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The Corporate Organic Conquest

Gray clouds over organic sky?
Clouds on the Organic Horizon
Tue, 30 Nov 2004 09:41:25 -0800
By Carmelo Ruiz-Marrero

Is organic farming becoming the victim of its own success?

Every Saturday morning at the bustling organic farmers market in rural Point
Reyes Station, California, local residents buy food directly from the
farmers who have grown it. Though one can walk from end to end of the market
in a single minute, the diversity it offers is bewildering: first there are
the vegetables: spiky leeks, autumn greens and warm-toned squashes. Then you
have the processed goods, everything from ice cream and olive oil to soap. A
musician plays for the crowd and the conversation is lively.

Here Cowgirl Creamery Dairy sells Mount Tamalpais cheese, over there Kevin
Lunny of Inverness sells grass fed beef while Warren Weber's Star Route
Farms of Bolinas sells edible flowers and Margie McDonald's Wild Blue Farm
sells pumpkins.

The shoppers will tell you they prefer organic foods for both health and
environmental reasons. The absence of pesticides is generally equally
important as the guarantee that food will not contain genetically modified
organisms (GMOs), whose health effects are still largely unknown.

Meanwhile at the other end of the North American continent, Whole Foods, a
Texas-based natural food chain, recently opened New York's biggest grocery
store in at Time Warner Center's new shopping mall, touting it as 59,000
square feet of the "Ultimate Grocery and Lifestyle Shopping Experience."

The company promises to turn "a seemingly mundane chore into one of New York
's favorite new pastimes." Customers are offered Jamba Juice fruit
smoothies, Genji Express Sushi wrapped in organic seaweed; more than 700
varieties of wine; and a Chocolate Enrobing Station "where customers can
request just about anything covered in chocolate."

Until a decade ago, organic foods were available only through tiny farmers
markets, health and natural food stores, but today their growing popularity
means that more organic food is now sold by chain stores like Whole Foods.
Often, the food itself is produced by companies ranging from General Mills
to Nestle to Coca Cola , and grown on corporate-owned farms no longer
synonymous with small farms, rural communities, social justice and humane
treatment of animals.

"I'm all for it as long as it's for real," says Jeremy Rosen of Fresh Run
Farm at the Point Reyes market, whose little stand boasts vegetables ranging
from artichokes and arugula all the way through nettles and turnips. "[But
large corporations] won't be able to put all the care into the land that
small organic farmers put in."

Rosen's farm, located just a few miles from Point Reyes, is in one of the
first organic production zones in the San Francisco Bay area and he doubts
that large corporate farms will ever be truly sustainable because
"conserving soil on a huge farm scale is not possible."

Yet, in order to meet the increasing demand for organic food, production is
increasing far beyond its original base. Sales of organic foods and
beverages in the United States surpassed the $11 billion mark in 2002, and
according to a 2003 survey sponsored by the Whole Foods retail chain, 54% of
US consumers have tried organic foods and one third consumed more of them
than in the previous year.

America's mega-stories like Wal-Mart, Price Chopper and 7-Eleven are already
in on the organic action, offering organic products on their shelves, and
food corporations, such as agribusiness giant Archer Daniels Midland and
Campbell's Soup, have added organic items to their product lines. The
organic market in the United States is expected to reach $30.7 billion by
2007, with a five-year compound annual growth rate of 21.4% between 2002 and
2007, according to the Datamonitor research firm.

"There are people who criticize the entry of these megacorporations into
organic[s]... They fear that they will jeopardize organic standards and the
very ideas organic agriculture is based upon," says Helge Hellberg, director
of Marin Organic a non-governmental organization that promotes sustainable
agriculture. "But it is also true that we need these companies in order to
make a nationwide movement for organic products," he adds.

The increasing level of consumer demand means boom times for U.S. organic
farms. The state of Vermont, for example, had 78 organic certified producers
in 1993, and by 2003 their number had grown to 289. Certified acreage in the
state has grown from 23,638 in 2001 to 30,387 in 2003. In California,
Certified Organic California Growers confirms that the state has 170,000
organically grown acres. At current growth rates, organic sales will
constitute 10% of American agriculture by 2010.

