Organic rules: impact on coffee industry

US federal regulations on using the term "organic" only went into full effect on Monday, but they are already rapidly transforming a niche of the coffee industry and will cost consumers more, experts say.

"I think we're looking this year at sales growth of our double certified line in the region of 50-60 per cent as some of our larger customers distribute (organic coffees) to more mainstream channels,"​ said Rick Peyser of Green Mountain Coffee Roasters based in Waterbury, Vermont.

Organic coffee is grown without prohibited synthetic substances.

At the same time as medium and larger roasters seize on a new area to capitalise on, smaller roasters, particularly in the East, will be pinched by higher costs and what appears to be mountains of paperwork.

"This will shake up the industry. Organic coffee is very much West Coast, so the impact will be even greater to the East Coast roasters because it is a smaller part of most people's businesses,"​ said Donald Schoenholt, president of Gillies Coffee Co. in Brooklyn, New York.

Sources said the financial load per pound could be from 2 or 4 cents up toward 17 cents for a small roaster. It depends on how many pounds the roaster will be spreading his costs across, they explained.

"For smaller businesses, the regulations may be a challenge,"​ said Peyser, pointing out that retailers will have to change their labels and identify their certifier.

One smaller roaster said: "The costs are running into the thousands. The new regulations require very strict, very detailed, careful record keeping, which only big corporations are good at."​

Higher prices aside, the consumer of organic coffee should be better off with the new regulations.

"The customer will have a much higher level of security and confidence in knowing the products are organic. This will be great for the buyer,"​ said Schoenholt.

"Come 21 October, anything that uses the term organic needs to be certified organic, unless your sales are less than $5,000. Anyone who produces or processes has to be certified if they use that term. You must meet the Federal rules,"​ said Lynn Moorer, director of operations and general counsel for the Organic Crop Improvement Association International, of Lincoln, Nebraska.

The National Organic Program (NOP) is the name of the set of regulations that lays out what insiders call "The Rule." The regulations were originally passed in 1990, but took a while to become final and are only now going into full effect, Moorer explained.

The road to formal certification has taken so long because of the US government's inexperience with organic coffee. Also, roasters of organic blends are spread out and made up of widely divergent groups of individuals.

"The organic community can be a real challenge to work with,"​ one source said diplomatically.

A certificate from the farmer is not enough. One small roaster complained that he had to complete a 140 page document.

"You have to demonstrate that you have an organic plan. Before there was no standard definition for organic. It is not just absence of prohibited substances, but also the proper use of the land,"​ said Moorer.

There are 54 accredited certifiers to the NOP and roughly 50 are in the United States.

"I think the NOP raises the bar and puts us on the map. The standards are verifiable and this takes the guess work out of certification. In the long run, it gives us more legitimacy in the eye of the consumer,"​ said Adam Tietelbaum, co-founder of The Organic Coffee Association.

The concept of independent certification tells the consumer that the products he or she purchased have been grown, handled and processed without any synthetic chemicals, and are in compliance with earth-friendly standards.

Earth-friendly is a way of saying that organic practices take into account long-term sustainable stewardship of resources like land and water, Moorer explained.

"More people will become compliant and others will see what happens. Consumers will now begin to demand proper certification paperwork,"​ said Jim Cannell of Jim's Organic Coffees in Wareham, Massachusetts.

Larger coffee and food companies have either purchased an organic coffee line or are shopping for acquisitions.

Tietelbaum started Adam's Organic Coffees in 1992 in Oakland, California, and it was snapped up by Peerless Coffee Co. in 2001.

The Frontier Coffee Organic Coffee brand was purchased by Green Mountain Coffee Roasters last year, and several roasters of organic coffee told Reuters they have been approached with tempting buy-out offers in recent months.

"We're bullish on organics. We bought Frontier and now have 25 product offerings that are certified organic and Fair Trade,"​ said Green Mountain's Peyser."It's like a dot-com rally for the organic coffee world,"​ said one West Coast roaster, referring to the prices being offered to some organic roasters.