Organic demand forces adjustment for baking industry

Food & Drink Weekly, March 21, 2005

Bakers and suppliers alike dealing with the challenges of ingredient procurement and segregation, supply and demand, formulation and processing changes, and regulatory labeling as more and more consumers turn to organic foods. With increased consumer respect and a loyal following, what used to be viewed as food for those on the fringe of society now has a reputation for quality and a perception of health.

Organic baked goods have recorded a five-year compound annual growth rate of 21.4% between 2002 and 2007, compared with a 21.2% rate between 1997 and 2002. This performance narrows the gap with "natural" foods, which maintained a small lead with sales of $11.3 billion. However, "natural" grew just 4% during the period.

Compare these with figures from three years ago when the "naturals" category achieved sales of $9.6 billion, while organics only saw sales of $7.6 billion. Increased consumer awareness of health and wellness, steady sales growth and the fact that several major food manufacturers have joined the growing orchestra of players in the organic segment all suggest this category is no longer a fad but a mainstream market segment.

For years, organic foods have been a niche item found in health food stores and specialty markets. However, with the influx of major players such as General Mills, Kraft and Frito Lay, demand took a giant leap forward, and suppliers are scurrying to keep up. Also, bakers must compete for organic grain supplies with the cattle and poultry industries that use the grains for feed.

For bakers, everything from equipment clean-out and ingredient segregation within the plant to basic sourcing and supplier certification and integrity are issues with which they must contend. The time and effort it takes farmers to certify their crops as organic has become burdensome and even though grain supply has improved in the past few years, some ingredients such as baking soda are next to impossible to source.

Packaging continues to grow in importance because it serves as a billboard for health and nutritional claims. And the use of pictures and graphics is the most powerful sales tool, according to several processors. Federal regulations governing symbols and labeling of organic foods were established in 2002 as part of the National Organic Program, managed by the U.S. Department of Agriculture. However, foods labeled "organic" must conform to N.O.P. rules.

Any product labeled as organic must identify each organically produced ingredient in the ingredient statement of the package's information panel. The name of the certifying agent for the final product may be displayed on the information panel as well. Regulations also cover labeling of nonretail containers for shipping and storage of raw organic materials. These materials are to be labeled "100% organic," "organic" or "made with organic ingredients" according to the rules stated above. The package may also display the "U.S.D.A. certified" logo, identification of the product as organic, special handling instructions needed to maintain the organic integrity of the product and identification of the certifying agency. They must display the raw material lot number, if applicable.