These skyrocketing growth rates convinced the U.S. Department of Agriculture
(USDA) to set national organic standards in October 2002, after 12 years of
delays. While some organic advocates consider USDA recognition a triumph,
according to Ronnie Cummins of the Minnesota-based Organic Consumers
Association (OCA), the department set the standards largely at the request
of agribusiness corporations and mass retailers. He believes they wanted
uniform national standards to speed their entry into the organic market,
replacing multiple state standards that made it more complicated for the
chains who grow in one part of the country and sell at the opposite end of
the nation.

"The biggest problems with the USDA organic regulations is that they say
nothing about subsidized water, animal treatment, labor standards and food
miles (organic advocates want to reduce the distance that food travels from
farm to consumer in order to reduce fossil fuel use and promote local
sustainable development). Also the organic standards are biased in favor of
large corporations because they are size-neutral, that is they apply equally
to an agribusiness giant and a small family farm. Large businesses can cover
the costs of these regulations more easily," says Cummins.

Indeed, according to a recent International Federation of Organic
Agriculture Movements (IFOAM) report, the USDA is now investigating support
for international organic standards in order to facilitate global trade in
organic food.

The USDA itself does not certify farms or products. Rather, it accredits
institutions, be they public agencies or private firms, to do the actual
certification. Neither growers nor sellers are allowed to label "organic"
any product that has not been certified as such by a USDA accredited
institution, and the agency is the final authority for appeals on just what
the organic standard will mean.

Olivia Sargeant, a nutritional consultant from San Francisco, who works at
the Marin Sun Farm booth at the Point Reyes market thinks the bigger
corporate and governmental role "has both pros and cons." Wider penetration
"will bring some education to people, but it's also co-opting the very term

Sargeant is also concerned that large natural food retailers like Whole
Foods are putting mom-and-pop stores out of business in the same manner as
conventional food chains like Safeway and Wal-Mart. "My local health food
store went out of business because of Whole Foods. Large retail chains, no
matter how 'ecological' they may be, are bad for locally-owned businesses."

But even natural foods giant Whole Foods could eventually lose out to
conventional stores. USDA statistics estimate that the market shares for
organic food sales are: conventional supermarkets have 49%, natural food
stores have 48% and farmers markets and food buying clubs just three
percent. And a June 2003 study, which uses stricter
criteria for what constitutes a health food and natural food store,
estimated that the percentage of sales of organic food sold through these
outlets fell from 62% in 1998 to just 31% last year.

Despite the fact that most consumers are buying their organic food from the
big retailers, buried in the 2003 Whole Foods survey is another interesting
piece of information: 57% of organic consumers believe that organic foods
are grown on small farms.

While Cummins believes that this is still largely true in practice, he says
that this will change over time. "I see some troubling trends, especially in
organic dairy. In that sector there is a major move toward moving production
from family farms to industrial feedlot factory farms. Horizon controls 70%
of the US organic dairy market, and last year it was bought by Dean Foods,"
he told CorpWatch..

"No way in hell can you be organic if you have over a few hundred cows.
After a certain size, the operation cannot be ecologically sound anymore,
among other things because of the amount of manure produced," added Cummins.

"In California there are huge organic farms that produce organic lettuce and
carrots in large monocultures, using large energy inputs and receiving
subsidized water- three elements that are anti-environmental and
unacceptable for those who want ecologically sound farming," he adds.

In a 2002 study conducted at the University of California at Davis, Karen
Klonsky documents that organic food production in California is already
concentrated. Two percent of organic farm operations, about 27 growers,
bring in over $1 million a year and represent over half of the organic sales
in the state.

Indeed while over 90% of all U.S. farms are categorized by the USDA as
small, the other 10%-big agribusiness-provide approximately 60% of all food

Nationwide, two corporations, United Natural Foods and Tree of Life, control
the distribution of about three-fourths of all-natural products. Tree of
Life is owned by Koninklijke Wessanen, a Dutch conglomerate that is itself
one of the largest food companies in Europe.

Not all in the organic food business see these trends as negative, Barbara
Haumann, spokesperson for the U.S. Organic Trade Association says, "The more
players, the more products will be available to consumers, who, in turn,
will buy more products. This will result in more land under organic
production, regardless of the size of the operation. And that will be better
for the environment, local communities and the planet."

