly recruiting anybody who could hold a pen as plaintiffs and then taking the biggest share of the money in the settlements that followed. Attorneys could conceivably have plugged in that ATM decades ago, but forces outside the truly natural core handed the attorneys a gun and consumer advocates gave them the bullets.
The gun was GMOs. The bullets were forged in public awareness. GMOs are, to many, clearly not natural. So while there is still no legal definition of what natural is, there is a legal argument to pursue as to what natural is not. The GMO angle proved the strategy, and the plaintiff attorneys have since moved beyond it to pursue less high-profile ingredients turning any company with close-to-deep-pockets status into a target.
PepsiCo has very deep pockets and settled for $9 million in a combination of five class action suits that included the presence of GMO ingredients in its NAKED juices. Kellogg’s paid $5 million in an all-natural suit against its Kashi brand over the use of synthetic ingredients. Whole Foods Market has been hit by two lawsuits in the last two months. Heinz was sued in California in March over GMOs in its all-natural vinegar. Lawyers found GMOs in Campbell’s Soup in 2012. Smaller brands closer to the core like Barbara’s have also been hit.
Companies from startup to legacy, all anxious for a safe harbor, are not likely to find one anytime soon, at least not a harbor deep enough for anchor. The USDA’s definition has never been—and really can’t be—enforced and the FDA has revealed repeated reluctance to wade in. “The FDA doesn’t want to touch this with a 10-foot pole,” says Mary Mulry, a natural foods industry veteran and president of FoodWise, also working as private label manager for Natural Grocers by Vitamin Cottage. Indeed, since the legal tsunami swelled judges have repeatedly asked the FDA for a definition and the agency, as recently as January, has refused to get involved.
Gene Grabowski doesn’t believe their involvement is so necessary. A strategist to the food industry and crisis management expert at Levick—and former spokesperson for the Grocery Manufacturers Association—Grabowski questions the scientific legitimacy of the GMO complaints and believes the plaintiff attorneys and the market are effectively defining natural without government intervening. “When they sue in great numbers and the pain is felt, industry responds,” Grabowski says. “The system isn’t broken. It’s working properly.”
While Grabowski believes that companies removing natural from their products are likely to replace it with “wholesome,” “simple” and similarly comforting vocabulary, he believes the gig is up for faux natural, and the big companies know it. “Some of these companies have been around for more than 100 years and they can tell when the tide is turning,” Grabowski says. “They have very good antennae.” It starts with the label but could well end up in regulation, he says. “I think USDA is going to come up with some guidelines that are a little bit more distinct. I think we are four or five years from that,” he adds, “but it’s going to be a moot point before that happens.”
Stephen Gardner at the Center for Science in the Public Interest says he also sees hints of movement toward regulation. Gardener is “philosophically” prepared to see natural banned for good. In June, Consumer Reports petitioned the FDA and USDA to have the word removed from all food products, and while he admires the “elegance” of that solution, Gardner believes legitimate companies should still be able to make legitimate claims. “We like the idea that people should still be able to do things honestly,” he says. The natural label shouldn’t even be necessary. “A lot of the companies that are making actual natural products don’t say it because of course they are. You now they are.”
Gary Hirshberg, a pioneer in organic and the founder of Stonyfield Farm, has been involved with such companies throughout his career, but he notes that one brand in particular, Brown Cow, has already removed natural from its label. Hirshberg describes that decision as “a hard call.” “There are a certain number of consumers who believe that natural means what those of us who have sincerely used it have meant it to be, and walking away from those consumers is not something that we took lightly.” Though he is part of the Only Organic project aiming to do away with natural as a marketing term altogether, he worries about companies offering real health benefits and simultaneously losing the ability to market those benefits. Can the ethic evaporate with the incentive? “If you are spending that cost and you see competitors who are making the same claim and they are not, then that’s motivating you to rethink your competitive posture,” Hirshberg says. “You either hunker down and create a whole standard or move away from natural. Because of the lawsuits, frankly, the latter actually becomes easier.”
The story so far
The history of government delving into the definition of natural is not encouraging. The FTC put a toe in the water in 1974 to develop a definition, and kept it there for nine years before stepping back on shore with no standing definition or clarity. The words “natural” and “sustainable” disappeared from the FTC’s Green Guide in 2012. The USDA offered up its definition—no artificial ingredients and “minimally processed”—in 2005, but called it voluntary. The FDA approached the process in 1993 but backed off.
