TRUTH or SCARE

American Demographics, March 1, 2004

Byline: RICHARD MCGILL MURPHY

Two days before this past Christmas, Oregon cattle rancher Doc Hatfield was sitting in his office after finishing his outside chores, when the phone rang. A customer, worried about catching the human equivalent of mad cow disease from eating Hatfield's beef, wanted to know what steps he had taken to protect his animals.

The 65-year-old Hatfield was perplexed, but he calmly explained to her that mad cow disease spreads when cows eat feed mixed with boiled-down slaughterhouse byproducts. Hatfield's High Desert Ranch cows, on the other hand, are fed a diet of grass and natural grain that contains no hormones, antibiotics or other artificial additives. "Nothing is a thousand percent," Hatfield assured her. "But we're as safe as you can get."

Hatfield didn't understand the woman's sudden interest in bovine spongiform encephalopathy (BSE), a disease that had wreaked havoc on the British beef industry in the late 1980s and early '90s. Then he turned on his television. On the evening news, U.S. Secretary of Agriculture Ann Veneman was announcing that federal food inspectors had discovered the first suspected case of BSE in the U.S. in neighboring Washington state.

The incident, so far, has turned out to be a single, isolated case. As is the tendency when food safety scares occur, shocks of alarm pulsed through consumerdom and the media in the immediate aftermath of the disclosure. Government health and safety officials, lobbyists, agencies and corporate affairs representatives sprang into action. They responded decisively and methodically to consumers' fears and questions as the nation momentarily curbed its huge appetite for beef. But only momentarily.

Assuming no new cases of the disease emerge in the coming days and months, December 23, 2003, may well pass into food safety annals as little more than a footnote. Americans' consumption of about $900 billion in fresh and processed foods each year - through channels such as supermarkets, corner delis, price clubs and mass merchants, convenience stores, restaurants, hospitality and other food service providers, as well as other conduits - won't be likely to change a lick as a result of this lone incident.

What is changing, though, is a broader context of consumerism within which the mad cow scare took place. The challenge for those vested and invested in the food business is that more and more ordinary people are becoming more demanding about everything they buy. They want to know precisely what's in what they buy. What are the ingredients? What was the manufacturing process? Who made it? How was it made? Where? Were the conditions safe? Humane? What impact did the manufacture of the item have on the environment, and the people in the environment? People are asking these questions and demanding "transparency" and forthrightness in answers to them.

For the American food business, the telephone call to Doc Hatfield on the afternoon of Dec. 23rd told of a story behind the headlines, illustrative of an American consumer public that has begun to behave differently - more information-hungry, more active, more discriminating - in an environment where food safety crises crop up in America and around the world. Crisis public relations may have been sufficient to quell concerns about America's food supply this time round, but food manufacturers, distributors and retailers may not be so fortunate in the future.

In the weeks that followed that first late-December phone call, Hatfield had at least 50 calls and e-mails from prospective customers interested in buying his natural beef because of concerns over BSE. However, Hatfield, who heads Oregon Country Beef, a family ranch cooperative, says consumer demand had been increasing even before the latest scare. Oregon Country Beef saw same-store sales of its meat jump 43 percent in the last quarter of 2003. Sales for the year reached $18 million, 24 percent higher than in 2002. The cooperative's biggest customers include the Whole Foods Markets natural food chain and a number of high-end independent grocery stores in the Pacific Northwest.

"When we started 18 years ago, our customers ranged from hippies to urban gourmets," says Hatfield, who founded the business with his wife Connie. "But now mainstream urbanites want to know where their food is coming from. It's not just about nuts and twigs any more."

NOT JUST GRANOLA

Hatfield's right. It's not just "nuts and twigs" who are buying food produced without chemicals, hormones and other additives. As more Americans make health, nutrition and food safety a higher priority, they're buying more organic and natural food. "Organic" is one of the labeling terms in the food business Americans equate most closely with transparency, and so they're driving high double-digit sales growth in food categories that are generally flat year-on-year. Americans bought $13.5 billion worth of natural and organic food in 2002, 8.9 percent more than they did a year earlier, according to the latest data provided by SPINS, a San Francisco market research company that tracks retail sales scanned at supermarkets, natural food stores, mass merchandisers and drug stores. Of that, organic food sales were $8.2 billion, or 17.8 percent higher than in 2001. SPINS estimates that natural and organic food and beverage sales rose more than 12 percent. That rate of growth is considerably higher (by a ratio of 4-to-1) than that of conventional grocery product sales.