Organic certification – what is the cost of clean production?

Cited as one of the nation’s top five growth industries by the Biological Farmers of Australia, the Australian organics industry has gone from strength to strength over the past decade.

Mainstream supermarkets have embraced the ever-increasing demand for certified organic products, farmers markets are popping up all over the country, and home delivery services are available for those too busy to join the checkout queue.

Access to premium quality, certified organic produce has never been easier.

The health and environmental benefits of organic farming have also been well documented. Organic production prohibits the use of pesticides and pharmaceuticals (antibiotics) ensuring the sustainability of the land over the long term, and eliminating the presence of synthetic chemicals in food.

It all sounds fantastic, but what are the realities for a food manufacturer in gaining a certified organic status? Do you need certification to make an organic claim? How do producers tackle seasonality in supply? And importantly, how do food companies communicate the higher cost to consumers, who in the end, bear the premium price burden?

Gaining organic certification poses many barriers for producers and manufacturers, namely availability of supply, time and cost. Organic produce attracts a higher price point, but along with a premium product, the costs of production also demand higher overheads.

So there the question lies, how do food manufacturers weigh up the costs and benefits associated with organic certification? What exactly is involved in achieving a certified organic status and does it pay off at the checkout?

Organic certification bodies in Australia

Australia’s peak body for the Australian organic sector, the Organic Federation of Australia, lists a number of Australian organic certifying bodies on its website including NASAA Certified Organic, The Organic Food Chain, AUS-QUAL, The Bio-Dynamic Research Institute, Safe Food Production Queensland, The Tasmanian Organic Producers and Australian Certified Organic.

Australian Certified Organic is the largest of the certification bodies and is the nation’s premier auditing, certifying and licensing company of both organic and biodynamic operators.

The organic certification process

The Department of Environment and Primary Industries states that the certification process differs depending on whether the application is for primary producers, manufacturing and distribution or the retail trade. In reality, the process to gain organic certification is far more involved for primary producers than it is for food manufacturers.

The idea behind certification is that it provides a guarantee that the integrity of organic food is maintained from the farm gate all the way to the end user.

According to NASAA, organic certification within the processing and manufacturing sector is complementary to existing environmental, quality assurance and HACCP based food quality standards.

The certification essentially ensures that the ingredients, associated inputs, processing activities and transportation of goods all conform to the stipulated standards set out under the National Standard for Organic and Bio-Dynamic Produce 2008.

Manufacturing and distribution operations can achieve certification following an inspection of the processing site and an examination of associated documents, all of which must display a clear and auditable paper trail to verify all organic claims.

For a product to hold a ‘certified organic’ label, 100 percent of the ingredient list must be certified, with exceptions for salt and water.

Food manufacturers are also subject to routine annual audits once certification is granted to ensure that businesses and farms are meeting the organic standards stipulated in their contract.

Does a product have to be certified organic to make an organic claim?

According to the Australian Competition and Consumer Commission (ACCC), an organic claim is any claim that describes a product as organic, or containing organic ingredients. For example food manufacturers may choose to use the terms ‘made using organic ingredients’ or ‘100 percent organic’.

Current organic product standards are governed under a voluntary Australian standard for growers and manufactures who wish to label their products as ‘organic’ and ‘biodynamic’ (AS 6000-2009).

A food manufacturer does not need certification to make an organic claim, however Australia’s main supermarket chains, Coles and Woolworths, will not stock products with organic claims unless they’re backed by a recognised organic certification body.

A false claim can lead to heavy fines and legal action if it’s found to not comply with national standards and another point to mention is that by law, if food manufacturers plan to export out of the country with an organic claim, the product must be fully certified.

Outgoing CEO for Australian Organic, Andrew Monk, said that although producers making organic claims without certification has been problematic in the past, today it’s a different story.

“Ironically, [organic claims without certification] used to be a more problematic situation for us in the past, but our take on it now is that it is possibly of benefit in a strange sort of way,” Monk told Food Magazine.

“There are consumer laws around misleading claims, so we do, as an industry, have an agreed base national standard and that means that if a company is going to try and make a claim that is not backed up by an independent certifier claim, it’s going to risk their livelihood in the long run.

“The industry has gotten cohesively together behind a base standard that can be tested by law at any time on uncertified product.  I certainly wouldn’t want to be the director of a company that made that sort of a claim in this new consumer law environment that we now have.”

Creating the balance between cost and benefit

The argument to go organic is two-fold. The certification not only provides an official confirmation of sustainable farming and processing practices, but it also acts as a powerful marketing tool, offering consumers a measure of trust and in turn, attracting a higher price tag.

However on the other side of the coin are availability in supply, seasonality and cost.

Organics, despite strong growth in recent years, still remains a niche market and as such, securing consistent supply in raw ingredients can be a challenge.

Monica Meldrum, founder of certified organic snack food company, Whole Kids, said when starting her company eight years ago, it was initially quite difficult to source certified organic suppliers.

“Our product development is largely driven by availability of supply, because it’s very much a growing industry in Australia, so sometimes we just simply have to hold back product sales because the supply is not available,” Meldrum told Food magazine.

“However, supply has increased over recent years and we are finding that farmers are moving to what’s called ‘in-conversion’ so they’re looking at the organic space and converting their farms.”

Meldrum says that despite the occasional hiccup in supply, her customers demonstrate a high loyalty to the Whole Kids brand, and understand that products are not necessarily available all year round.

Meldrum agrees that gaining certification is a rigorous process, and encourages businesses to only invest in organics if they are prepared to make a commitment to the industry long term. She stresses that good supplier relationships are imperative to the success of her business.

“We have to be certified right throughout our supply chain and in terms of managing supply, we actually have really good relationships with all the growers. We work directly with them,” she said.