Industry, the courts and consumer activists have clamored for a definition only to hear FDA pass it off as a low priority. Nobody is dying here. The agency has no shortage of urgent matters to attend to with higher priority and greater clarity, especially across the aisle in dietary supplements with high-profile enforcement of DMAA and copycat compounds in bodybuilding and pain management making headlines. “The all-natural issue is a not a threat to public health. It’s not a threat to food safety,” says Grabowski.
The various agencies have met various difficulties and few would disagree that natural presents a thorny thicket of complications. One could easily see a phone-book thick list of ingredients to be rated one by one. Each process could be evaluated step-by-step, and whole categories would demand exceptions where existing technology could not meet the standard but still offer a viable, shelf-stable ingredient.
“The truth is not everybody can do organic. Sometimes there’s not the tech to do it,” says Dan Fabricant, who recently moved from the top supplement spot at FDA to become CEO of the Natural Products Association in April.
Still, a complicated challenge unanswered leaves an open door for forces that would see the definition of natural as diluted as it is now but with regulation backing up that hollow claim. The deepest pockets in food have the most to gain, and the most money to throw at regulators. The urgency from within natural products begins to focus around preempting such watered-down regulation with a definition that could differentiate truly natural products and send the not-so-natural brands scurrying off into “wholesome” and “simple.” That definition might not be all things to all people, but the time to put it in writing is now, insiders say. “You’d rather be 95% right than 100% wrong, which, if you sit around, is exactly what you will get,” Fabricant says.
It came from the corn belt
That gloomy result is not entirely hypothetical. Big Ag has big money and a big interest in seeing GMOs allowed in products labeled natural. They see the risk. Prop 37 may have failed in California but it sprouted ballot initiatives the way a hydra sprouts angry heads. Vermont Governor Peter Shumlin signed a mandatory labeling bill in May. An Oregon labeling initiative qualified for the November ballot in July. In all, labeling measures are in the works in as many as 25 states. All of this has built the consumer awareness that gave credence to the attorney claims, and has 93% of Americans in a June ABC poll agreeing that they want GMO foods labeled. Facing a hodgepodge of state-level laws, Big Ag has moved to establish a national standard, perhaps more accurately described as a non-standard. A bill introduced by Representative Mike Pompeo (R-Kansas) in April would negate all state laws on GMO labeling. Leaders in the natural products industry have already labeled Pompeo’s bill the DARK Act— Denying Americans’ Right to Know. The bill also directs the FDA to define natural, conceivably with GMOs included.
Such a definition may be the industry’s biggest fear. It may also be the industry’s fault. Hirshberg calls Pompeo’s bill “a kind of inevitable result of the lack of a coherent definition around what natural really means.” At this point, Pompeo’s bill may be little more than a feint. Govtrack.us gives the bill a 17% chance of making it past committee, and a 3% chance of being enacted. In the immediate future, there is little chance the bill will see the top of the inbox, much less the floor of the House of Representatives, before the midterm elections, but it does telegraph the punch Big Ag is winding up.
GMOs in the spotlight
The right approach remains elusive. Is it time to duck the punch or throw a leftist hook? Some groups see mandatory GMO labeling as vital, while others could concede that voluntary labeling and allowing consumers to guide the market would be sufficient. Non-GMO Project verified foods are growing in numbers and sales. New data from NBJ indicates that sales of non-GMO products grew by 80% in 2013. Projections are on target to hit another 53% growth in 2014. According to the Non-GMO Project itself, there are currently more than 20,000 verified products from 2,200 brands and annual sales have now passed $7 billion. Polls show awareness of GMOs has led to consumers viewing the non-GMO seal as more valid and important even than USDA organic, despite the fact that GMOs are not allowed in organic products by default.
Clearly the issue is hot. Though black and white to many eyes, GMO-free remains a challenge to even well-intentioned food companies. With the bulk of soy and corn production gone to GMO, the commodities grow scarce to the point where Fabricant laughs about a label that could have a corn-included qualifier—“made with all natural ingredients, except for the corn.”
Industry steps in?
With Congressional paralysis at its peak and corporate interests so heavily bankrolled, no one interviewed for this story—with the exception of Fabricant—sees a truly feasible path to a federal standard. Fabricant describes a process of exerting “legislative pressure” that may require a coalition in Congress that has yet to emerge. He still thinks it’s possible. Legislators have listened to consumers before. If the FDA defined “fresh,” they can define “natural.” Says Fabricant: “There’s got to be some legislative pressure that says, ‘Hey, it’s important to consumers. We understand it’s not the highest thing on your priority list, but it’s got to happen.’”
