Will Kellogg's New Attempt To Support Organic Farming Confuse Shoppers Even More?

May 17, 2016

And will shoppers pay more for a product that is “almost organic?”

Kellogg’s Kashi brand CEO David Denholm announced this morning that the company has partnered with Quality Assurance International (QAI) to support a new program called Certified Transitional, which is designed to provide a market for products from farmers who are transitioning their farmland and crops from conventional to organic.

The cereal maker is committing to buy ingredients that are Certified Transitional, starting with red winter wheat that will be used in a new cereal called Dark Cocoa Karma Shredded Wheat Biscuits.

The announcement comes at a time where consumers are more confused about food labels than ever, and Kashi’s reputation and image continues to be under scrutiny. 

Transparency in the food business is more important than ever as the Millennial generation, with their passion for food, continue to scrutinize and ask for answers. They are leading the “free-from” trend, wanting minimal processing, more local, a shorter list of ingredients, no GMOs and no pesticides. Chains like Panera Bread and Aldi’s are posting lists of ingredients they will not use. Some 68 percent of shoppers across all generations are “interested in knowing where my food comes from” and 59 percent said they actively seek out information about nutrition to determine their food choices, according to a January 2016 SupermarketGuru Consumer survey conducted for the National Potato Council.

May is a busy food month. The USDA is now reviewing the 7,687 comments submitted to it on the use of the term “natural” on food products as it tries to decide if the time is right to finally regulate the term; and on May 26 the United States Judicial Panel on Multidistrict Litigation in Chicago will decide whether 33 supposedly misleading labeling and marketing lawsuits should be combined.

Kashi is clearly trying to improve their image with this new program, but is the timing wrong and will the new program work?

The reasoning behind this new Transitional Certification program is to increase acreage and help support farmers looking to grow more organics. The transition process is cumbersome and expensive. USDA Organic certification requires that crops and the land on which they are grown do not receive any synthetic chemicals including fertilizers or pesticides for three years prior to the harvest of the organic crop. Organic farmers must also use a longer crop rotation than conventional farmers and the same row crop cannot be produced in consecutive years on the same field. And record keeping and paperwork can be challenging — a study by the University of California at Davis reported that 38 percent of organic farmers listed regulatory burdens as their chief challenge.

Kashi, in a press release, said that the first ever crop to use Certified Transitional ingredients will be their Dark Cocoa Karma Shredded Wheat Biscuits cereal. The company contracted for hard red winter wheat at a price above the conventional market rate, although they did not share just how much of a premium was paid. The cost to the farmer for this new certification according to QAI is 50% of the typical QAI organic certification fees.

Sarah Krol, Global Managing Director of QAI, said in an email that the QAI Certified Transitional program can be applied throughout the supply chain to certify agricultural crops (farmers, processors, finished products). The QAI Certified Transitional process involves five basic steps, whether items are produced at the beginning, middle or end of the supply chain: application, on-site inspection, technical review, resolution of any corrective measures necessary and certification. Steps 2-5 are repeated on an annual basis with additional requirements added in year 2 and year 3 in order to stay in compliance with the program and get ready for organic certification eligibility in year 3. 

Do we want (or need) yet another label on our foods? The list goes on and on with more products adding labels like USDA Certified Organic, Certified Gluten-Free, Non GMO Project, Certified Vegan, Facts up Front, and No Artificial “anything” to the fronts of already crowded packages. The Certified Transitional logo, Krol writes, can be used on packaging with at least 51% transitional ingredients.

In June of 2015, a global comprehensive study from Washington State University scientists David W. Crowder and John P. Reganold, Financial competitiveness of organic agriculture on a global scale, added just what organic farming needed: proof that farmers could make more money growing organics. They found that the actual premiums paid to organic farmers for their crops ranged from 29 to 32 percent above conventional prices and point out that these price premiums have held steady over the 40 years represented in the study. And even with the higher costs associated with growing organics and a 18 percent lower crop yield, the breakeven point for organics was 5 to 7 percent. Crowder and Reganold added an important takeaway to the analysis: the need to support beginning farmers as the three year transition represented the most financially risky period for the farmer.

The USDA’s Census of Agriculture reports that there are 14,903 organic farms in the U.S. of which 12,634 are certified (1,459 are exempt from certification as their sales are less than $5,000 a year) which together account for 3.7 million acres of organic production. The survey also reported that 39 percent of the farms intend to increase organic production over the next five years while just 5 percent intend to decrease or discontinue organics. To put organic farming acreage in perspective it represents just 1% of all farming according to the Organic Trade Association.

The reality is that very few farms actually transition their entire farms to organic. Most take a portion of their acreage and transition while growing conventional crops, or have their fields adjacent to other farms that may be using synthetic pesticides and other practices that are not allowed in USDA Certified farming practices. Paula Rosenblum, co-founder and managing partner at Retail Systems Research (and fellow Forbes.com columnist who has written about Kellogg’s before) says there is a “denial that plants pollinate through the air, so they will be in transition forever. It’s not about organic fertilizer, it’s much more about GMO, which consumers most definitely are wanting to move away from.”

The brand has been on the defensive since John Wood, owner of The Green Grocer in Portsmouth, Rhode Island, removed Kashi’s GoLean® cereal from his shelves (along with other Barbara’s, Bare Naked and Peace products) after discovering that the soy ingredient in this “natural” cereal contained GMO soy and posted a sign saying so back in April 2012. He also made the point that the brand he thought was a small company was actually owned by food giant Kellogg’s. Professor Phil Howard of Michigan State University shares with us an infographic showing just how many large food companies own organic brands.

Keegan, a Kashi team member and nutritionist, said in  video published on Kashi’s Facebook page in response to Wood, “that it is possible that some of their products contain GMOs due to pollen drift from nearby crops, and current practices in agricultural storage, handling and shipping, have led to an environment where GMOs are not sufficiently controlled.”

The Cornucopia Institute, which published Cereal Crimes, is where Wood read about the misleading labeling on the cereals and detailed the use of GMO grains and pesticide residues. Cornucopia vehemently denied Kashi’s claim that their report was flawed and stated they sent an actual box of the cereal, bought at a Whole Foods store, to an accredited lab for testing.

In September of 2015 a federal judge in Florida settled a false advertising class-action lawsuit against Kashi in which the suit claimed its products were falsely labeled as being “all natural” and contained “nothing artificial.” The judge stated that since multiple Kashi products contain GM soy and corn, this “sufficiently alleges that a reasonable consumer would expect a product labeled “all natural” to be free of GMOs.” A similar case was also settled with similar results in California.

While sales of on-farm organic foods continue to rise to over $5.5 billion in 2014 according to the USDA National Agricultural Statistics Service’s 2014 Organic Survey and U.S. organic retail sales of both food and non-food products was over $39 billion (an 11.3 percent increase); many farmers find it economically challenging to make the switch, as crop yields are less without the use of conventional pesticides or fertilizers and labor costs are higher – and they are not able to charge the higher prices that organics fetch until they receive the USDA certification.

Which is why this new Transitional Certification has been created. The idea is simple. When a farm achieves this QAI certification they can charge a bit more (but less than USDA Certified Organic) to ease their financial burden, but without a detailed and transparent explanation of just what this means, and how it benefits the consumer, it may hurt progress of transitioning farms more than it helps. And then there is the fact that this certification is temporary, lasting only for the three year period it takes to comply to USDA Organic standards, opening the discussion for brands including Kashi to determine if it is worth the added cost of marketing and package changes as well as the potential for consumers to question why they are paying more for a product that is “almost organic.”