“Although we are not growers ourselves, we still go through a pretty rigorous process to ensure that there is no contamination of ingredients at any point along the supply chain. Australian Certified Organic even goes so far as to test some of the soils in adjacent properties to some of our growers, just to test that there is no possible contamination, and everything through to production, warehouse and storage and distribution is also audited.

“People who are getting into organics need to understand that it is a long process and they need to be in it for the long haul. Sometimes there is this assumption that you can make a quick buck because you can charge a premium, but I think that with organics, you really need to work with growers and suppliers throughout the supply chain. But the customers really appreciate it and they are very, very loyal.”

The time and cost associated with gaining certification is far more expensive for farmers than food manufacturers. The main concerns for food manufacturers in making the organic switch is more in line with processing compliance issues, which ACO’s Andrew Monk claims are not unlike those of HACCP.

“Almost every processor in the country by now should have had a HACCP system implemented and independently certified. And it is fundamentally no different than that really,” Monk told Food magazine.

“The first point of difference is more that there is a production standard that you will need to comply with, which goes a bit more into detail than the food safety standard does. But all those same principles are there. You apply and have an auditor come out and cross check that what you are claiming to be doing is exactly what you are doing.”

Chief executive of Aussie Farmers Direct, Braeden Lord, agrees that the certification process is not as complicated as many make it out to be.

“Organic certification is a simple process providing you follow the bouncing ball,” he said.

Aussie Farmers Direct recently went into a joint venture with Organic Dairy Farmers to build an organic butter plant attached to the side of Aussie Farmers Direct’s conventional dairy.

In order to achieve organic certification for the new plant, the companies had to build a complete separation between the conventional milk and organic milk lines.

“It was only really a process of the certifiers coming through and viewing the factory and making sure that everything was in its place. And making sure that we have a way that we can separate out finished products so there is no confusion,” said Lord.

“We have a system called SCARDA which is a very sophisticated dairy management production system, so it literally monitors the milk from the time it arrives, to the time it enters into the silo, to the time it enters a bottle.

“The system is able to batch control, so we can show the certifiers that we are managing the milk as it comes through the processing, which of course they are thoroughly excited about.”

The realities of supply and certification

While growers and food manufacturers generally see the value in organics, some argue that with particular crops, certification is either simply not viable, or something they’re simply not interested in.

Bruce McPherson, co-owner of Bundaberg strawberry company, Tinaberries, says that although he applies a holistic approach to his farming practices, it is simply not viable for him to grow strawberries organically.

“We employ so many organic practices. Things like companion planting, we don’t fumigate our soils, we introduce microbes into our soil and we regularly sap test our plants,” McPherson told Food magazine.

“We use a lot of things like kelp or seaweed, and we use amino acids. So when we say we don’t spray, of course we spray, but we seldom use so-called agrichemicals. Having said that, we are not going to throw the baby out with the bathwater, if we really get a problem, we will move into that.”

McPherson had previously looked at going organic, but after a trip to Spain, one of the world’s largest strawberry producers, he changed his mind.

“What we found [in Spain] was that there was no price advantage for organic strawberries for the grower, and the quality of the strawberry wasn’t as good as the sustainably grown [not organic] varieties,” he said.

“[Furthermore] It’s very hard to grow a strawberry organically, especially to grow one in volume and for it to be economical. It’s been proven around the world that they are just one of the hardest things to grow. And once you get a disease or pest pressure, it’s very hard to deal with it effectively.

“I have no problem with organics, but I’m not convinced by the masses that it is as big an issue as what certain parts of the consumer base thinks it is. For us to be here next year we’ve got to make money out of it, we’ve got to be commercially viable.”

New Zealand based peanut butter producer, Pic Picot, owner of Pic’s Really Good Peanut Butter, said that if he could source good quality organic peanuts, he would consider an organic line. However, he’s yet to find organic peanuts that are up to his standard.

“Of the nuts that we have tried, and we have tried all the nuts that we could get our hands on, the only organic nuts that we could find were not up to scratch,” Picot said.

“I would be happy to buy organic nuts if we could find some that tasted good, but our concern is to make the best peanut butter that we can, and not have it as a purely certification sort of thing.”

According to Picot, the only organic peanuts with a steady supply come from China, and to a lesser extent Argentina and America. Picot explains that the Chinese nuts have a tendency to go rancid very quickly and deliver a metallic after-taste, whereas the Argentinean nuts don’t have the right “depth of flavour.”

Picot says that his supplier, the Peanut Company of Australia (PCA), completed trial crops of organic peanuts, however they have only been able to successfully produce around one-sixth of the size of a standard conventional crop.

“It used to be in Australia that all Australian peanut growers used a hell of a lot of sprays … The PCA has had a massive seed development program, so they have spent a hell of a lot on adapting Australian peanuts to require less and less chemicals.

“If we did find really good organic peanuts – Australian organic peanuts – at a price that we could afford to make peanut butter out of, then I would consider it.”

Is it worth it?

The organics industry really does boast a myriad positive attributes including clean and green production, loyal consumer bases, freedom from synthetic chemicals and, of course, a premium price advantage.

The decision to enter the organic space predominantly depends on the market in which a company chooses to operate.

Organics is in no way a quick or an easy way to justify a price premium. Extensive research and preparation needs to be undertaken in order to create a sustainable, profitable and long-term business model.

Having said that, organic certification truly stands as a reputable confirmation of sustainable farming practices, equating to premium quality, healthy food. Conventional operations can still maintain clean and green production methods without an organic certification, however they don’t have the same authority to market their point of difference, and of course they’re unable to back up their claims in the way that a certified organic producer can. 

 

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