- After two years of development, the Organic Trade Association (OTA) launched the Organic Fraud Prevention Solutions program. The goal is to reduce and eventually eliminate organic fraud worldwide by helping businesses develop and implement an organic fraud prevention plan, according to a press release.
- Ten companies have pre-registered for the program including J.M. Smucker and Stonyfield. Although voluntary, annual program enrollment fees range from $320 - $6,000 based on a sliding organic sales income scale.
- “Organic now operates in a global market," Laura Batcha, CEO and executive director with the Organic Trade Association. "Fraud is one of the biggest threats to that market, and it cannot be tolerated in the organic system.”
Organic products now comprise 5.5% of the total retail food market in the U.S., the OTA said. With consumers paying about 7.5% more for organic foods and beverages than conventional items, according to Nielsen, it’s no wonder that so many producers and CPG companies are looking to cash in on this growing industry. It's also inevitable that organic food fraud will increase as dishonest parties look to take advantage of this market.
The only problem is that organic is difficult to enforce. The standards suffer from multiple weaknesses, including the fact that farmers hire their own inspection companies which announce visits far in advance to give growers time to prepare and or cheat. These vulnerabilities are only magnified with imported products, which often involve more middlemen. Although most organic produce is grown stateside, foreign suppliers are becoming an increasingly bigger part of the market. According to OTA, organic imports into the U.S. increased nearly 25% for 2017 totaling about $2.1 billion.
With such growth, it stands to reason that whatever fraud is currently taking place will be magnified as quantities of organic foodstuffs increase. Already, there have been a few well-publicized instances of organic fraud, including a 2016 shipment of conventionally grown Turkish corn and soybeans that was imported to the U.S. under the "USDA Organic" label.
Some have criticized the U.S. Agriculture Department for being too lax and slow in inspecting fraudulent organic imports. In this situation, it makes sense for a trade association to step up its efforts. This voluntary initiative comes a few months after the Farm Bill established $50 million in permanent annual funding for organic research and "makes significant strides to improve the oversight of global organic trade and safeguard the integrity of organic."
Interestingly, not many large CPG companies have signed up for the OTA program. This could be because membership dues run as high as $6,000 annually and companies don’t yet see the benefit of putting their name behind a program that doesn’t do much other than offer tips on how to prevent organic fraud —something many of them already do on their own.
Stonyfield, which is known for its work in environmental sustainability, makes sense as an inaugural member of the fraud program. Smucker may be getting on board because of its recent initiatives to change its marketing strategy and becoming more innovative and agile in how it develops and markets brands.
With only 10 CPG companies and two advisors, the OTA has a long way to go in growing its nascent program. Still, with organic consumption increasing and fraud tied to these products on the upswing, a program to tackle fraud is necessary to maintain the integrity of the space.
To be sure, the OTA has a vested interest in having consumers of organic foods trust that what they buy is organic. If consumers are unsure that the food is organic they may be less reluctant to buy it or pay a premium regardless of its reported health benefits, a move that will inevitably hurt demand for the product. While the OTA-led program is a positive first step, for meaningful progress to be made to fight fraud it will likely need more funding and regulatory guidance from the U.S. Agriculture Department.