Fabricant believes the industry needs to approach Congress and the FDA with a definition in hand, a worrisome task as natural products manufacturers are notorious for their lack of cohesion and coordination. “The industry does one thing well and that’s circle the wagons and shoot inwards,” Fabricant says.
There is no shortage of opportunity to become mired in the minutiae. Todd Harrison, a partner at Washington-based Venable specializing in food and supplement regulation, thinks the urgency of the moment could perhaps nudge the wagons into line if the goal remains simple. “If you make a 50-page document, that’s worthless,” Harrison says, advising a “couple of pages” as best. “It’s not going to be 10 pages long, but it will take in the uniqueness of each industry.”
That doesn’t mean it will be simple to get there. Harrison is one of the founders of the Organic and Natural Products Health Association (ONHA), a new hybrid trade/consumer advocacy group announced last month. He believes that previous efforts have failed because there were not enough chairs at the table. ONHA’s aim is to bring industry, trade associations and consumer advocates together to agree on a robust but reasonable standard. “The only way to bring in any sanity is to come up with a definition that has sign-off from industry but also from the consumer groups.” ONHA Executive Director Karen Howard has said the new organization aims to hold discussions at Natural Products Expo East next month, engage the appropriate parties in a discussion and have a definition, including possible certification, by the first quarter of 2015. The challenges, as Harrison sees them, include discovering what each side is willing to give up. “If industry leaders don’t won’t to step up, and if the consumer groups won’t step up, you will never define natural.”
Loren Israelsen of the United Natural Products Alliance (UNPA) believes it could be even more complex than that—but no less urgent—and UNPA would be willing to participate in a coalition that includes ONHA, NPA and additional trade associations. Israelsen warns of “elbow throwing and jousting,” but says he could see early goals shaping up to be not just a definition from the industry, but a way to enforce it without an FDA standard. “If a member is non-compliant, hopefully part of our job is to call them out—UNPA and other associations. Trade shows ought to do that. The public ought to do that. Consumer groups ought to do that.”
UNPA, ONHA and NPA fail to inspire confidence in Mulry. “I don’t think there is any organization that’s up to the task right now,” she says. What is needed, according to Mulry, is a coalition not unlike what Israelsen describes but including ONHA’s stated mission to invite industry and advocates. Retailers need to be there too, she says, starting with the Independent Natural Food Retailers Association and the National Cooperative Grocers Association. “I would reach out to grocery chains like Natural Grocers, Whole Foods, Earth Fare. I would reach out directly to retailers.” Fabricant agrees: “We have to start with retailers. We have to start with independents.”
Get the right people together, Mulry says, and the challenge is not insurmountable. “I think it is very doable. I don’t think it is doable by people without egos who want to own it.” She points to NPA’s natural standard for personal care products as an example of a single organization attempting to create a definition. “I would venture to say NPA’s standard is known by a very small fraction of people.” Mulry has assisted Natural Grocers and Boulder-based Alfalfa’s in creating their own standards, and thinks a simple list of what is and what’s not natural in ingredients and processes could be put together quickly from existing documentation. “The background work is all there,” she explains.
The new definition, however, would need to be the starting point in an “evolving” rubric, and that’s where a new group may be most needed. “Who is going to own it?” she asks. Fabricant also sees the wisdom in an evolving set of rules, and describes a strategy of starting small with a select and short list of ingredients and processes. “You’re probably going to have to start with 20 bad guys, knock them off, and then you move through the deck.”
Israelsen hopes for a “process” strategy, adopting already-established standards like USDA organic and the Non-GMO Project policies. That framework is solid, he says. Compliance processes already exist. “You can put natural inside that with this very robust chassis around it. That you can work with, and that will create a durable useful mechanism.”
Israelsen and Fabricant agree the definition needs to be adaptable for categories. Supplements present a particular problem, Israelsen notes with ingredients as simple as vitamin C qualifying as synthetic. He is not as optimistic as Mulry and thinks the current legal free-for-all could wind up enforcing a definition before industry gets its act together. The biggest player, he says, is “money.” The lawsuits are forcing “a cleansing process” that imposes validity on natural, he explains, and consumers have that power too. “Money, well applied, will make natural matter. It will be meaningful enough that it becomes a driver to cause a change in agricultural policy and consumers voting with their dollars for products they regard as being natural,” Israelsen says. “The cleansing process will do that.”
In that regard, intention doesn’t matter anymore. The action is already underway.