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A milestone for organic producers, the organic standards have reached toddlerhood. As a sales driver, the two-year-old program gets mixed reviews from retailers interviewed by SN.At Thriftway stores in the three-unit, Seattle-based Penhollow Markets group, all red meat sold is classified as "natural." In addition, organic milk sales have "skyrocketed" in the last year or so, according to Larry Roberts,

A milestone for organic producers, the organic standards have reached toddlerhood. As a sales driver, the two-year-old program gets mixed reviews from retailers interviewed by SN.

At Thriftway stores in the three-unit, Seattle-based Penhollow Markets group, all red meat sold is classified as "natural." In addition, organic milk sales have "skyrocketed" in the last year or so, according to Larry Roberts, president.

In five years, sales of all fresh foods at Wild Oats Markets, the country's second-largest natural and organic supermarket chain, have grown from 50% of store sales to 65%.

Meanwhile, at Phoenix-based Bashas' Supermarkets, Bill Romley, vice president and produce director, said organic produce sales account for just a fraction of department sales and really haven't budged in recent years.

Three different retailers provide three different snapshots of how sales of unconventional fresh foods have been faring of late. What do the three have in common? None of them single out the national organic standards as having a huge impact on their fortunes.

"I don't have the sense that our customers have changed their buying habits or feel differently about organics or natural foods as a result of the USDA Organic seal program coming into the picture," Roberts said.

Sonja Tuitele, a spokeswoman for Wild Oats, gives a little more credit to the National Organic Program, but stressed it's just one possible explanation for the growth of organic perishables.

"It's brought a greater level of awareness of organic, and that's probably helped us in our efforts to communicate the benefits of the product and justify its price," she said. "But the USDA seal isn't on that many of our fresh foods."

Yet Jay Jacobowitz, president of Retail Insights, a Brattleboro, Vt.-based consultant to natural products retailers, credited the standards for contributing to the background buzz about organics.

"Probably there are not that many people who are aware that something happened two years ago," he said. "But it contributes to the critical mass of impressions that are leading people to be more accepting of it."

Hailed as a boon to the fortunes of organic producers, retailers and consumers, the certification standards were conceived as a way to bring certainty and order to an industry that was rapidly taking on a "Wild West" feel. One national standard governing what could be called organic and how it was to be produced, packaged and labeled replaced a patchwork of regulations, guidelines and practices.

While retailers and other observers said the standards have had some impact, most noted it has been marginal at best, especially in the area of fresh foods. The bigger impact, they said, may have been felt in the emerging non-fresh foods sector, where products with multiple ingredients raised more doubts about the veracity of organic claims and more complications with respect to labeling.

However, a recent study of the state of the organic foods industry called into question the actual impact of the national standards across the board. In its recently released study, "Organic Food & Beverage Trends 2004," The Hartman Group, Bellevue, Wash., said the national standards have had a "negligible" effect on organic's fortunes.

"The associated press around the labeling has increased top-of-mind awareness around the word 'organic,' but has not suddenly propelled new consumers into the marketplace simply because of this government oversight," the report stated. "Despite industry claims to the contrary, consumers were not waiting around for the label so that they could finally trust the products."

With fresh foods, in particular, consumer confidence and interest had been growing steadily well before standards were implemented. Fresh foods, most notably produce, have had an organic component longer than non-fresh, and fewer questions about integrity hobbled the category. Other factors -- from worries about mad cow disease, hormones and antibiotics in meat to increased consumer attention to lifestyle issues of health, wellness and environmental concerns -- are seen as having more influence on the growth of organic and natural fresh foods than certification standards.

According to The Hartman Group study, fresh foods still are where most of the action is in organic, although new categories are emerging. Among the top five food categories based on consumer purchase levels, four are fresh: produce, dairy, eggs and meat/poultry.

Additionally, figures from recent ACNielsen LabelTrends research showed organic fresh foods growing at a healthy clip, in some cases outpacing sales of their non-organic counterparts. For the 52 weeks ended Sept. 4, sales of one slice of the market -- UPC-coded organic fresh foods -- totaled $1.11 billion, up 7.4%. Some big advancers included eggs, up 19%, and lettuce, up 28%. With a growth rate of 23% for the period, organic tomato sales outpaced the 8.6% growth for overall tomato sales; organic salad mixes grew 18%, double the rate for the entire category.

