State of Green Business
Kashi steps up purchases from farms transitioning to organics
Food company Kashi is expanding the ingredients it is sourcing as part of its unique program for helping agricultural operations make the tough, three-year transition from conventional to organic farming.
In addition to the "transitional" wheat it buys and uses in a specially branded Kashi cereal called Dark Cocoa Karma Shredded Wheat Biscuits, the Kellogg-owned company works with growers specializing in almonds, dates and even sorgum. Those ingredients will be used in another entirely new product line announced Feb. 22, Chewy Nut Butter Bars.
The main ingredients used in all of these products are part of the Certified Transitional program, which Kashi helped create to support farmers financially as they go through the capital-intensive process of converting their management processes, irrigation practices, fertilizers — even their grain siloes — into systems and processes worthy of being blessed by the U.S. Department of Agriculture’s rigorous organics certification. That process takes at least three years, which places a heavy financial burden on farms that decide to make the commitment.
It's one reason that while roughly 5 percent of food sales are for "organics," just 1 percent of U.S. farmland is certified to produce it. You could call it the classic chicken-and-egg problem; more farmers would like to make the switch, but they can't afford it. Meanwhile, food companies are looking to extend their organic lines, which is why you've seen so many start buying farmland outright.
"What we find is happening in the industry, when we step back and have a look at this," said Kashi CEO David Denholm during a GreenBiz 17 keynote session. "There is the presence of vertical integration. Because the supply of organic is not keeping pace with demand, we have a situation where some companies are actually buying up their own farmland or even putting in place very long-term contracts for organic supply."
Under the Certified Transitional initiative, started about 18 months ago, Kashi will use the crops grown on "transitional" land in its specially branded products until a farmer completes the switch. It pays them more than the price for conventional grains, but less than the price of fully certified organic ingredients. Close to 3,500 acres are dedicated to the Certified Transitional effort, which is quadruple the amount of land participating just one year ago. The Karma cereal has been on shelves last summer, and it has done suprisingly well — considering that Kashi needs to "sell" the transitional concept to consumers.
"We were excited to start with wheat, because wheat is a globally traded commodity," Denholm observed. "So, what you find is it is more difficult for some wheat farmers to transition to organic, because in many cases they don’t have the financial resources to do that."
To be clear, these transitional farms aren’t obligated to sell to Kashi, but the food company is willing to buy from them, especially as consumers appear to be intrigued by the label it’s including on the products. "That has been a very successful launch for us,” Denholm said during the GreenBiz 17 session, referring to sales for the Karma cereal. "We have found it to be our best-selling cereal in the last five years."
The idea was born out of a conversation with a farmer, who said as a consumer she would be willing to buy products from organizations that had committed to organics but hadn’t been fully certified yet.
That success convinced the company to expand into other crops. Almonds were picked because there aren’t enough of the organic variety to meet Kashi’s needs.
"As a farmer, I think of the decision to switch to organic as an equation — with dozens of variables that must be considered — such as the projected price of organic products, consumer demand, changing environmental conditions and more," said Richard Gemperle, president of Edelweiss Nut Company, a supplier for the new Chewy Nut Butter Bars. "For me, Certified Transitional changed the equation in favor of making the transition to organic, giving me a way to reap immediate economic benefits."
An independent organization, Quality Assurance International, is spearheading the process of verifying the crops. That makes sense as it's one of the third parties that helps the government validate organics operations. Still, Kashi is actively recruiting farmers to participate, especially as its hope is that transitional farms eventually will graduate to full-blown organics production.
Denholm talks up the "open source" approach of the transitional label, compared with similar proprietary programs from other companies that are also trying to nudge more growers toward organics.
"This opportunity is bigger than Kashi; it’s bigger than any one brand, any one industry," he said. "For example, organic cotton is challenging to source. It’s got some of the same challenges as the food-based ingredients. This is something that could apply to food or fashion."
For that reason, you can expect Kashi to source its entire product line from either transitional or organic farmers at some point in the not-so-distant future. "Brands have the power to create the positive change that’s needed to address this challenge," Denholm said.