Why Your Organic Food Isn't as Organic as It Used to Be

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It used to be that organic food was a niche market. Cooks who wanted to put together a completely organic meal had to go out of their way to find a dedicated, organic supermarket like Whole Foods (WFM) or their local equivalent -- if one even existed.

Now, a stroll down the aisles of strip-mall stalwart Safeway (SWY) reveals a surprisingly strong and ever-increasing selection of organic foods. And even discounters such as Walmart (WMT), Costco (COST), and Target (TGT) are stocking their shelves with organic fare.

This might seem like a dream come true for organic devotees, but this increased availability highlights a new dilemma for organic-food purists: Organic food simply isn't as organic as it used to be.

Big Government, Meet Big Food

For food to receive the coveted "USDA Organic" seal of approval, it must meet specific requirements, one being that all nonorganic ingredients a producer wants to include must appear on a list of approved substances.

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The Department of Agriculture's "National List of Allowed and Prohibited Substances" is the master list of substances that may or may not be used in organic crop production, organic livestock production, and in or on processed organic foods. In 2002, there were 77 items on that list. But The New York Times reports that as the world's industrial food concerns have gotten more involved in the production of organic food, that list of approved nonorganic ingredients has grown to more than 250 today.

Why allow nonorganic ingredients in organic foods at all? In some cases, it's unavoidable. Take bread. As the Times reports, baking soda isn't organic, but you can't make bread -- organic or not -- without it. So baking soda is one of the approved nonorganic items on the list.

Better Foods, Bigger Profits

Organic food still counts for just 4% of food sales, but that percentage is growing as "big food" (as it's called by its detractors) establishes a presence in the natural food market. It's a tasty market for large corporations: As anyone who's shopped for it knows, organic food commands a higher price point and therefore more profit.

Big companies have been busily stocking their pantries with small, once-independent organic producers. And where they can't acquire an established company, they create their own organic brands to fill supermarket shelves. A niche market that was once small (all-natural) potatoes has turned into big business. Just take a look:
  • Cascadian Farms and Muir Glen are owned by General Mills (GIS), which had $16.7 billion in sales in the past year.
  • Kashi and Morningstar Farms are owned by Kellogg (K), which had revenue of $13.2 billion in the past year.
  • Honest Tea is owned by Coca-Cola (KO), which had sales of $47.2 billion in the past year.
  • Naked Juice is made by PepsiCo (PEP), which sold $67 billion in products in the past year.
  • Boca Foods is owned by Kraft (KFT), which recorded $54.9 billion in sales in the past year.
A few well-known organics brands remain small and independent, including Eden Foods, Clif Bar, and Amy's Kitchen. But it's plain to see that organics have become big business.

Take Two Aspirin and Call the USDA in the Morning

As more companies get into the organics business, and more types of organic foods are produced, there are bound to be additions to the USDA's list of approved nonorganic ingredients.

Is this a bad thing? It's up to consumers to decide.

Take aspirin, for instance. Aspirin makes the list for treating inflammation in livestock, a worthy cause. But aspirin is definitively man-made. And while it's hard to make too much of a case against the use of baking soda, one could easily make the case against the use of aspirin.

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Why Your Organic Food Isn't as Organic as It Used to Be

Organic brands Cascadian Farm and Muir Glen may make you think "small." Don't they both sound kind of pastoral, the sort of products that might come from family farms? Think again: Both brands are owned by food giant General Mills (move over, Betty).

Vans footwear calls forth images of rebellious skater youth, not to mention some musical credibility, given its frequent sponsorship of the annual Warped Tour. However, it may lose a few counterculture points given it's owned by brand giant VF Corporation (VFC), which also owns Timberland, SmartWool, 7 for All Mankind, Lee, and Wrangler, to name just a few.

In Maine circa 1970, a guy named Tom and his partner Kate dreamed up a whole slew of natural products for folks who, like them, yearned to simplify their lives. Certainly some of Tom's customers really wanted to stick it to The Man and all his chemical-laden merchandise, too. In 2006, consumer giant Colgate-Palmolive (CL) acquired Tom's of Maine. But let's face it: Tom's of Colgate-Palmolive just doesn't have the same ring.

Trader Joe's products always give a mysterious, boutique sort of feel, like some remarkable merchant named Joe has gone all over the world picking out exotic goods to stock the shelves. It's a nice thought, but in 2010 Fortune magazine revealed that some of Trader Joe's store brands are actually made by big companies like PepsiCo's (PEP) Frito-Lay. Incidentally, Trader Joe's is owned by Germany's Albrecht family, which also owns the Aldi Sud global supermarket chain. (U.S. Aldi supermarkets are owned by a different part of the same family.)

Morningstar Farms may sound like it should be just up a country road from Cascadian Farm, but the veggie-burger maker is owned by Kellogg (K). Who knows if Tony the Tiger participates in "Meatless Mondays" after a hearty breakfast of Kellogg's Frosted Flakes? Meanwhile, Kashi might make a lot of people want to don their tie-dyes and grab handfuls of granola, but it also happens to be a Kellogg subsidiary.

The fact that many brands boast counter-cultural appeal but are actually parts of huge conglomerates isn't necessarily awful. For example, Kashi says it's still run independently in La Jolla, Calif., according to its original business philosophy. In fact, it says its mission expanded in 2000 "with a little help from a friend." (Kellogg's one heck of a big friend, that's for sure.)

Likewise, Tom's of Maine still claims to be holding true to its original all-natural mission, despite Colgate-Palmolive's involvement. On the Tom's website, it claims, "Our simple, direct approach hasn't changed one bit: we listen to what our customers want (and don't want) in their products, we learn how it can be done, and we respond with effective natural (and sustainable) solutions."

Still, from the consumer viewpoint, it's always good to know a little bit more about what you're purchasing -- and putting in or on your body -- and from whom. Your dollars equal support, after all. Betty Crocker never had a choice as to which products she'd purchase (she was obviously a General Mills gal all the way!), but American shoppers do.

So while it's not automatically a bad thing for new substances to make it onto the list, the jump from 77 approved nonorganic ingredients in 2002 to more than 250 today is alarming, especially considering the USDA's organic standards didn't exist before 1997.

For health-conscious consumers who go out of their way to buy organic, and who pay the extra money for the privilege, it's worth reevaluating the meaning of "organic" and whether or not the extra effort -- or the extra money -- is still worth it.

John Grgurich is a regular contributor to The Motley Fool, and owns no positions in any of the companies mentioned in this column. The Motley Fool owns shares of PepsiCo, Whole Foods, Costco, and Coca-Cola. Motley Fool newsletter services have recommended buying shares of Costco, PepsiCo, Coca-Cola, and Whole Foods, as well as creating a diagonal call position in PepsiCo and a bull call spread position in Walmart.

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