The biggest winner, though, was meat, up nearly 200%. True, growth came from an extremely small sales base. At the retail level, demand for organic meat remains fairly limited so, for that reason, sources said they mainly carry organic meat in frozen form.

While there's little solid evidence of a link between the national standards and positive growth in organic fresh food sales, some suggested they might actually be stifling growth. Wild Oats' Tuitele, for instance, said there's evidence that stricter regulations on how organic fresh produce must be handled and displayed actually may have soured some conventional supermarkets on the category.

"It requires a lot more work to prevent co-mingling of organic and conventional product," she said. "Customer service, training and consumer education issues also are more time-consuming. At the same time, though, conventional retailers are doing a good job with organic dairy, which doesn't require that much labor."

At Bashas', the organic fresh produce selection has remained steady the past two years, even though the natural foods section of the stores has grown.

"I'm still not sure organic produce will find a real strong place in the conventional supermarket," Romley said. "I don't know how to get the organic shopper into the conventional format, and pick and choose between 15 and 20 hardware-type items. I'm sure we're missing some sales in organic, so we're continuing to evaluate it and looking for ways to improve."

In the last two years, Penhollow Markets has seen steady growth in organic and natural products. While the organic produce selection has stayed constant, a few more fresh bakery items made from organic wheat are on the shelf, and organic milk has been wildly popular, said Roberts. Yet the biggest gains have come in the meat area, where natural products -- not to be confused with organic -- have captured customers' imagination.

"Two years ago, we started carrying Black Angus, all-natural, hormone-free meat," he said. "It reached about 25% of meat sales. But then about six months ago, we converted all of our meat to that supplier, and it now accounts for 100%."

At the same time, free-range poultry and natural pork have grown as a percentage of sales, as have organic cheeses and a line of nitrite-free fresh deli meats. In the latter category, the company has opted to not carry an organic line.

It's clear more supermarkets are dabbling in organic and natural foods, and fresh products continue to be the area that gets the initial attention.

Holly Givens, spokeswoman for the Organic Trade Association, said while some organic fresh foods may have been given a boost by the standards, others have added on to a strong pre-existing base. Produce, in particular, continues to be a gateway category for new organic consumers, and a trusted one with a lot more choices for established and regular users, she said.

"Dairy has been another big grower, and now fresh meat is growing," she said. "Meat, in particular, has definitely been helped by the new regulations because they've given those who had been producing organic meat, but weren't allowed to label it as such, a chance to now label the product as organic."

Ongoing Challenges

Think the national organic standards that took effect two years ago finally solved all the knotty issues about what is and isn't organic? Think again.

Due partly to the food industry's quest to jump on the organic bandwagon, national standards that were so carefully hammered out have been challenged on some fronts. While most attempts to water down the standards have been beaten back, challenges are likely to continue.

"We're concerned about the whittling away of the standards," said Liana Hoodes, organic policy coordinator for the organic committee of the National Campaign for Sustainable Agriculture, Pine Bush, N.Y. "Our hope is that standards will stay true to the definition of organic that was defined in the original law."

The NCSA pointed to a couple of cases. In February, Congressional legislation nearly passed that would have permitted organic meat producers to use non-organic feed. In another instance dating to October 2002, the U.S. Department of Agriculture overturned a denial of certification for a Massachusetts egg producer that did not meet outdoor-access requirements for hens.

"There have been more challenges since and we see more coming," Hoodes said. "Now there's some pressure coming from Alaska salmon producers to have their wild fish labeled organic. There are a lot of questions about whether fish, in general, can be organic."

Hoodes noted there's also mounting pressure to relax standards for organic milk. In some markets, the supply of organic milk doesn't come close to meeting demand, she said. The big supply-demand gap has some producers itching to tap into it by circumventing standards.

NCSA and other organic farming groups, Hoodes said, are intent on ensuring that organic standards that were fought for so hard are not compromised.

"We want clear, transparent standards that allow the consumer to know what she's buying, and we'd like to keep the playing field level for the small family farmer," Hoodes said. "If we changed standards, it's going to give big factory farms an advantage."

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