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Organic sector attracts food giants

After years of record growth, the UK organic market may have slowed, but it continues to garner the attentions of major food players keen to claim a stake in a $1.8 billion industry that managed still-impressive growth of more than 10 per cent last year.

Mergers and acquisitions include the 1999 purchase of Rachel?s Organic by US organic dairy producer Horizon (itself bought by Dean Foods in 2003); Go Organic, purchased by Dutch/Anglo conglomerate Unilever Bestfoods; and Kallo Foods, which was snapped up by Dutch multinational Koninklijke Wessanen in 2002.

While the injection of capital allowing organic farmers and food producers to upgrade their operations has been welcomed, prices are now being forced down. This has led to concerns about the merit of such an influx of big business capital into an industry that has always placed an economic value on its ethical foundations.

Michael Marriage, director of Berkshire-based Doves Farm Foods, an organic flour miller and food producer, is concerned about the trend.

?It is worrying because there are no small organic companies left—almost every single one of them has been bought out,? he said. ?Take Horizon/Dean?s buy out of Rachel?s Organic. Dean has a virtual monopoly on the US milk, soy milk and organic milk market. For such a company to own Rachel?s raises ethical questions. They have a different economic model that has little to do with organic principles.?

Unnecessary concerns
Welsh-based Rachel?s Organic managing director Neil Burchill highlighted the advantages of fresh capital investment in organics, wherever it comes from.

?The reason the original owners of Rachel?s sold was because they wanted to project the organic message to as many consumers as possible, and they didn?t have capital. Horizon did.

?It meant a wider selection of products, better marketing and an expansion in facilities. The number of employees rose dramatically and it had a lot of good knock-on benefits locally,? Burchill said.

Concerns that bigger companies are less likely to adhere to organic standards are unfounded, he said. ?The standards are there and must be met no matter what size of operation you have,? he said.

Industry consultant Simon Wright agreed about standards but, nevertheless, blamed major retailers for driving down prices.

?It is very damaging when individual supermarkets have a policy of being cheaper than their competitors. If everyone then follows suit, it is particularly damaging as this drives down prices and takes value out of the supply chain,? he said.

Craig Sams, president of the Green & Blacks chocolate company, threw his weight behind the presence of big companies.

?Now there is the chance for an innovative idea to quickly reach critical mass because there is such an expanded marketplace,? he said. ?Then you can attract the investment to go to the next stage and then, hell yes, sell to Wessanen or Dean Foods or Unilever and go and do it again or stick a well-deserved cheque in the bank.?

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