Another supporter of corporate entry into the market is the pioneering
organic yogurt maker Gary Hirshberg CEO of Stonyfield Farms. He shepherded
the sale of the United State's premiere organic yogurt maker to the
France-based multinational Danone corporation while keeping himself as CEO
of the acquired company. Hirshberg's family made an estimated $35 million on
the $125 million dollar sale. He says he believes the end result of the deal
is a win-win situation for organic producers and consumers.

Asked if the buyout had affected Stonyfield's practices, company
spokesperson Mary Townsend says: "Danone actually let us operate the way we
always had, contracting with small family farms and in line with the
strictest organic standards. Furthermore, Danone is asking us to help them
change their operations worldwide to organic production."

Laurent Sacchi, vice president of corporate communications for Groupe
Danone, tells CorpWatch: "Danone has encouraged (and will continue to
encourage) Stonyfield to continue the practices that have made them
distinct; for example, the 10% profits for the planet program, the support
of family farming, their support of organic. Danone is using Stonyfield as a
model for how alternative ways of doing business and farming could be
successfully developed, even inside or in the frame of a more 'classical'
company. "

Business accounts of the sale note that since it costs $70-80 million just
to launch a national brand in the U.S. acquiring an established name like
Stonyfield is far less risky than starting a competitor.

But Paul Cienfuegos of the California-based Arcata Committee on Democracy
and Corporations and a longtime critic of "corporate organics" accuses large
firms like Stonyfield of using their organic subsidiaries to infiltrate
sustainable agriculture and water down organic standards.

He cites a recent organics convention in Texas where an OTA sponsored panel
considered how organic and genetically engineered (GE) crops could co-exist.
Cienfogos maintains that most advocates believe that the discussion on GE
crops should focus on how to get them banned, not on how they could co-exist
with non-GE crops. "The fact that the General Mills corporation [Owner of
the Cascadian organic brand] is a major donor (of OTA) may have had
something to do with this," he says.

And critics such as Rich Ganis, who writes for the online newsletter, contend that the modest ecological benefits of more
organic acres under production due to corporate agriculture are being
"offset by the tremendous amount of fossil fuel, packaging, and other
resources expended in the production and distribution of these 'value-added'

Small Brands, Big Owners

What have organic brands Health Valley (cereals), Bearitos (corn chips),
Bread Shop (granola) and Celestial Seasonings (tea) have in common? These
apparently independent companies are all owned by the Hain Celestial Group

Even though Hain Celestial is an organic giant in its own right, it has even
bigger owners. According to research by Paul Glover and Carole Resnick of
the Greenstar Food Coop (Ithaca, New York) the company's investors include
Philip Morris, Monsanto, Citigroup, Exxon-Mobil, Wal-Mart and aerospace
military contractor Lockheed Martin. And in September 1999 the H. J. Heinz
food conglomerate bought a 20% stake in Hain Celestial.

Hain Celestial is by no means a unique case:

* Cascadian Farms is a subsidiary of Small Planet Foods, which is a division
of agribusiness colossus General Mills. And General Mill's main shareholders
include Philip Morris, Exxon-Mobil, General Electric, Chevron, Nike,
McDonald's, Monsanto, Dupont, Dow Chemical and PepsiCo.

* Silk Soy Drink is part of the White Wave corporation, itself a Dean Foods
subsidiary. And according to Glover and Resnick, Dean Foods' main investors
include Microsoft, General Electric, Citigroup, Pfizer, Philip Morris,
Exxon-Mobil, Coca Cola, Wal-Mart, PepsiCo and Home Depot.

* Odwalla, makers of organic orange juice, is owned by Minute Maid, which is
in turn a division of Coca Cola.

* Boca Burger is owned by Kraft, which is part of Philip Morris.

* Arrowhead Water and Poland Spring Water, are Nestle subsidiaries.

* Organic Cow, founded by small New England organic dairy farmers, is now
part of the Colorado-based Horizon, whose sales just topped $200 million
annually and which controls 70% of the American organic milk market .
Horizon Holding company was itself was acquired by the Dean Foods
conglomerate in 2003.

Carmelo Ruiz-Marrero is Director of the Proyecto de Bioseguridad and a
Research Associate at the Institute for Social Ecology, as well as a Senior
Fellow, Environmental Leadership Program.

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